Ageing infrastructure, increasing demand, ambitious environmental targets, growing worries over security of supply, and rising prices for consumers. These are just a few of the well-publicised issues facing the UK energy industry.
Unfortunately, Ed Miliband’s proposed solution to this febrile cocktail – outlined at the Labour party conference in Brighton yesterday – doesn’t come close to addressing these problems. Indeed, it could even make things worse.
Arguing that the “big six” energy companies have been overcharging customers for years, he pledge to “reset” the energy market by freezing energy bills for 20 months if he wins the 2015 election. He claimed that the move could save an average family £120 per year, whilst business could save upto £1,800.
Predictably, his arguments have been rapturously received by the party faithful, welcomed by consumer groups and angrily dismissed by the energy industry, which has warned that the move could hamper its ability to invest in new infrastructure, and even lead to the risk of blackouts.
In an unusually strongly worded statement issued on its website, British Gas owner Centrica said: ‘If prices were to be controlled against a background of rising costs it would simply not be economically viable for Centrica, or indeed any other energy supplier, to continue to operate.’
Meanwhile Angela Knight, chef executive of trade association Energy UK warned that while freezing bills is “superficially attractive” the move would also ‘freeze the money to build and renew power stations.’
It’s entirely plausible that the shadow government is correct in its assertion that that the UK’s big energy companies can afford to take a hit, and it’s probably also true that the blackout warnings are little more than scaremongering.
But concerns that such a move would hamper industry’s ability or appetite to invest in the new infrastructure that we so badly need should be taken a little more seriously.
Indeed, Labour’s proposed policy could give industry the perfect excuse not to make the huge investments in infrastructure and generating technology that would be essential to meet Ed Miliband’s stated aim to decarbonise electricity by 2030.
There was nothing in Miliband’s speech on the real energy issues. No mention of new nuclear. Nothing on renewables (a sector that he was regarded as a pretty credible champion for when he was government’s energy minister). No comment on the divisive issue of shale gas, CCS , or energy storage technology – I could go on.
Sadly, the pledge to freeze bills smacks of tokenism that’s unlikely to have much impact on anything. There’s little to prevent energy companies raising prices before and after the freeze period and is a £120 saving over the course of year really that significant? An extra £10 a month is unlikely to make a significant difference to even the poorest members of society.