UK government intervention has made energy more expensive

Constant government intervention in Britain’s energy sector has led to a complex system of subsidies and an uncompetitive market that fails to deliver low-cost and secure electricity, a report by an Upper House parliamentary committee said.

Successive governments have taken measures since the early 2000s to encourage lower-carbon electricity generation, such as the closure of coal plants and subsidies for renewables and new nuclear plants, the Economic Affairs Committee report said. Power generated from fossil fuels is still cheaper than from renewables, the report said, and the average domestic electricity bill has risen 58 per cent since 2003.

The government is under pressure to act on rising energy costs after three of Britain’s biggest energy suppliers announced price rises over the last few months. “Poorly designed government interventions, in pursuit of decarbonisation, have put unnecessary pressure on the electricity supply and left consumers and industry paying too high a price,” Clive Hollick, Chairman of the committee at the House of Lords, said in a statement.

The report said numerous schemes and subsidies designed to encourage renewable generation and investment in new power plants were not ensuring security of supply.

There are also concerns about the reactor technology and finance for EDF’s (EDF.PA) planned Hinkley Point C nuclear plant in southwest England and other nuclear projects.

“It is imperative that the government publishes contingency plans for how it will make up the capacity due to be provided by these plants in the event one or more does not succeed or is delayed,” the report said.

The committee advised the government to reduce and remove interventions in the market by securing generation capacity through a single competitive auction for supply.

[Reuters]