The Prime Minister has made clear her intention to intervene in the energy market to stop the rip-off standard variable rate tariffs. Her focus on this will be popular with consumers and harks back to Ed Miliband’s opinion-poll-shifting promise of an energy price freeze.
James agrees with what she intends to do. The gap between the bills of the savvy switcher and those that stay put on standard tariffs is too large and the non-switchers are too often those who find their energy bills hardest to pay. Writing to people to prompt them to switch will not solve the problem and it is wrong that those who will not play the market are exploited.
However, he worries that focusing exclusively on regulating price within the existing market leads to missing some important opportunities to reduce bills in other ways.
Firstly, and most importantly, efforts in promoting greater energy efficiency within the home and business must be renewed. Capping prices might remove the imperative to worry about energy usage and so the most obvious incentive is lost; simply paying less because less is being used.
Secondly, James believes there is a need to be clearer on the benefits of upgrading our energy system. What are the opportunities to reduce transmission and distribution costs through localized generation? Is so much generation capacity necessary when a decentralized energy system is so much more resilient? Does the digitized energy system allow the system operators to operate on lower capacity margins? Are people fully harnessing the cheapest generation technologies? To the average consumer this is profoundly technical– and very dull – stuff, but this should be as important to policy makers as capping profits for the big energy companies. This is the one bit of the energy revolution that consumers cannot do for themselves.
Thirdly, the opportunities that clean tech and the arrival of the internet of things will play in reducing bills need to be embraced. Storage and demand response are no longer the obsession of the "loony Green", they are an obvious solution to empower consumers to shift their load and take full advantage of the discrepancies in supply and demand that lead to such fluctuations in energy prices. The potential savings for both the business and residential consumer are huge, especially when allied to some localized generation capacity too.
The irony that Ed Miliband, who led the charge in changing the debate over clean tech, should have been the politician to fracture the consensus is not lost on James. The infamous “cut the green crap” line from David Cameron was a response to the clear enthusiasm amongst voters for Miliband’s promise of an energy price freeze. The view was compounded when steel mills were closing and citing high energy costs as the cause.
Government must now walk a tightrope. The energy market is still broken, consumers are being exploited and intervention is well justified. But it must also be that capping prices in the current system is not much different to capping the price of horse feed when the future was obviously the motorcar. One simply cannot take one's eye off the opportunity for consumers that comes with the system upgrade nor should one be blind to the productivity gains it delivers either.
Clean tech is not just about decarbonizing in the same way as moving from the horse to the car was not just about comfort. It’s about embracing technological progress and the productivity gains it brings. If the energy market is going to be looked at again, it should be made sure that whilst looking at the existing market and making sure that it works for consumers now, the potential future market should also be looked at and considered.
Study after study has shown that the flexible and digital energy system of tomorrow brings huge savings - some would say as much as a 50% reduction on bills. Not to mention the obvious quick win of re-focusing on getting people to just use – and therefore, pay for – less energy. This is just good, future proof policy making and the benefits to consumers are more permanent than any market intervention, no matter how needed that is right now.