We may have a new Government, but the big questions around Net Zero are still with us. Families and businesses are facing enormous energy bills that are much higher than they should be and, while the recent fuss about cuts to the Winter Fuel Payment dominates the headlines, it’s easy to forget the bigger, broader problem of how we’re going to cut the overall costs of energy for everyone, across the board.
The problem is that UK energy bills are inflated by clunky old rules about how power is generated, regulated, traded, stored and transmitted on its journey from the place it is created to the homes and businesses where it is used. Those rules embed huge extra structural costs into everything we do, and are a big part of the reason why our energy bills haven’t fallen nearly as far or as fast as international gas prices, which are almost back to their previous levels before Russia invaded Ukraine.
The good news is that everyone’s bills could be lower, and we could get to Net Zero more cheaply, providing the Government sets about stripping out these unnecessary costs. And, as I argue in a new report that’s out today called ‘A Cheaper Route To Net Zero’, there are 20 changes that Energy Secretary Ed Miliband could introduce which would decarbonise our country cheaply, without leaving everybody shivering over Christmas.
These changes include rewiring UK energy markets away from using the short-term ‘spot’ gas price as their benchmark, because it doesn’t reflect the true costs of the renewable power generators which will provide more and more of our energy in future. We also need to be more honest and transparent about the impact on energy bills of building extra power stations or vast new energy storage facilities that have to sit idle for long periods, as insurance for intermittent renewable energy in case the wind doesn’t blow or the sun doesn’t shine.
We should start rewarding energy firms, businesses and households who use the electricity grid more efficiently, because they can help cut hundreds of millions of pounds off the enormous costs of upgrading our electricity grid to cope with Net Zero. We need to reform the energy price cap to create more consumer choice, keener prices and fewer rip-offs. And last but not least, we can level the playing field for UK manufacturing jobs and firms, that have been struggling for decades to win business against rivals based in countries where energy is cheaper because it is less green.
All of these ideas would cut your and my energy bills. None of them are likely to cost taxpayers substantially more, and several would save money instead. All of them are future-proofed against rival energy technologies leapfrogging each other before being overtaken in turn. All of them would improve our economic productivity and rate of growth; and one – a Carbon Border Adjustment Mechanism – could help start a renaissance in British manufacturing after decades of decline.
Even better, none of the ideas contradict any of the policies in Labour’s manifesto, although several of them challenge some longstanding bureaucracy and vested interests. But Ed Miliband recently asked the director of the National Grid ESO for ideas on how to decarbonise the electricity system. This paper gives him 20 low-cost, no-regrets answers to his question.
Without these ideas, Net Zero will cost billions of pounds more than it needs to, handing huge bills to British households and crippling UK manufacturing at the same time. But if we decarbonise in the right way, our energy can be both greener and cheaper.
Click here to subscribe to our daily briefing – the best pieces from CapX and across the web.
CapX depends on the generosity of its readers. If you value what we do, please consider making a donation.
