Affordability and decarbonisation must not be prioritised ahead of security of the UK's energy supply, according to a House of Lords committee.
The Economic Affairs Committee said in a report released today – The Price of Power: Reforming the Electricity Market – that decarbonisation should be achieved at the lowest cost to consumers.
“This may mean waiting for the development of new technologies which can reduce emissions,” the committee said.
“The government should make sure that the pace of reductions is flexible and not a rigid path to be achieved at all costs,” it added.
The report said that constant intervention by successive governments in the electricity sector has led to an opaque, complicated and uncompetitive market that fails to deliver low cost and secure electricity.
It said that the current system exhibits rising costs to consumers and businesses – a 58% increase since 2003 – and there is only a narrow amount of spare capacity.
Government interventions in the market should be reduced by ensuring that electricity generating capacity is secured through a single, technology-neutral, competitive auction for supply.
“This auction would ensure that consumers are paying the lowest prices for low-carbon electricity,” the committee said.
An Energy Commission should also be set up to provide greater scrutiny of energy policy decisions.
“This independent advisory body would report to the Secretary of State and advise on the best way for all the objectives of energy policy to be delivered,” the Lords said.
The establishment of a National Energy Research Centre would also help bring new cheap and clean energy to market, the report said.
Economic Affairs Committee chairman Lord Hollick said: “Poorly-designed government interventions, in pursuit of the decarbonisation, have put unnecessary pressure on the electricity supply and left consumers and industry paying too high a price.
“The government must make sure that the security of the UK’s energy supply is the priority of its energy policy. Affordability must not be neglected and decarbonisation targets should be managed flexibly.”
But Michael Grubb, Professor of International Energy and Climate Change Policy at UCL said the report is “marred by a slanted presentation of conclusions and statistics”.
He said the report “cites the big rise in electricity bills without acknowledging the impact of gas prices as a key historic driver of this over the past decade."
Grubb added: “It is comparing apples with oranges in a generalised claim that generation from fossil fuels is cheaper than renewables.
“And it refers to the cost of backing up renewables, without acknowledging that these costs to date have proved far less than predicted, and that the cost of backup so far procured under the capacity mechanism will add barely 1% to electricity bills.”
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