Helm slams network profits

Professor Dieter Helm has slammed network companies for making excessive profits and warned that the chances of hitting the government’s 2035 grid decarbonisation target are receding by the day.

In a speech delivered at the Policy Exchange thinktank in London on Thursday, the author of the government’s 2017 cost of energy review criticised the hefty distribution costs being passed onto cash-strapped customers.

He said: “After Storm Arwen we now know that they don’t even deliver services they are supposed to for the extremely abnormal profits being earned.

“While customers are choosing between cooking and heating for use of electricity, those profits are still way beyond what anyone needs to earn for those kinds of activities.”

Helm, who is professor of energy at Oxford University, also warned that the absence of an over-arching plan to revamp the grid threatens to undermine the government’s prospects of meeting its 2035 grid decarbonisation target.

“What we need, if we mean 2035, is a plan. We can’t get there by leaving it to the market.

“If I was an investor, I would have no confidence in achieving the 2035 target.

“The 2035 target for decarbonising electricity looks further and further over the horizon every day.”

But Helm also warned ministers to be “wary” about the risks of making long-term generation technology bets in the middle of the current crisis.

Describing the use of the term “crisis” as “dangerous” in relation to energy, he said: “The instinct is to believe that the crisis is a new normal and extrapolate that new normal.

“There is the assumption that oil and gas prices are now at a new level and can only go up.”

Helm cautioned ministers to be very careful not to make a  “whole host of policy decisions” that depend on these current price levels continuing, adding that historically almost every energy price spike has been followed by a price collapse.

As an example of technologies deemed too expensive hitherto now winning favour, he pointed to recent statements by business secretary Kwasi Kwarteng that more nuclear power is needed to safeguard against high and volatile gas prices.

But in the short run, the government lacks levers to bolster energy security, Helm said: “The capital stock is largely a given so there is very little that can be done in the heat of crisis other than reduce demand and using public funds to protect customers from scale of the shock hitting them.

“If you are really worried about doing something urgently, get people to turn down the thermometer by one or two degrees.”