Rupert Darwall: It’s Families Who Are Footing Bill For Britain’s Deluded Energy Policies
Keeping the lights on for the few, turning them off for the many. It’s hard to see this being welcomed by Just About Managing families whose interests the Prime Minister has put at the heart of her plan for Britain.
Last week when the Prime Minister took the unusual step of attending the House of Lords debate of the Brexit Bill, their lordships were finalising a damning report on the energy policies of the past three governments. Worse still, the Government is limbering up for a fake row over proposals to cap energy prices. Greg Clark, the Business and Energy Secretary, is threatening government action whenever the markets are not working for consumers. As the Lords report makes clear, the real problem is government policy not working for consumers.
In their report, the House of Lords economic affairs committee points out that having competition in energy benefited consumers. Labour’s 2001 election manifesto boasted how it had brought about “full competition”. For much of the Noughties, Britain had some of the cheapest domestic and industrial electricity bills among similar European countries.
That all changed in 2008 when Ed Miliband announced “a strategic role for government” in energy markets. As Dermot Nolan, the feisty head of energy regulator Ofgem, told the inquiry, the Government had decided to intervene in the market. “Is it less of a competitive market than it was 15 years ago? Undoubtedly yes,” he said.
In his evidence, Greg Clark claimed not to see conflict between security of supply, having more weather-dependent wind and solar, and cutting energy bills. Instead, he described it as an invitation “to see how we can solve them as simultaneous equations”.
Pseudo-mathematical flannel can’t hide the fact that you can’t simultaneously maximise two variables, let alone three. You can’t maximise the amount of wind and solar while maintaining grid reliability and simultaneously drive electricity prices down. Something has to give – and it’s consumers who are picking up the rising bill for the Government’s Mission Impossible.
Between 2008 and 2015, the average electricity bill rose by 22pc. Over the same period, the price of hydrocarbon fuels used by power stations fell sharply – coal down by 33pc and gas by 13pc. The rise in electricity prices is wholly attributable to government policies – and would be even higher if coal and gas prices had not fallen. As it is, industrial electricity prices in Britain are the highest in Europe, a millstone around the neck of business as it prepares to compete in a post-Brexit world.
The Lords criticise the Hinkley Point nuclear deal. One expert, Cornwall Energy’s Peter Atherton, called Hinkley “the most expensive programme for delivering nuclear power that we could have come up with”. The most recent estimate by the National Audit Office puts the extra cost to consumer of the 35-year contract at a cool £30bn.
What particularly riled the committee is the way these costs are imposed by the Government. Because they are not levied as a tax, it is not clear to customers the extent to which they are on the hook, an approach condemned by several witnesses as regressive, hurting those who can least afford it. The distortions created are now so dire that since 2012, no new power station has been built without some form of government support.
Stealth energy levies are also difficult to control. Adair Turner, the first chairman of the committee on climate change, acknowledged the “open-ended nature” of renewables subsidies. These unleashed a feeding frenzy of Green special interests. The worst example is solar, a technology that contributes nothing to peak electricity demand at 6pm in winter. The Government expected 3 gigawatts of solar but ended up with 11 GW. Costs spiralled out of control.