Three wishes for energy in Europe

This is a story about energy. Energy is a utility, a basic necessity for homes and business. It is also a big investor and a major employer. But electricity - and energy costs in general - has become a major issue for householders, for the competitiveness of manufacturers and for exporters in every country of Europe. And Europe – itself a bit of a dog-whistle issue in the UK - has, as we saw just the other weekend, become a very hot topic indeed, writes Angela Knight, chief executive of industry body Energy UK.

While each member state has its own energy policy we know the whole thing must fit into a wider EU framework for things like carbon reduction and climate change targets.  It is Europe that determines just how far any government can help through state aid. It is Europe that holds sway on a host of technicalities that translate into a wide range of practical things from: how we trade power and gas to the cross-border links and interconnectors we have with other European countries; or emission directives to the power stations that continue to run and those that close down.

Once upon a time nobody talked much about energy. You flicked the switch – the light came on. When it was cold, the central heating kicked in.  Now energy has nudged up the political thermostat here and elsewhere. It is a key issue in many other European countries too. 

The reason is quite simple – the cost of energy has gone up. 

And that is down to a whole rainbow of reasons.

The UK has – since 2004 – gone from being a net exporter of gas to being an importer. By 2010 the world price of gas had doubled. At the same time Britain and Europe were struggling with the aftermath of the biggest financial crisis for more than 100 years.  So, it’s a no-brainer to see we need to reduce dependency on oil and gas. Equally, we all aspire to cut the carbon footprint and promote renewables – as well as cleaning up our remaining plant.  But it’s a costly process and, as so often happens, we focus on the broader canvas and the emotion of the moment leaving the practicalities and the price to one side.

We’re in a situation where we are making a major investment to: change the generation cocktail to renewable sources – such as wind, biomass and solar; provide back-up generation – predominantly from gas; redevelop the network; and ensure new nuclear is on its way. 

The shift from fossil-fuel power generation to renewables can be measured in rejigging distribution networks, supplying conventional back-up and multi-billions of pounds of investment.  And, while the UK is a leader in many renewable areas and has some of the largest offshore wind farms in our coastal waters, the cost sits on the bill.

Even reducing energy consumption, the Cinderella of the climate change story, costs money.  Discounts and free – or subsidised – insulation are two major programmes the energy industry is required to undertake. They help those who get them but the cost has to be shared on everybody’s bill.

The UK has some poorly insulated housing where improvements would be a major step towards people using less energy and keeping warmer.  Over time, we fix up our homes through normal improvements and maintenance but it takes more than £1.5 billion a year for energy companies to insulate social housing and the homes of people on low incomes.  Again, the cost is on every bill. 

Elderly people also get a discount, known as the Warm Home Discount, which takes £135 off their annual energy bill. This is paid by everybody too. 

In fact Eurelectric has just published analysis showing just how much, across Europe and in the UK, the cost of your typical energy bill comes from governments’ policies and taxes.

There is a complete disconnect with all this. 

On the one hand we all, at both a national and an individual level, quite naturally want the jobs, the economic benefit of investment in energy and cleaner, greener power. On the other, all the polls tell us people don’t want to pay any more for their bills.  From a customer perspective the cost of energy is already too high. Yet, from a generator perspective, the wholesale price of electricity is too low to think about building low carbon plant without a subsidy.

I’ve no magic wand but, like all good stories, I have three wishes.

One: I want an honest and full discussion about energy in the round. Not one bit of energy in isolation but an adult conversation about our choices where the costs are not buried in the small print, if they are talked about at all.   I believe that debate is long overdue and that policymakers must be open with the public about what is being proposed and the price tag which will need to be attached.  I believe we can take the first steps towards that on these pages.

Two: we need to remember where people’s concerns lie. It’s right to think of the future and sustainable energy so, when everyone was well-off, politicians made carbon-reduction targets law. Now people are strapped for cash. Poll after poll says paying the bill tops peoples’ priority list. So, it is important to meet our obligations cost effectively. And bringing people with us to build low-carbon generation and tackle climate change needs a pragmatic and realistic way forward.

And three: the time has come to call a halt to ever escalating demands and new measures. As the new European Parliament takes its place, and the new Commission is formed, we need to remember – and to remind our representatives – that energy is a major economic issue for all member states.

None of this is going to happen by sprinkling fairy dust. We need a considered path to deliver energy security and meet future demand. And that means agreeing a sensible plan, and a realistic price tag, before we all end up counting the cost.