Professor Helm CBE puts forward proposals on how to reduce costs in the power system in the long-term whilst ensuring the UK meets its climate change targets.
BEIS 25th Oct 2017 read more »
An independent government-commissioned review into the cost of energy has concluded energy prices are being pushed up by years of government policymaking distorting the market and shackling consumers with hefty legacy costs. The controversial review, led by Oxford academic Professor Dieter Helm, argues the costs of high-profile clean energy policies such as the Renewable Obligations Certificate, Feed-in Tariff and Contracts for Difference (CfD) schemes are largely responsible for rising energy prices. The paper suggests without excessive market intervention the cost of energy should fall as technologies improve and costs continue to come down. The solution, according to Helm, is to radically simplify the energy market to allow market forces to find the most efficient route to decarbonisation. Following this vein of thinking, the Feed-in Tariff system and the Contracts for Difference programme should be phased out and replaced with a “unified equivalent firm power (EFP) capacity auction” to ensure “the costs of intermittency rest with those who cause them”, the paper argues. This system would encourage intermittent generators – such as wind farms or solar farms – to team up with stabilising technologies such as battery storage to secure a power supply contract, it claims. Meanwhile, the legacy cost of clean energy policies should be ring-fenced into a ‘legacy bank’ that are charged “separately and explicitly” on consumer bills, with industrial customers exempt from the charges. And instead of further individual market interventions, Helm argues the most effective way to meet the UK’s climate targets is the introduction of a universal carbon price across the whole economy, which he claims would be cheaper than maintaining multiple market interventions. A government press release announcing the publication of the review was non-committal over the extent to which it would take his advice on board. It has already committed up to £557m for low-carbon CfD auctions, with the next one to be held in Spring 2018. James Court, head of policy and external affairs at the Renewable Energy Association, said the review contained ideas 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”. “The energy market is changing rapidly, and the future energy market can be lower cost, lower carbon and centred around the consumer,” he added. “This report hints at the evolution of the industry, but perhaps doesn’t fully recognise the fundamental shift that is happening from centralised and inflexible generation to a smarter, more connected and decentralised energy system, and the policy framework needed to make that happen.”
Business Green 25th Oct 2017 read more »
Dieter Helm has recommended that feed-in tariffs and Contracts for Difference auctions be phased out and merged into a single, unified Equivalent Firm Power (EFP) auction to better reflect costs associated with intermittency. The proposal, which is likely to prove contentious, is included within the academic’s eagerly anticipated cost of energy review which also includes specific mention of the “excitement” surrounding next-generation solar generators. Helm’s review details his considerations that households and businesses had not been able to fully benefit from the rapid decrease in costs associated with renewables. This, Helm said, had been a result of legacy costs associated with ROCs, FiTs and CfD awards used to stimulate investment in low carbon generation.
Solar Power Portal 25th Oct 2017 read more »
Energy bills ‘significantly higher’ than necessary, review shows.
FT 25th Oct 2017 read more »
Telegraph 25th Oct 2017 read more »
