The government’s energy security strategy, released yesterday, failed to provide a sensible, long-term response to our energy crisis.
In a moment of newfound clarity, Boris Johnson explained that energy policy had too long been dominated by short-termism and that there was a need to think much longer term. It’s hard to disagree with the Prime Minister there. But what we have achieved in the energy security strategy belies this ambition and instead offers a one-dimensional solution to a complex problem.
The myopic focus on new sources of energy supply is the main weakness of the strategy. Of course, we need all the low-carbon energy we can get to replace fossil fuels, and that means increasing wind, solar and nuclear power. The government has set quite ambitious goals for the production of new energy from these technologies. Some of them, I would say, are unrealistic, as is the case with nuclear energy. Nevertheless, the strategy correctly identifies clean energy as the main way to tackle the energy crisis while reducing bills.
But by focusing solely on supply, we continue to pump billions of extra pounds of public money into a fundamentally broken energy market.
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The first question to ask is why we pay so much for our energy in the UK, when a quarter to a third of our energy comes from wind and solar. After taking into account the initial investment costs of these technologies, each unit of electricity produced is free and yet we pay many times what it costs to generate electricity from these cheap sources. .
The design of the UK electricity market is to blame. It gives gas-fired power plants a more central role in the energy system, allowing them to set the overall market price. As gas prices have increased internationally, our domestic prices have also increased, negating the benefits of cheap renewables. Adding more wind and solar power won’t reduce consumer bills if the market continues to be rigged in favor of gas, but the strategy doesn’t have much to say about that.
Focusing solely on new ways of producing and storing energy also underestimates the role of energy efficiency. The government’s flagship efficiency scheme, the Energy Company Obligation (ECO), has shown estimated annual savings of £300-350 per household that has received retrofit measures. Combined with the government’s £350 support package, this would have fully cushioned the blow to households from the recent rise in energy bills. Energy efficiency reduces energy bills immediately and permanently, and failing to promote it, without additional funding or regulatory commitment, is a serious missed opportunity.