Published yesterday, the independent Cost of Energy Review compiled by Professor Dieter Helm is clear – the cost of energy is too high.
- The UK’s energy costs are higher than they need to be to meet the UK’s climate obligations.
- Consumers are shouldering higher prices because renewable technologies receive too much subsidy, whilst older technologies are locking the UK into contracts that are too long-term.
- The costs of intermittency on the central transmission and distribution (T&D) network are currently accounted for in customers’ energy bill.
The problem here is that Helm’s review is an analogue analysis in a digital age, running the risk that its findings will fast become irrelevant.
Cost of Energy Review, p. 143
Helm’s proposed “default tariff” to replace Standard Variable Tariffs (SVTs), as well as a cap on suppliers’ profit margins, is partly based on assumptions that the cost of a centralised T&D network will have to be paid for in future.
However, the UK is developing an ever smarter energy system that will see homes and businesses increasingly pair their own renewable generation assets with battery storage. We could also see the potential for peer-to-peer energy trading via electric vehicle charging as we move to a low carbon transport system.
Such changes will potentially result in reducing consumers’ reliance on the central electricity grid.
With an energy system shifting in this direction (for those who can afford it), is it fair or realistic to offload potentially disproportionately higher T&D costs onto those consumers who find themselves stranded on an under-utilised future grid?
If Helm’s findings are based on outdated assumptions and analyses – the review itself reveals that there are “no new facts to discover” – then their relevance will quickly start to be questioned.
Despite its length, Helm’s review takes us no further towards understanding how a fair and equal energy system can be achieved. To get to this point, a forward-looking analysis of how future energy prices could change in a digital world is desperately needed.
Madano is a strategic communications’ advisor to clients across the energy sector.