The White Paper on electricity market reform
I doubt whether anyone has yet digested all 142 pages of the electricity White Paper published this afternoon, but some of the measures have been trailed previously and there has already been debate about the proposed carbon floor price – which TUC Congress supported last year.
In general I think the White Paper is right to propose bold action to accelerate the development of low carbon energy. The twin challenges of combating climate change and ensuring security of supply cannot be ignored and deserve equal priority.
The comprehensive package of measures set out finally give the lie – albeit reluctantly – to any idea that either of these objectives will be achieved by relying on the market alone.
Indeed for the first time the Government has moved some way to specifying the technology mix. There is also helpful recognition of the need a complementary strategy on networks and system flexibility, without which it will not be possible to deliver a bigger share of renewable generation to areas of highest demand.
A stable floor price for carbon can play an important role in stimulating investment alongside strategic government support to stimulate innovation and UK supply chains. It is right that all low carbon plant should be treated in the same way. To date the EU Emissions Trading Scheme has failed to provide such certainty, but getting the carbon price right is essential to support the business case for investment in all low-carbon generation, including nuclear and renewables.
At Prospect, we share concerns about the impact of these measures on consumer prices but, against a background of volatile world energy prices and growing UK dependence on energy imports, we would urge caution in simply blaming the White Paper for rising bills. It is correct to say that prices would have risen anyway to pay for replacement of the UK’s energy infrastructure which has not been prioritised in the 20 years since privatisation.
But there is no disguising the fact that higher bills will hit many households hard, and the Government must take urgent action to alleviate any increase in fuel poverty. The Green Investment Bank should also have a role to play in supporting investments in household energy improvements through the Green Deal.
It is a major omission that yet again the Government has nothing constructive to say about investment in staff and skills – which will be critical to delivering the White Paper’s objectives. It neglects the fact that getting the right engineering skills will be just as important as getting the right financial framework. As this White Paper has ducked the issue, it is essential that the imminent Green Economy Roadmap has a more positive message about skills.