Why we can't afford to move post-truth in energy policy

01 Mar 2017

UK energy prices are uncompetitive. Renewables are to blame. A House of Lords report says so. Three statements, widely reported in the press. None of them true. How can this be? The Lords are supposed to stand above the fray. Their enquiries are thorough, open, take evidence from anyone who takes the trouble to write in. Their evidence hearings are even broadcast on the Parliamentary website. Evidence is often conflicting and complex. Committee staff go to great lengths to analyse it. I know because in my capacity as an academic I've been able to act as advisor to both House of Lords and Commons enquiries. 

 

Let's take the first statement. Are our energy prices uncompetitive? Domestic prices in the UK aren't high. They are almost exactly mid-table in Europe. Taxes and levies aren't particularly high either. Consumers in Germany for example pay much higher environmental charges. The Lords are concerned about industry prices - which are indeed rather high. So is this down to renewables? No. It can't be. Why? Because energy intensive industries are exempt from most of their costs or compensated through rebates. The Lords report even goes so far as to say that we need to understand why industrial prices are high. It isn't obvious and the Lords are right to call for more work on this. But it's not because the UK is out on a limb on renewables. 

 

Even for domestic consumers the impact of renewables is modest. Environmental policies add about 10% to bills. This isn't opinion. It is a fact carefully worked out and documented in government statistics. All the data are available too so there really shouldn't be any debate about this. 

 

The Lords report actually explains all these facts in the detail. Indeed much of the detail in the report is good stuff. Complex and dull perhaps, but that is energy policy for you. Yet in its summary it overlooks its own analysis. Instead it makes two important but unconnected statements next to each other – “Governments have subsidised renewables, passing on the cost to consumers in their electricity bills. The average domestic electricity bill was 58 per cent higher in 2016 than it was in 2003 [and] industrial electricity prices in Britain today are higher than anywhere else in Europe.” 

 

Most readers won't get beyond the summary. Most would infer causation and so a new meme has been created. We have high bills and renewables are to blame. But it isn’t true.

 

The truth is that bills went up almost entirely because the UK still gets most of its power from coal and gas. Fossil fuel prices went up, relentlessly until 2014. When they fell, wholesale power prices started coming down but end user prices appeared rather more sticky. This is a concern, but it has little to do with renewables. Indeed if the UK were less reliant on fossil fuels we would see more stable bills, since renewables have no fuel costs and the cost of nuclear fuel is a small fraction of total costs. It is no coincidence that countries like France or Norway which invested heavily in nuclear or hydro several decades ago now have some of the lowest power prices.

 

There's lots to debate in energy policy. Is a 10% penalty for renewables too high? Is the market working? Why are investors reluctant to build new gas power stations? What will Brexit mean for a country that relies on imported gas, not just to keep the lights on but to keep us all warm? If electric cars really take off then will local power networks cope? And so on. When she was Energy Secretary Amber Rudd said that she wanted to make energy  policy 'boring'. Energy geeks like me might not warm to that, but the sentiment is right. Energy policy is too important for short term political point scoring.  It's extremely disappointing to see that even the House of Lords can't resist the temptation not to prevent the facts from spoiling a good story. 

 

Dr Robert Gross is Director of the Centre for Energy Policy and Technology at Imperial College and a UKERC Co-Director. He is a former advisor to the House of Commons Energy and Climate Change Select Committee and House of Lords European Union Committee.