Do Conservatives really get the big calls right?
A decade of under-investment and “light touch” regulation will cost us dear.
Salient points drawn from a recent Times article – Owl
As households and businesses face crippling energy bill increases and fears grow of potential blackouts this winter, recriminations are flying over how Britain got to this point. “Twelve years of failed Conservative energy policy has left bills too high and our energy security too weak,” Ed Miliband, the shadow climate change secretary, said. Andy Prendergast, of the GMB Union, said: “Successive governments have been asleep at the wheel for years over the UK’s energy strategy.” Emily Gosden www.thetimes.co.uk
CAMERON CUTS “THE GREEN CRAP”: 2013
Rob Gross, director of the UK Energy Research Centre (UKERC), said. “Better insulated houses would without doubt have eased some of the pain this winter.” Even if prices were just as high, better insulation could have helped households to use less, mitigating the increase in their overall bills.
“The No 1 thing that the government could have done differently would have been to have a serious energy efficiency policy over the last decade,” said Simon Evans, deputy editor of the specialist energy and climate website Carbon Brief. “There’s been just a succession of policy failures on energy efficiency.”
Insulation rates plummeted by about 90 per cent in 2013 as the coalition government changed to a new energy efficiency scheme that it then scaled back after David Cameron reportedly ordered officials to “cut the green crap”.
ZERO-CARBON ABANDONED: Cameron 2015- cost over coming year £2.1 bn
In 2015 the Cameron administration also abandoned the planned zero-carbon homes standard that would have ensured that new-builds were well insulated. “We’re still building houses that are not brilliant from an energy efficiency point of view and we should have stopped doing that years and years ago,” Keith Anderson, chief executive of Scottish Power, said.
Carbon Brief estimates that these two decisions alone will cost households an extra £2.1 billion over the coming year. Other failed energy-efficiency efforts include the Green Deal, a coalition era scheme to encourage households to take out loans to pay for home improvements, and the Green Homes Grant voucher scheme in 2020.
Analysis by the Energy and Climate Intelligence Unit finds that homes with the worst energy efficiency ratings, rated “G”, will pay almost £2,000 more for their energy this winter than those rated “C”, the government’s target.
GAS RESILIENCE: Failing to develop gas storage [cost consumers last year £230 million]
Britain imports just over half of its needs. Despite this the government over the past decade rejected repeated calls to bolster Britain’s gas storage capacity, which was already one of the lowest in Europe.
In 2013 Michael Fallon, the energy minister, ruled out subsidising new storage sites, arguing that supplies were resilient and the market would deliver security of supply more cheaply. This led to Centrica scrapping two proposed projects.
In 2017 the situation worsened as Centrica announced that it was closing Rough, Britain’s biggest gas storage site, as it was not economical to repair without subsidy. The business and energy department, then led by Greg Clark, did not intervene and Richard Harrington, one of his ministers, said: “The closure of Rough will not cause a problem with security.”
The government still did not heed calls for a rethink the following year when the Beast from the East led to a rise in gas prices, even as analysts at Wood Mackenzie warned that Britain’s lack of storage left it “precarious” and could lead to blackouts in a winter supply crunch.
Less than a year ago Kwasi Kwarteng, the business and energy secretary, was still insisting that gas storage was “a red herring”, but he now appears to have had a change of heart and is in talks with Centrica over reopening Rough. Centrica claims that the site would have “saved consumers about £100 each last winter had it been operational”. [There are around 23 million domestic gas meter points in UK so £100X23,000,000 = £230 million
GAS IMPORTS: Failing to secure long-term supplies [cost unknown but significant]
“Because the UK took a view that state-backed long term contracts (for LNG in particular) weren’t necessary or desirable, we now have to pay high prices to ensure that gas is delivered here, rather than into Asia, where long-term contracts remain more common,” Gross, of the UKERC, said.
Kathryn Porter, of the Watt-Logic consultancy, agreed that gas policies had been complacent. “Successive governments essentially took a bet that the global market would remain well supplied and neglected to hedge against rising prices,” she said. “An appropriate hedge would have been to buy some of these volumes on firm, fixed price contracts.” One energy chief executive argued that households would be better off if the government had stepped in even a year ago to procure gas supplies for the nation.
GAS DEPENDENCE: Failing to develop more wind, solar and nuclear [Cost this year £10.5 bn]
The coalition government decided in 2014 to restrict subsidies that supported the deployment of solar farms, and in 2015 David Cameron’s Conservative government scrapped onshore wind subsidies and tightened planning rules.
Carbon Brief estimates that if solar deployment had continued at its previous pace then it could have reduced annual energy bills by almost £3 billion from October and continued onshore wind development could have saved £4.5 billion.
Tom Greatrex, chief executive of the Nuclear Industry Association, said: “For more than a decade, experts have been warning that a failure to replace our retiring nuclear fleet, which will be all but gone by 2028, would result in increased supply volatility and higher prices. Had decisions been made sooner on projects like Hinkley Point C, which would have saved consumers £3 billion had it been online this winter, the industry wouldn’t have to be playing catch up now.”
POWER IMPORTS: Failing to secure adequate back-up for wind power [unknown but significant]
High gas prices are not the only thing pushing up power prices: there have also been increasing periods when electricity supplies have simply been scarce, especially at times when wind speeds are low and wind farms are producing less than expected.
“As Britain and other countries progressed their wind-led energy transitions, gradually intermittent renewables displaced ageing thermal and nuclear generation to the point where security of supply is at risk when wind output is low,” Kathryn Porter, consultant at Watt-Logic, said. “In the past there was a view that it would always be windy somewhere and so better interconnection would allow those surpluses to be carried to the markets that need them. Unfortunately we have discovered that this is not always true in practice.”
Tom Edwards, of Cornwall Insight, said that allowing interconnectors to take part in this scheme was a mistake as it “allowed replacement of UK generation capacity with cables”. Lisa Waters, of Waters-Wye Associates, added: “The market has long argued that interconnectors are not generators, just wires, so they are being paid for capacity that in reality they may not be able to deliver.”
ENERGY SUPPLIERS: Failing to ensure robust companies [cost £5.7 bn]
Since summer last year 29 energy suppliers have gone bust after being unable to withstand soaring energy prices. This has resulted in multibillion-pound costs to consumers that are now being recouped via energy bills. Of the failed suppliers, 28 have been dealt with through an Ofgem process that is estimated to have cost £2.7 billion, or £94 for every household; the costs of the 29th, Bulb, remain unclear but could be as high as £3 billion.
Ofgem, the energy regulator, has taken most of the blame for these failings, accused by MPs on the business select committee of being negligent and incompetent by failing to check if suppliers were set up and financed properly. The MPs found, however, that the situation also reflected a political drive to encourage competition and low prices as the top priority.