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Bemused observations on energy policy debate

This week I am pleased to introduce a guest article written by Gearóid Lane, whose expertise on the subject of energy I can personally attest to. Formerly a member of the British Gas Executive Committee and member of the government’s Renewables Advisory Board, he is now Chief Executive Officer of AgilityEco, a company that harnesses the knowledge of its founders in the provision of services surrounding energy efficiency and facilitates eco projects that tackle systemic issues such as fuel poverty - Peter Rolton

11th November 2013    |     Gearóid Lane: Chief Executive Officer, AgilityEco

As a former senior director of British Gas, I look on with some alarm at the rapid deterioration of the reputation of energy companies in the eyes of the Great British public. Of course, energy suppliers have never been highest in the popularity stakes, but in their defence they have tried hard to improve customer service over the years: they do a lot to look after their most vulnerable customers, they’re investing billions to keep the lights on, and fundamentally they can only operate in the market that the politicians and civil servants have designed for them. Still, despite many years of constant market enquiries and a never-ending series of “market reforms”, the accusations of a rigged market, over complex pricing, profits being hidden in the upstream business and suchlike persist, not based on any evidence but on rhetoric and unfounded claims. I even heard on the radio just now someone wishing that switching energy suppliers could be made easier “like they’ve done for bank accounts”!

In my opinion, the energy suppliers are being used as a political football. Prices are going up, and they will continue to go up over the long term; this isn’t because the suppliers are making higher and higher profits, profit margins in supply are less than 5% and have remained around that level for several years. It’s also hard to class the upstream prices at which energy is transferred between wholesale and retail as being excessive, as power prices are below the level that will allow us to build the new power stations that we badly need and the vast majority of the gas supplied is bought from companies that are completely unrelated to the major energy suppliers themselves.

But enough of that, the issue that really worries me is the latest round of politics. In an attempt to win back the upper ground in the political debate and counter Labour’s highly popular but patently stupid price freeze, the government has decided to roll back green taxes and charges. It may be expedient to deflect blame for rising bills onto these so-called “green taxes and charges” but:

(a) They’re not going to make a blind bit of difference – they only represent a few per cent of the bill; (b) They are there for a purpose – to look after our most vulnerable customers, to help us reduce energy demand in our leaky houses and to reduce our dependence on high-carbon imported fossil fuels; and

(c) We’ll have the same debate all over again next year and the year after and the year after that until we have the honest conversation about energy and actually tackle the disease rather than the symptoms.

So how do we tackle the disease? We reduce our dependence on high carbon, imported, scarce and increasingly expensive fossil fuels for heating and for electricity. We do this in two ways: improve energy efficiency and produce more renewable heat and power. But hey, hang on, isn’t that what the “green taxes and charges” are there for…?

All of this demonstrates one thing to me: energy policy must be set and then followed through by brave politicians with long-term vision, who are willing to have the real conversation rather than simply play to the gallery. Unfortunately, we don’t have any of them right now so in the meantime those of us that operate in the low carbon/energy efficiency markets must expect to see continuous change and volatility. These are not ideal conditions for building an important new industry but hey, it’s all we’re going to get.

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