Lords launch inquiry into UK energy policy market failure over rising prices and supply threats

Fossil fuels and renewablesThe House of Lords’ Economic Affairs Committee has launched a new inquiry into the economics of the UK energy market, which have focused on three objectives over the past 10 years: –

  • Maintaining continuous supplies of energy and minimising threats to energy security;
  • Ensuring that the costs of energy supply are competitive for business and individual users; and
  • Decarbonising the mixture of energy used in the UK as a contribution to the international effort to minimise the risks of climate change.

Lords will consider whether the present mix of policy interventions and subsidies have led to failures in the energy market. It will look at what measures are required to correct these failures.

The accelerated closure of coal-fired plants and subsidies for renewables have been the principal means of securing decarbonisation.

Paying for subsidies by charges on consumers, rather than from taxes, has meant that prices have risen while the resultant lack of investment in baseload capacity means that continuity of supply is now seriously threatened.

This suggests a dysfunctional energy market or a conflict of government policies. But the inquiry will not consider arguments about the science behind climate change because ‘the Government’s commitment to reducing carbon emissions is taken as a given’.

House of LordsLord Hollick, Chairman of the Committee, said: “In our report into the economic impact on UK energy policy of shale gas and oil in May 2014, we concluded that there had been a lack of clarity and consistency in energy policy over many years.

“This failure of policy had left the UK dangerously close to lacking sufficient electricity generating capacity.

“Over two years later, little has changed. Coal power stations are being closed and old nuclear stations are coming towards the end of their life. But it is not clear how they will replaced and at what cost.”

“The core question for the Committee is;’ Are there failures in the energy market and what measures are needed in the future to correct them?’”

“The energy market involves an extraordinarily complicated mix of policy interventions and subsidies.

“Every investment in electricity generating supply is effectively determined by the Government. This inquiry will seek to investigate whether current policy is delivering the best deal for energy users and whether it is striking the correct balance between private and public sector involvement.”

The deadline for submissions is 30 Sept 2016

Economic Affairs Committee
Committee Office
House of Lords
London SW1A 0PW

Telephone: 020 7219 5358
Fax: 020 7219 4931
Email: economicaffairs@parliament.uk

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