Chief Executive Sandy Ruthven urges the government to hold its nerve and keep investing for a country that’s more energy secure, greener, more efficient and more competitive.
UK tops the price table
Energy prices are high. We pay more in the UK than most of Europe and the US. There is a very simple reason for this. The price per kW is dictated by gas prices which are usually significantly higher than renewable energy costs. They’re high because of wars in Ukraine and the Middle East. Those of you who are old enough to remember the ‘dash to gas’ back in the 80/90’s will understand we moved to gas-fired power stations because it was cheaper, more secure than oil and much, much cleaner than coal. It is the reason UK carbon emissions have nearly halved since 1990. But we are still at the whim of international prices and more reliant on gas than other countries.
Standing charge ‘extras’
But the government adds extras to our bill. The chart shows you what your standing charge is made up of – that’s the bit that isn’t paying for the actual energy you use.
It pays for the company billing systems (45%), maintenance of the existing wires and pipes (36%) but it also pays for other things too that could be considered ‘optional’. Things like supporting poorer bill payers with their costs, the roll-out of smart meters (which save everyone money), paying off debts from Covid and when companies go bust. But it is the ‘green levies’ that are in the news now. They go towards things like home retrofit and investment in the grid and support for older wind turbines and solar panels.
Image: Ofgem
Savings that will cost dearly
The government is beginning to consider removing some of these levies to reduce bills and I think this is a mistake. If the green levies were removed the average home would save around £200 a year – of course an outcome I would support, but it would leave us with a £6 billion annual hole in the finances.
Let’s start with the name. A levy implies a tax, money that goes into general pot and is never seen again. When in fact this is an investment in our country and the world that we are all contributing to. And in the long run we will see the benefits.
Learning from water
Remember the water companies! Twenty-five years ago Ofwat was tasked to reduce water bills for customers. It did a good job – water bills have been historically low for a long time – but there is a catch: bills stayed low because the water companies didn’t invest in the infrastructure we need. And here we are, twenty-five years later, with a water industry on its knees and sewage flowing into our rivers and lakes.
Let’s not rinse and repeat
By removing investment from our energy bills I believe the same thing will happen to our energy grid; we will see a short-term drop in prices but a long-term degradation of our energy infrastructure. If the government really wants to become a green-energy super power and reduce bills in the long term, it has to keep investing in renewable energy, home and business energy efficiency and our grid.
The government should hold its nerve and think of future generations.
Without investment we will end up with a broken system, leaking energy through the walls and roofs of our homes; we will fall behind on renewable energy generation and lack flexibility in our grid making us less competitive. And, in twenty years time, we will end up paying for it anyway as future governments realise they have failed to invest for decades and our prices will rise like our water bills – nearly 50% in some cases – and sewage will still be spilling into our rivers for years to come.
The government needs to hold its nerve
Some will advocate that the investment should come through general taxation but I just don’t believe it. With government funding cut to the bone and the rise of the far-right net zero sceptics, investment is at risk of being cut back if it is government-funded.
So I say let’s keep investing. There will be some short-term pain but as a country we will be more energy secure, greener, more efficient and more competitive if we keep investing through our bills now. The government should hold its nerve and think of future generations.
