Energy Reset: We have been dishonest with the public

As part of our Energy Reset campaign, Utility Week has been gauging the views of senior retailers on long-term reform of the market. In the latest summary of their responses, we discuss claims that the industry, politicians and regulators have not been honest with consumers over the complexities – and the cost – of the energy transition.

Ofgem’s announcement of an almost £700 increase in the energy price cap from April put it in the context of a “once in a 30-year event” – in reference to the volatility of global gas prices.

The regulator went on to promise it was working to “diversify our sources of energy which will help protect customers from similar price shocks in the future”.

However, senior figures across energy retail have told Utility Week there is a danger of down-playing the complexity of the energy transition and the implications for power prices over the coming decades.

They expressed fears that price volatility will remain a facet of the energy market for years to come and that a proliferation of renewable generation alone will not solve the issue. Is there a risk of this leading to a lack of trust in the net-zero journey or that climate change sceptics seize the narrative?

At a roundtable held prior to the cap announcement, and the accompanying support measures unveiled by the Treasury, sector leaders insisted it was time to initiate a grown up conversation with the public about reaching net zero and the fact there are no easy answers.

The head of a major supplier said: “We’ve got a great opportunity here to be upfront and honest with the consumer that we can have a massive reduction in fossil fuels and as long as we’ve got an interconnector with the rest of Europe we will not remove volatility in prices. Unless we cut ourselves off and become an economic island, it won’t happen.

“We need a whole lot more renewable energy but we have to be honest with consumers that that in itself won’t solve it. We need smarter grids but when the wind doesn’t blow we’ll be in trouble because we don’t have enough batteries.

“We have collectively – as an industry, policymakers, regulators – been dishonest with the public. This is a really complicated problem and there isn’t an easy fix. Just racing towards fossil fuel removal without a proper plan will make this problem worse. I know that’s inconvenient but it’s true and we have got to be careful.”

This was echoed by another executive of a large supplier who stressed that honesty around the energy transition was “fundamental” and attempting to simplify the issue was simply “delaying an awkward conversation”.

“What we have had in terms of the energy policy debate is essentially ‘we’ve capped the price, so don’t worry about that, and we’ve got a long-term aspiration to get to net zero, so that’ll solve the problem’. There hasn’t been that much thought about the transition itself and how you cut over from the fossil-based system we have at the moment into one that is much more demand, much more dynamic and renewables-based.

“There is a real risk of continued periodic crises and high volatility during that cut-over. That honesty hasn’t been there.”

Treat the climate crisis like the pandemic

Another senior supplier pleaded that while wider reform was needed, a positive message about the benefits of renewables must be maintained.

“We have to recognize that renewables, even before this crisis, were cheaper at generating energy than fossil fuels. Every single wind turbine we build for some time to come will reduce the cost of electricity. That’s an important message.

“We need to treat the climate crisis as seriously as the pandemic – where we shrunk the 15-year bureaucracy of a vaccine down to a year. If we did that it wouldn’t be taking seven years to build a wind farm.

“We, as the people in positions of influence in the industry, should now be asking very loudly why are we not building wind farms so that next winter is not as bad as this one.”

They conceded the point raised above on the lack of storage capacity to support a green grid, but added: “The first thing we need to start doing is viewing gas as a way of filling the gaps when it’s not windy rather than being the base fuel. That will get us to the point when the electrons are so cheap and batteries are getting cheaper, it can cut the cost of energy over the long term.”

A politician taking part in the roundtable said there was trepidation within government about addressing the cost of net zero. They added that there was a real risk of the debate being hijacked by voices on the wrong side of the climate debate.

“The thing that has been missing from the net-zero conversations is that everyone has been talking about how you get there but no one has been talking about price.

“The only people who have been starting to talk about it are the people who don’t like the idea that climate change might be a real thing. The wrong people have been clapping.

“The current situation is going to shove price right back onto the front of the political agenda. Net zero is vital but so is price and people want both. It’s no good saying it’s one or the other because people will then look for someone who tells them what they want to hear, whether they can deliver it or not.”