Policy oversimplification not the answer to cheaper energy, say researchers

In a submission to a Government call for evidence on energy costs, a team from Imperial College London argues that cutting red tape is not a cure-all.

Late last year Dieter Helm published his independent review on the cost of energy. Commissioned by the UK Government, the report puts forward proposals on how to reduce costs in the power system in the long-term whilst ensuring the UK meets its climate change targets.

In November the Government the opened a call for evidence on the report’s conclusions. In response researchers from Energy Futures Lab and the Grantham Institute – Climate Change and the Environment have submitted a joint response laying out their views on the report’s recommendations.

The Helm Review is a wide reaching document and one of its arguments is for a streamlining of the country’s energy policy and that this will help lower costs for consumers. It is this point in particular the team disagrees with.

“We believe that the Helm Review has provided a focus for discussions in government about the cost of energy and the impact energy policy has,” says Dr Aidan Rhodes, one of the authors of the response, “However we don’t agree that there is a clear link between policy complexity and consumer price increases.”

The team’s response includes a range of suggestions that they feel could make energy policy more transparent while also ensuring that the Government can meet all its objectives. These include subsidy-free Contract for Difference agreements or a different way of allocating system-wide costs to reduce the impact of increased renewables on customers’ bills.

“The key for us is that all these issues require detailed analysis to determine what changes would actually decrease household energy bills,” explains Dr Rob Gross, Director of Policy at Energy Futures Lab and co-author, “I think the government’s own modelling expertise is a vital tool to test and improve our policy mix and therefore we do not support the recommendation in the Review that it is scaled back.”

The response does not solely focus on these points. The team agrees with the Helm Review’s view that auctions can reduce the costs of both capacity and low carbon contracts. However the team were not convinced that merging the two forms of support is the best way to minimise the system costs associated with variable renewables.

Another issue that the team feel needs to be tackled is innovation and support for new technologies. “For me support for testing and early stage deployment of new technology is key, it is essential to cost effective decarbonisation,” says Alyssa Gilbert, Director of Policy and Translation at the Grantham Institute, “Having such policies in the UK provide opportunities for emerging technologies to enter the market in general and the UK market in particular.”

The response from the team is available to download and read as a PDF. It was compiled by Dr Aidan Rhodes and Dr Robert Gross of Energy Futures Lab; Alyssa Gilbert, Dr Ajay Gambhir and Dr Jeff Hardy of the Grantham Institute; and Ian Temperton, an Independent Expert on Low Carbon Finance.