Many of the 5 million vulnerable households who already have their energy bills capped will be hit by an average price hike of £57 a year from Sunday. Five of the big six energy firms are raising their tariffs for prepayment meters – mostly used by renters and people who have fallen behind on payments – to within £1 of the new £1,089 cap. SSE may yet follow and make it a full house. Some might call it cynical to price so close to a cap intended to protect society’s poorest. Consumer champion Martin Lewis says it shows how “flaccid” the cap has proved. The bigger question is: if this is how energy companies act towards vulnerable consumers, why should they act differently when Theresa May’s flagship cap comes in? The prime minister’s wider cap for 11 million households on poor-value standard variable tariffs is expected to get royal assent this summer, and take effect at the end of the year. The Conservatives promised people savings of up to £100 on their bills. The cap would, the party’s manifesto said, “protect energy consumers from unacceptable rises”. But the reality is that a cap is not a freeze, as the former Labour leader and proponent of price-freezing Ed Miliband has been at pains to point out since the Tories remixed his idea. A freeze results in prices staying the same for a set period. The cap means that every six months the energy regulator reviews the costs facing suppliers – and potentially hikes the ceiling up, just like the regulator, Ofgem, has just done with the prepayment cap. The only real answer to protecting consumers from rising energy bills is twofold. First, a serious energy efficiency scheme to permanently cut costs. That would also help address the energy security fears raised by recent cold snaps, energy researchers concluded last week. On Friday the government took a small welcome step by refocusing its £640m-a-year energy efficiency scheme, ECO, 100% on low-income households (it was previously 70%). But the funding is still much lower than under previous insulation schemes. Second, there needs to be a U-turn on the government’s ban on onshore wind subsidies, which offer the UK the cheapest form of new low-carbon generation. Ministers know that, economically speaking, onshore wind makes sense: they just need to execute the political acrobatics and back a policy that will genuinely help billpayers.
Guardian 1st April 2018 read more »
The media is awash with stories of the imminent emergence of ‘subsidy free’ wind and solar power in the UK, but the reality is that the uncompetitive nature of the British electricity market mostly undermines that prospect. In theory onshore wind power and maybe some solar power projects would be able to generate power to sell at competitive prices on the British wholesale electricity market. In practice most of the potential buyers of energy from new renewable energy projects will not be interested in buying the energy even at cheap prices simply because it conflicts with their own generation portfolios. True, there is a limited possibility for some very large corporate consumers who are interested in buying green electricity to fund new projects by issuing corporate power purchase agreements (PPAs). But in reality this market is small, and I have heard this estimated to be no larger than 100 MW a year. That means it would take around 20 years for not quite 1 per cent of electricity to be supplied this way. PPAs are needed for new renewable energy projects that offer the genrators the certainty that they can be paid a minimum amount for each MWh that they produce for the long term. The UK Government’s PPAs, called contracts for differences (CfDs), last 15 years. However they are no longer available for onshore wind and solar. The problem is that most of the market for offering PPAs that can fund new renewable energy projects comes from the big electricity suppliers, who have been known in the past as the ‘Big Six’. Only PPAs offered by really large companies will be usually taken seriously enough by banks and and other institutions to enable renewable energy projects can obtain long term loans or equity. The trouble is that the Big Energy suppliers will usually have little interest in offering long term PPAs to new renewable energy projects since. For a start they can buy in power at much the same price as the renewable energy generator can offer without needing to commit themselves to long term agreements. Crucially, the big electricity companies are struggling to keep their own power stations in business, and are not going to sign up competition from other people for their own business!
Dave Toke’s Blog 1st April 2018 read more »