Is this the crisis that proved Ed Miliband right?
In recent days, the Energy Secretary has pointed to the Iran conflict as proof that Britain must “double down” on Labour’s net zero policies. [some emphasis, links added]
In contrast to volatile oil and gas, the Government’s clean power plans will lead to improved energy security, good jobs, and lower bills, he says.
“We won’t ignore the lessons of the past as others are seeking to do,” Miliband says.
It certainly sounds appealing. But do these claims stand up to scrutiny?
Look closely, and the picture is not quite so straightforward. In fact, though many agree with the Government’s long-term goals, experts say Miliband’s current approach risks driving bills higher and hurting energy security.
“What we’re going through now is a kind of traumatic shock to the gas and oil markets,” says Michael Liebreich, an independent energy consultant and former government adviser.
“The danger is that we take the wrong lessons from it.”
Net-zero costs will inflate bills
In the short term, Miliband is correct that the Middle East crisis has led to a “roller-coaster” for fossil fuels.
This month alone, the European benchmark natural gas price has surged by as much as 80% while the international oil price has jumped by 70%.
Miliband has compared the situation to the brutal price spikes seen after the Russian invasion of Ukraine in 2022, when the loss of supplies from Russia caused a similar market shock and sent household bills soaring.
Because the Government guarantees renewables such as wind farms a fixed price for power through contracts for difference (CfDs), they can cushion the blow when the cost of other types of generation rises.
Yet it’s not short-term fluctuations like the current price surge that are expected to drive British energy bills higher over the next four to five years.
Instead, the country’s top energy suppliers have warned that a bigger danger lurks in “non-commodity costs” – industry jargon for the plethora of charges that have been quietly tacked on to your bills to pay for various government priorities.
These encompass everything from wind and solar farm subsidies (including CfDs) to insulation schemes, the construction costs of the Sizewell C nuclear power station, and work to dramatically expand the electricity grid.
Excluding VAT, such non-commodity costs made up 64% of a typical household’s electricity bill in 2019. By 2030, they are expected to account for 73% of the total.
It’s a problem that is causing concern because the Government’s push to cut carbon emissions depends largely on people switching to electrified heating and transport technologies such as electric vehicles and heat pumps.
But by adding so many extra costs to power bills, green energy alternatives are being made less attractive, critics say.
The problem is even worse for businesses than households, with British factories paying the highest industrial electricity prices in the developed world.
“That’s where the current failure is,” Liebreich says. “And there is no plan to fix it.”
Read rest at The Telegraph
