The Department of Energy and Climate Change (Decc) has been “reckless and wasteful” in managing renewable energy subsidies, and in overseeing the spend Treasury and Decc have focused entirely on individual programmes instead of considering total costs and affordability, says Policy Exchange. Meanwhile Decc is failing to bring forward up to £9 billion in annual savings from energy efficiency that could help consumers struggling to pay energy bills.
In a new report, The Customer is Always Right, the think tank says the Levy Control Framework, set up to manage costs, fails from the start because it does not include all policy instruments. Leaving out programmes for energy efficiency and smart meters meant that the overall programme lacked any holistic management that would focus spend where it was most effective.
In any case, Policy Exchange said, budgetary management in the current LCF was “reckless and wasteful”. It said the cost of feed-in tariffs for small scale renewables could be double that planned in 2014/15, reaching £870 million. Meanwhile, lower ‘brown’ energy prices and higher production than expected would raise the overall cost of supporting large scale renewables. That could mean an overspend of 20% in 2020/21 – over £11 billion of spending that was “locked in”.
The report calls for a much tougher approach to renewables, setting carbon reduction targets and allowing expensive technologies to fail. That would focus deployment on the most cost-effective technologies – nuclear, some types of biomass, commercial onshore wind, solar PV and hydro. If government did extend support to less established technologies it should focus on those – like carbon capture and storage – that could make a global impact on carbon emissions.
Meanwhile, government should greatly increase the focus on energy efficiency, which has been “overlooked in favour of large-scale, supply-side (generation) solutions to energy policy challenges.” Energy efficiency could cut energy bills by £9 billion annually, as well as addressing fuel poverty and fuel import dependency.
Policy Exchange found that consumers bore the brunt of policy costs and said they must have more influence in policymaking.
In balancing security of supply, decarbonisation and affordability Decc worked to government targets on the former two objectives, but had no clear definition of “affordable energy’, no statutory advocate for consumers and met less often with consumer groups.
Policy exchange wants to strengthen Consumer Futures, the customer group now acting within Citizens Advice – including giving that group a say in managing the LCF and in challeneging network companies, where customer costs are rising.
It also wants Decc to make a broader assessment of how energy bills will affect customers, including their cumulative effect alongside rising water, transport and other costs.