Labour’s clean energy plan needs a revamp: get real on costs and ignore the artificial deadline | Nils Pratley
“I know my job is to get bills down by £300,” said Ed Miliband, the energy security secretary, in his BBC interview at the weekend, acknowledging that the government is on the hook for its pre-election promise to reduce energy bills by 2030.The problem, though, is that the bill-cutting task also seems to be falling by default to Rachel Reeves, the chancellor.It is beginning to look as if the only sure way to make energy bills fall by £300 by 2030 is to shuffle a chunk of the expense into general taxation.Miliband hinted the 5% VAT charge on bills could be removed in next month’s budget, which would cost the government £2.5bn.
To put it mildly, Reeves is unlikely to be delighted by this prospect but she, like everyone else, will have heard the high-powered crew of retail energy bosses set out the arithmetic on bills in stark terms to a Commons select committee last week.Many of us have been pointing out for ages that clean energy is not a free lunch (certainly not by 2030), but the experts’ numbers were revealing in their precision.“If we continue on the path we are on, in all likelihood electricity prices are going to be 20% higher even if wholesale prices halve,” said Rachel Fletcher of Octopus Energy.“Non-commodity costs are adding about £300 [a year] of pressure,” she added, referring to everything from the costs of maintaining and upgrading the gas and electricity transmission networks to funding the rollout of renewable and nuclear generating capacity.Chris Norbury, the chief executive of E.
On UK, and Simone Rossi, the chief executive of EDF UK’s energy business, said much the same,Far from being “speculation” – as Miliband’s department dismissed it – the bosses’ analysis flows from granular details,One can see, for example, the subsidies for wind and solar capacity under construction or likely to be commissioned; the multiyear charge for the Sizewell C nuclear power station; and the rates of return that the regulator Ofgem will allow the three big electricity transmission companies to earn as they build the £80bn new grid,Note that the criticisms are not coming from opponents of the ambition of switching to cleaner energy, or from net zero sceptics,All that is really being asked is an examination of tradeoffs, sequencing, who should pay and what options exist for doing things more cheaply.
“There is no budgetary control of this,” Fletcher said.Rossi noted that electricity demand is 9% lower today than in 2019.Norbury said policymakers should look at the extent to which “incentives being offered to build infrastructure are necessary”.Miliband can argue, as he did in a speech last week, that his job is harder because of “the legacy of decades of underinvestment in energy in this country”.Absolutely true.
The grid is old, as are most of the nuclear and gas-fired plants.Even if the UK were not decarbonising and electrifying, there would be a large catchup bill.New gas stations, the Tories’ preferred short-term option, aren’t free either.Equally, though, Miliband’s claim that the “sprint” to clean energy by 2030 will – of itself – cut £300 from household bills now seems fanciful.Sir Dieter Helm, a leading energy economist, put it bluntly in a recent Bloomberg podcast: “We have hit the reality wall.
It isn’t going to be £300 cheaper – unless the gas price falls very sharply … The problem for the government, I think, is that half the government understands that and half the government doesn’t.”What should be done? Step one would be to recognise that the 2030 deadline for clean power, defined as 95% low-carbon generation, was always arbitrary and that trying to hit it almost certainly adds expense because speed is being prioritised over cost.Would the UK’s long-term decarbonisation and electrification strategy really be imperilled if, say, only 80% was achieved by 2032? Hardly.Once that mental hurdle is cleared, options open up.One of the energy suppliers’ complaints, in essence, is that grid capacity is being commissioned to arrive before it is needed (and customers will have to pay for it) and that smarter energy-using solutions may be more effective.
They may have a point,So concentrate above all else on minimising “constraint” costs, the maddening payments to windfarms (usually in Scotland) to turn off when it’s too windy, plus incentives to other generators (usually gas-fired plants in the south of England) to fire up on the other side of a bottleneck,Such payments are still projected to hit £4bn by the end of decade, and threaten to become an electoral liability in 2029,Sign up to Business TodayGet set for the working day – we'll point you to all the business news and analysis you need every morningafter newsletter promotionOr slow the rollout of renewables, especially offshore wind, where the big cost variable is developers’ borrowing costs,If there is a reasonable expectation that interest rates will be lower in future (not impossible), why not wait for cheaper “strike” prices in future auction rounds? As things stand today, the government has said it will pay up to £113 a megawatt hour for offshore wind capacity in this year’s auction, AR7, far above the gas-dictated wholesale price of £83 MWh over the past 12 months.
