The real cost of energy
To meet our climate change commitments, secure our energy supply and keep energy affordable, we cann
With the festive season approaching, you might well be in the market for a turkey. The UK has a good market for turkeys. Corn fed, free range. There's a variety of retailers offering a broad selection of products that can satisfy your turkey needs. When it comes to turkeys, the UK is a global leader.
However, if your turkey was suddenly more expensive than last year, at every shop you visited, then you'd know something was wrong. You wouldn't blame the butcher -- you'd want to know what was happening at the farm.
The same is true of energy (and I promise no more bird analogies). Whatever company you get your energy from, wherever you are in the country, your energy bill has gone up.
The problem is more complex than blaming the logo printed at the top of your bill or the wind farm in the next valley. It's because the price of energy is a global issue. According to the Department of Energy and Climate Change's (DECC) own figures for the first half of the year, the UK had the third cheapest domestic electricity price for the EU15, and the cheapest domestic gas price. On the day the Chancellor gave out his Autumn Statement, the Office for Budget Responsibility highlighted that much of the contraction in the UK economy was directly due to the rise in global energy and commodity prices. The main problem isn't at the point when the product is sold to the consumer, but that is where the debate is focused.
There are important improvements to be made with retail and it's certainly helpful to simplify tariffs and switching. We must use ideas to help the public save on bills by using less energy while keeping their homes warm -- the green deal has the potential to unlock huge energy savings for all of us and, just as important, create jobs and stimulate investment. I, for one, am delighted the government has found £200 million to incentivise uptake to make sure it launches with a bang.
But we mustn't think this will make energy cheaper. It's a global price. To make our energy affordable we don't need the quick fixes -- we need to take on the big problem. That means fixing how we make energy, not how we sell it.
The real competitive market we need to grow is in energy production. We need to attract new capital to replace our ageing energy infrastructure now, regardless. This is expensive, but as well as a cost to us, it's an investment and an opportunity. We can replace what we have now with something more secure and low-carbon. It will take more than one political cycle to have in place, but in the long run it's the only way to stop the sky-rocketing of bills that will be the result of business as usual.
Now, the government does get this. Policies like electricity market reform and the Green Investment Bank are intended to make the UK more attractive to investors, and we need the government to stay focused on them. Inward investment in our energy infrastructure is good for growth: it will encourage the take up of new technologies, grow new skill bases, and have the potential to refresh our manufacturing supply chains as new entrants hit the UK market.
This need to secure our supply links in neatly with keeping it cheap and decarbonising. Those are the three goals we need to deliver and the best way of delivering each of them is to ensure all three support each other -- if we are to meet our climate change commitments, secure our energy supply and keep energy affordable then we can't drop one objective. To do this right requires a little ambition, yes, though it will stop prices soaring, and in the short-run delay some cost. That is why the government was wise to include protection for our energy intensive industries in its Autumn Statement.
We need to be open about this and government needs to keep that cost down as low as possible with smart policies for households and business. The media and political classes love to debate, but we can't risk talking ourselves out of decisions we're already committed to. Instead, we need to stay the course and deliver on time. Otherwise, we risk waiting until the price is just too high, the situation just too desperate, so that we have to pay a lot more to fix it later.
Tags: Energy News