Although the introduction of the Energy Price Guarantee is a broadly welcome and a required intervention by the UK Government, there are number key clarifications still needed.
The Guarantee is designed to limit the damage of the energy crisis, and protect consumers through winter, and was announced less than a week after Liz Truss took up office as Prime Minister.
This short time frame must be remembered, said panelists during a webinar this morning, along with the need to replace short-term support with concrete measures to act as the catalyst for the future energy system. This in turn will promote a secure and green energy system for years to come.
“The Energy Price Guarantee has been quickly introduced and is focused on damage limitation. This needs to be changed to a policy that lays out positive outcomes for the future that everyone can get behind,” Simon Skillings, senior associate at E3G said during the latest Current± Briefings webinar this morning (22 September).
The Energy Price Guarantee sets the average domestic energy bill at £2,500 by setting the unit prices at 34.0p/kWh for electricity and 10.3p/kWh for gas for variable tariffs, and is expected to cost upwards of £100 billion.
An important detail is that the scheme will not cap energy bills at £2,500 but instead cap the unit prices. A recent study revealed that 40% of the general public in the UK did not realise that their bills could exceed £2,500, highlighting the need for greater communication.
Greater clarity from the UK Government on these new support measures is crucial for its success, helping prepare customers for the future.
This perspective is supported by Stuart Dossett, senior policy adviser at Green Alliance, who argued that although the measures are huge for the industry, more communication on what they do is greatly needed.
“It’s a very big package but it will also create national energy expenses. There’s lots of positive aspects to the newly introduced measures however it needs more communication around it. There’s a lot of confusion about what the package actually is,” he said.
He suggested that energy efficiency should be a focus for the new measures. With the recent schemes announced expected to steady the ship in the energy sector, an opportunity is now presented to the government and energy sector to develop a bill that can spearhead the creation of an efficient energy system.
This point was also emphasised by other panelists, including Robert Buckley, head of relationship development Cornwall Insight and Rachel Hayes, associate director of Regen.
“The new measures show huge levels of ambition from government, the likes we haven’t been seen before for decades. However, I would like to see some measures introduced to boost energy efficiency,” said Hayes.
Increasing energy efficiency amongst the average British household could have a huge effect on the system. By opting for efficiency of the energy use over the quantity generated, each household could reduce their consumption and help mitigate the need for the development of vast amounts more energy generation.
This perspective is supported by Dossett, who believes that a campaign led by the government could have a fundamental role in creating more energy efficient practices around the UK.
“To support energy consumers in the medium term, we need to see a campaign from the government focusing on energy efficiency measures all consumers can do to make a difference. This should include easy energy efficiency measures everyone can undertake,” Dossett said.
Energy efficiency has already been a huge discussion point for the UK energy sector in recent months. In the same report that branded Ofgem as ‘incompetent’, the Business, Energy and Industrial Strategy (BEIS) select committee also called for greater energy efficiency measures to be introduced.
The report highlights a number of additional areas where policy support could make a difference to supporting customers, not least support for energy efficiency measures. This would be the most cost-effective and quickest way to reduce Britain’s dependence on gas and lower bills.
In developing energy efficiency, the recent Review of the Electricity Market Arrangements (REMA) could well develop the much need market reform required to help the energy sector transition to net zero, boost efficiency in households and optimise the UK energy system. Skillings believes more needs to be done to boost this development and make it more efficient.
“REMA is set up as a beauty contest in the energy sector,” he said. “What it needs to be is a process of constantly updating the markets in a way to drive a better energy system.” If this can be achieved, and an energy reform conducted, the UK could well benefit from greater energy security and cheaper bills whilst also spearheading the transition to net zero emissions.