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The surge in wholesale energy costs over the last year could help to flesh out UK’s net zero strategy by forcing earlier “evolved thinking” around how power is generated, So Energy’s founder has suggested.
Former Macquarie trader Simon Oscroft was speaking in the wake of Ofgem’s announcement last week of a £693 price cap hike and the government’s unveiling of a £9.1 billion support package to soften the blow, including a £200 rebate on electricity bills in October.
Oscroft told Utility Week high energy prices have raised questions about the country’s generation strategy and its exposure to worldwide commodity prices.
He added “Hopefully we also get some more evolved thinking earlier on in this decade as to how we generate our energy and how we bring it into the country so that longer-term net zero strategy can get fleshed out earlier.
“It feels like we have all been exposed to that big increase in wholesale costs. Everyone just wants cheaper energy. That exposes the net zero strategy. There’s some thinking we need to do as a nation quite quickly in 2022 to build that 10 or 20-year view.”
The government announced on Tuesday (9 February) that it is moving to annual Contracts for Difference (CfD) auctions, rather than once every two years as has previously been the case.
Business and energy secretary Kwasi Kwarteng said the government is “hitting the accelerator on domestic electricity production,” adding: “The more clean, cheap and secure power we generate at home, the less exposed we will be to expensive gas prices set by international markets.”
Oscroft said the energy crisis has also exposed problems with price cap, which he believes is unsustainable over the long term.
He said: “We’ve essentially just delayed a massive increase in cost on customers and we are also adding additional costs to them because we have seen a load of supplier failures and that money is then going to be spread disproportionately across the country.
“So Energy has been well managed all the way through and well backed by ESB. We believe having a framework that doesn’t involve a price cap will lower costs over the long term. That will be for all customers, not just standard variable tariff customers. All of our customers will be in a better place if we didn’t have that price cap methodology.”
Commenting on the measures unveiled by government, Oscroft said that, while any support is welcome, the cost of living crisis is on a scale “much greater” than the support offered.
“We are expecting the cap to go up by another £200 in October. That piece of funding announced by the chancellor doesn’t really do enough to make a proper dent in the £700 that we are staring at today. There is room for the Treasury to increase funding and smooth out some of the bill shock even more,” he added.
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