Solar, Nuclear, and Renewable trade associations support call for ‘radical change’ after Helm highlights too-high household energy bills

Professor Helm’s Cost of Energy Review has concluded that current energy policy, regulation and market design are not ‘fit for purpose’ given the speed of technology change.

Helm characterises the government’s energy policy as ‘picking winners’ to a degree not seen since the days of the Central Electricity Generating Board.

And – according to the Solar Trade Association – he also correctly highlights digitisation as driving a major structural break in the sector, requiring a radically different approach.

Chris Hewett, STA Head of Policy, said: “There are plenty of contradictions in Helm’s Review and his fixation with solar R&D is an unfortunate distraction.

“However, even if we don’t agree with all of his answers, this Review asks the big, strategic questions that need to be asked today, given massive technology change. Helm is also rightly looking at how to inject market forces back into energy policy for the benefit of consumers.

“Something has gone very wrong with the Government’s approach to energy markets when the cheapest and most popular technology <ie solar> is shut out.

“We hope this Review will prompt an urgent rethink and without further prolonging uncertainty for our industry.”

Professor Helm wants to see major institutional reform in the electricity sector so that a publicly owned National System Operator and Regional System Operators oversee more simplified regulation, with much greater use of competitive tenders and auctions.

The STA is keen to see faster opening up of markets for new, smart services, including in network deferment, and more liberalised balancing markets.

Helm also advocates Equivalent Firm Power auctions, where generators would be expected to internalise the costs of variability and of carbon. Helm does not mention the system costs of technology inflexibility. 

Hewett added: “However, the STA does not agree with Helm’s characterisation of solar power as requiring R&D. Many commercial solar companies are leading R&D lab breakthroughs.

“Multi-junction cells offer a further potential step change in technically achievable efficiencies – however these are very expensive and require manufacturing innovation and market development to reduce costs.

“Solar is already providing the most cost-effective source of energy in many parts of the world. These cost reductions, which Helm rightly praises, are in large part due to the deployment driven by government and consumer support mechanisms.

“Most of the costs of solar in the UK are in the installation, grid connection and other costs, rather than the panels themselves. Going forwards, the great majority of cost reductions are expected to come from these sources, highlighting the importance of national frameworks.”

Jonathan Selwyn, Chairman of the Solar Trade Association, added: “We welcome the Helm report’s potential to open up much-needed discussion on fairer markets that deliver better outcomes for consumers.

“The solar industry stands ready to compete on an equal footing with other technologies. However, it is disappointing that the report gives the impression that support mechanisms for early stage renewables are the major cause of rising bills.

“Recent studies show that support measures drive down the price of renewables, have lowered wholesale prices, and we know that renewable power provides protection against the unpredictable volatility of fossil fuel prices.”

The Renewable Energy Association agreed with the Solar Trade Association that large-scale thinking is needed in this time of transformation but said that the Helm report has fallen short of fully recognising the opportunities that are emerging  from a more decentralised, renewables-oriented energy system.

An REA spokesman commented: “There is broad thinking in this report that the renewables industry can get behind, especially that we need to decarbonise in the lowest cost way, and that uncertainty and continual government interventions can add to overall costs.

It is time for policy reform that gives industry longer term certainty about how the sector will be structured so that companies can make proper investments in manufacturing capacity.

“The energy market is changing rapidly, and this report hints at the evolution of the industry, but perhaps doesn’t fully recognise the fundamental shift that is taking place from centralised and inflexible generation to a smarter, more connected and decentralised energy system, and the policy framework needed to make that happen.”

Steven Day, co-founder of Pure Planet – an independent energy provider – commented; “This is a refreshing and welcome report by Professor Helm which rightly makes the point that people in this country are paying too much for their energy.

“We are particularly happy to see a pro-market approach being recommended. Too much government tinkering in the energy industry has led to a lack of clarity which is driving down customer engagement.

“Transparency on tariffs and pricing will lead those customers to choose better deals with cheaper, cleaner suppliers.”

 Lawrence Slade
Lawrence Slade

Energy UK chief executive Lawrence Slade commented: ““The industry has made great strides forward, with half of our generation now coming from low carbon sources and, as shown by the recent Contracts for Difference auction results, the cost of renewables is falling significantly.

“However when costs outside of suppliers’ control are levied on to customer bills we should be clear about these, as well as working hard to minimise them.   

“We will now look in detail at Professor Helm’s report and will respond to his recommendations.”

Tom Greatrex
Tom Greatrex

Tom Greatrex, Chief Executive of the Nuclear Industry Association, said: “This review provides an interesting analysis of how to meet emissions targets, secure the energy supply as current generation capacity nears retirement, while highlighting the complexity of energy policy in the UK.

“We welcome the recognition of past failure to account for the cost of intermittent generation.

“What is clear is that more intermittent power on the system will lead to higher additional costs, which isn’t reflected in the simplistic headline price comparisons we see.

As the distinction between energy and electricity diminishes, we’ll need a mix of low carbon power to meet our decarbonisation and security of supply objectives. That is why policy should be informed by a whole system approach.”

Greatrex also chided some elements of the renewable energy sector, adding: “Those who are serious about addressing these challenges should know better than pitting low carbon technologies against each other.”

26 Oct 2017

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