This article was written by John Penrose MP for The Conservative Environment Network: Link
Well, thanks a lot, Vladimir. The cold weather is here and, with energy bills being used to put the West under pressure for supporting Ukraine, every family and business has to be miles more careful with the heating than normal. Add in the lingering symptoms of the pandemic disrupting global supply chains and fuelling inflation everywhere, and it’s pretty much a perfect storm.
But there are still things we can do to minimise the problems. To start with, the Government is providing a lot of help with subsidies to make everyone’s energy bill a bit more manageable. But it’s ferociously expensive and, ultimately, switching the pain from our energy bills to our tax bills is only moving costs from one pocket to another. It’s enormously valuable and desperately needed immediate help, but it’s still a short-term sticking plaster rather than a permanent cure.
So what’s the long term answer? The fundamental problem is that, even though we’ve built loads more cheap, green renewable energy generation in Britain over the last decade or more, those lower costs aren’t showing up in our energy bills. We’ve got to carry on building even more renewable energy because it makes us less dependent on European gas prices and helps us get to our Net Zero targets too. But that won’t be enough on its own. I’ve just published a series of recommendations in a recent review called “Unfinished Revolution” and, if we get on with them quickly, they ought to provide the kinds of long-term answers which will make families warmer, cut businesses’ costs and leave Mr Putin fuming too.
Firstly, to update the system and directly lower energy bills, local residents could be offered discounted electricity if their community gives democratic consent for building new energy kit, whether it’s a new wind or solar farm, or a line of pylons, or a big battery facility to store power for later. They wouldn’t have to agree if they didn’t want to – that’s democracy, after all – but plenty would conclude that the lower bills were worth it. And everyone would benefit because the overall costs for the country as a whole would be miles lower too.
Those discounts would help with the second essential reform: unlocking local agreement to new infrastructure to speed up our incredibly expensive, slow, uncertain and risky planning system. At the moment it imposes unwanted developments on communities that hate them.
And it takes years too: at the moment new green electricity generators have to wait 10 years before they can connect to the power grid. The only people who do well out of it are the enormous and growing armies of lawyers and planning consultants who earn vast fees and a fat living out of making this lumbering, wheezing, over-complicated machine move ever-so-slowly forward. The whole thing needs to be much faster, simpler and cheaper, with democratic community consent outranking legal appeals instead.
Next, the way energy companies are charged for getting power from their generators to families and companies needs to reward the ones that do it well. That means charging less for firms that have generators close to their customers, because it minimises transmission losses in getting electricity to them. And charging less for firms that match their power generation to their customers’ needs most closely throughout each day, so there’s less strain and cost for the transmission grid to soak up, and lower costs for everyone overall too.
Finally, we’ve got to fix the price caps and social tariffs too. When prices start falling and the Government’s schemes aren’t needed anymore, we can’t just go back to the way things were before. We will still need a ‘relative’ price cap to stop energy firms from reintroducing loyalty penalties which sneakily penalise loyal customers who don’t switch. And a small, tight social tariff for the least well-off who are claiming benefits and who will still find energy expensive even when Vladimir Putin has been put back in his box.
My original Government-commissioned Penrose Report came in the wake of covid and before the invasion of Ukraine. Global context may have changed since 2020, but the need to make the UK the most competitive place for investment, support consumers and future-proof our energy system remains. There isn’t a moment to lose.