“We won’t buy at any price and if specific technologies aren’t competitive, we will look elsewhere,” Miliband also said last week about AR7.If he means it, he could show seriousness by ordering, say, only 4 gigawatts of offshore wind this year, rather than 8-plus the industry is expecting.In Reeves’s shoes, you’d be insisting on such cost-cutting thinking.Last week’s warning from suppliers on bills ought to mark a turning point: the clean energy plan needs an injection of cold-headed pragmatism.
Will no one think about poor Boris? Former PM smirks and sighs through Covid inquiry | John Crace
Bliss it was in that dawn to be alive, but to be young was very heaven. Just not if you happened to be a schoolkid during the pandemic. Then you were being asked to make the biggest sacrifices to protect elderly people, even though you were the least at risk. Still, I suppose there was a lesson in there somewhere. Almost everyone who comes into contact – however indirectly – with Boris Johnson generally finds they have been done over at some point
Reeves says economic damage caused by Brexit forcing her to take action in budget
Rachel Reeves has blamed a heavier than anticipated blow from Brexit and austerity for forcing her to take action to balance the books at next month’s budget.In her clearest attempt to draw Brexit into the framing of her imminent tax and spending decisions, the chancellor said leaving the EU was turning out to have caused more damage than official forecasters had previously outlined.The chancellor hinted she was braced for a sharp downgrade in growth forecasts from the Treasury’s independent watchdog, the Office for Budget Responsibility (OBR), alongside what is shaping up to be a crucial budget.“The OBR, I think, are going to be pretty frank about this – that things like austerity, the cuts to capital spending and Brexit have had a bigger impact on our economy than was even projected back then,” she said at an investment event in Birmingham.“That is why we are unashamedly rebuilding our relations with the EU to reduce some of those costs, that in my view were needlessly added to businesses since 2016 and since we formally left a few years ago
Rachel Reeves set to launch ‘blitz on business bureaucracy’ to save firms £6bn
Chancellor to tell business leaders at government’s first regional investment summit she plans to ‘cut pointless admin’The chancellor, Rachel Reeves, is poised to launch a renewed “blitz on business bureaucracy” ahead of next month’s budget to target savings for companies worth £6bn.With Labour under pressure to reboot the economy, Reeves is expected to tell business leaders in Birmingham for the government’s first regional investment summit that she plans to “cut pointless admin”.Measures include scrapping a rule for directors of small firms to file a directors’ report with Companies House, in the government’s latest push to demonstrate that it is listening to business concerns.More than 100,000 small business are expected to benefit, according to the Treasury, including microbreweries and family-run cafes, as part of a wider drive to slash red tape and regulations.It comes as the chancellor faces intensive lobbying from bosses amid growing boardroom unease over the prospects for a tax-raising budget on 26 November that would target companies and the wealthy
China spy case gives MPs the opportunity to discuss their favourite topic: themselves | John Crace
There are few things that MPs take more seriously than themselves. Their desire to put themselves front and centre of world events. Their need to imagine that everything they do makes a difference. No greater self-love hath any person than this. If they were to have a therapist, I am sure they would be having a field day
Tory MP criticised after demanding legally settled families be deported
A Conservative MP tipped as a future party leader has been condemned for saying large numbers of legally settled families must be deported, in order to ensure the UK is mostly “culturally coherent”.The Tory leader, Kemi Badenoch, has been urged to condemn the comments by Katie Lam, a Home Office shadow minister and a whip for the party. Lam was previously a special adviser to Boris Johnson and is often described as a rising star of the new intake.Lam told the Sunday Times she believed large numbers of people with legal status in the UK would need to have their right to stay revoked and should “go home”.She said: “There are also a large number of people in this country who came here legally, but in effect shouldn’t have been able to do so
Nandy says it was wrong to exclude Maccabi Tel Aviv fans as safety option for Villa match given rising antisemitism – as it happened
Chris Philp, the shadow home secretary, claims the government has changed its story on this.He says the PM told MPs last week minnisters and special advisers were not involved in handling the prosecution. But yesterday the Sunday Times claimed that, when the home secretary heard the case might be dropped, she made representations to ensure the evidence was as strong as possible.He asks when the home secretary heard the case might collapse.He says the Sunday Times reported yesterday on a meeting organised by Jonathan Powell, the national security minister, to discuss this in September
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