Key findings
The Committee examined the impact of the policies of successive governments
on the electricity market. In its report, “The Price of Power: Reforming
the Electricity Market”, published today, the cross-party Economic Affairs
Committee identifies two key failures in the current market: the narrow
amount of spare capacity, particularly in winter, and the rising cost of
electricity to consumers and businesses.
In order to address the failures in the energy market the Committee
recommends the Government should:
Ensure that security of supply is always the first and most important
consideration in energy policy. Affordability and decarbonisation must not
be prioritised ahead of security.
Ensure that decarbonisation is achieved at the lowest cost to consumers.
Decarbonisation policies accounted for around 10% of the average domestic
bill in 2013. This may mean waiting for the development of new
technologies which can reduce emissions. The Government should make sure
that the pace of reductions is flexible and not a rigid path to be achieved
at all costs.
Reduce and remove Government interventions in the market. The best way to
do this would be to ensure that electricity generating capacity is secured
through a single, technology-neutral, competitive auction for electricity
supply. This auction would ensure that consumers are paying the lowest
prices for low-carbon electricity.
Establish an Energy Commission to provide greater scrutiny of energy policy
decisions. This independent advisory body would report to the Secretary of
State and advise on the best way for all the objectives of energy policy to
be delivered.
Create a world-class National Energy Research Centre which would search for
new methods of producing cheap, clean energy and translate them into
commercial applications.
Outline its ‘Plan B’ in the event Hinkley Point C is delayed or cannot
produce the anticipated power.
Conclusions
The Committee makes wide-ranging recommendations to address the electricity
market, including:
Domestic electricity bills in Britain have gone from being second cheapest
in Europe in the mid-2000s to the seventh cheapest today. Decarbonisation
policies accounted for around 10% of the average domestic bill in 2013.
Industrial electricity prices in Britain are amongst the highest in Europe.
The Government has taken steps to compensate some energy-intensive
industries, but it still estimates 13% electricity costs after compensation
relate to decarbonisation.
The growth of renewable energy, supported by contracts that guarantee a
given price for a fixed period, has left the UK facing a possible shortage
of capacity as private investors have not been willing to build new
conventional power plants.
The UK’s capacity margin is narrow. The Government introduced the Capacity
Market in an attempt to reintroduce competition into the electricity
sector. However, it is still struggling to procure new power stations.
0 Comments