Energy market can’t just be ‘stitched together again’

The enormity of recent changes, which have left the UK energy market “completely broken”, have yet to be genuinely grasped, the shadow energy minister has warned.

Speaking at a fringe meeting at the Labour conference on Monday (26 September), following yesterday’s pledge by party leader Sir Keir Starmer to decarbonise the power system by 2030, Alan Whitehead said that the huge increases in power prices recently could not be treated as a temporary spike.

“We genuinely still have not quite grasped the enormity of the change that has happened with energy markets over the recent period and the extent to which the UK energy market is fundamentally unable to deal with it.

“It’s completely broken and there is frankly no stitching it together again in the near future.

“But we’ve also got to take a pretty clear-eyed look about why the system has got us to where it is now and what we need to do about it for the future. That’s about getting off gas and getting the balance between the supply side and demand side much better calibrated.”

The Conservatives’ focus over recent years on encouraging customers to switch suppliers seemed a “particularly inane policy” given that competition has virtually ceased in the retail market, he said: “We’ve only got 15 or so survivors now. The question that we got to get to grips with in the very near future is what are those survivors going to look like. They can’t do more of the same because the same doesn’t exist anymore.”

Whitehead told the meeting, which was held by the Social Market Foundation think tank and sponsored by Citizens Advice, that retailers must start looking at how they change from being traditional energy suppliers to providing a broader range of energy service, including energy efficiency.

“That actually means you’ve got to stay with that company for a rather longer period than that switching regime suggests. There’s a big area there, we’ve got to get to grips with as far as a future energy retail policy is concerned. “

While the government had no option to capping prices this winter, it must carry out market reform to decouple electricity wholesale prices from those of gas, he said: “That is something that we’ve got to do in a very short time. If we don’t, the volatility and the high prices of gas are going to stay with us throughout that period when they’re making the change.”

Whitehead also said he would like to “dragoon” local authorities to take the lead on rolling out cross neighbourhood energy efficiency schemes.

“The government’s got some wonderful targets about how to improve energy efficiency in houses but no method whatsoever as to how to do it.”

He added that he expected half of homes will be equipped with heat pumps in the future with the balance equally divided between district heat networks and hydrogen boilers.

Gillian Cooper, head of energy policy at Citizen’s Advice, told the same meeting that energy bills were going to be “higher than normal for an extended period of time, possibly to the end of this decade.”

Reform of the energy market will be a key theme at the Utility week Forum on 8-9 November in London. Find out more here.