Helm Talks - energy climate infrastructure & more6 Jan 2022

The first net zero energy crisis

Energy price crises are usually triggered by external events. But the UK has been hit particularly hard by the global gas price increases, and for mainly home-grown reasons. This is the first net zero energy prices crisis and, unless action is taken, there will be many more to come. There are two main reasons: the energy system is not designed to handle the intermittency of the renewables; and the legacy costs from past subsidies on renewables confront consumers with rising prices when costs are falling. They both need to be urgently addressed, because the 2035 target to completely decarbonise the electricity system is a mere 13 years away. The key steps were set out in the Cost of Energy Review in 2017: socialise the legacy costs, split out the system operators so that they can oversee the pathway to the net zero targets, move away from wholesale markets to Equivalent Firm Power so that those who cause intermittency have to pay for it, and make the polluters (ultimately you and me who buy the power) pay the costs through proper carbon energy pricing. Short-term sticky plasters, such as abolishing VAT, will make matters worse, and abolishing the price cap (or even shortening the period) will encourage a return to some of the appalling behaviour in the supply market before the cap was introduced and avoid the obvious necessity to regulate the market properly. Better to get on with the fundamental reform as set out in the Cost of Energy Review and tell the public the truth: that net zero is going to cost, and, without reform, it is going to cost a lot. And if politicians are not prepared to say this, then admit that all the hype at Glasgow from the UK side was just that - hype.

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