Energy Security Strategy

John Penrose Excerpts

Tuesday 5th July 2022 Westminster Hall

[Mick Whitley]

I thank the hon. Lady for that point. The Minister will point towards the considerable up-front costs of tidal power as a barrier to progress, but such a view ignores the fact that all renewable technologies are expensive in their infancy, as well as the fact that some of these installations could have lifespans of more than a century.

[John Penrose (Weston-super-Mare) (Con)]

The hon. Gentleman is to be congratulated on getting this debate organised. My constituency of Weston-super-Mare fronts on to the Bristol channel, which is the largest source of potential tidal power. He is right, of course, about the up-front costs being significant and the lifetime costs being lower. However, even factoring that in, the total lifetime levelised costs of tidal power are, from all the figures I have seen, dramatically higher than anything else out there. Has the hon. Gentleman seen figures that I have not?

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[John Penrose (Weston-super-Mare) (Con)]

Thank you, Mr Davies. I congratulate the hon. Member for Birkenhead (Mick Whitley) on bringing this debate before us today.

I support a great deal of what is in the energy security strategy. The measures to diversify our electricity supply are welcome, necessary and absolutely essential, particularly with what is going on in Ukraine and internationally, as we have already heard from numerous contributions. There is a great deal to applaud and support in the document. However, the problem is that, while most of the measures are good, necessary and welcome, they are very long term. We cannot build a nuclear power station or even an offshore wind farm terribly quickly. Most of them are several years away at a minimum, and some of them a great deal longer than that.

Of course, the energy crisis is now—today. All of us have people in our constituencies who are struggling with their bills, which are bad already and will be even worse this autumn because, as we have already heard, of the expected rise in the energy price cap. There will be another swingeing increase and people will find that what is difficult today will be impossible by then. I urge the Minister to consider some short-term measures in parallel with the Bill, to ensure that we do not forget the pain. We need measures to deal with some of that pain as fast as we decently and respectably can.

We have already heard from pretty much everybody who has spoken so far about the importance of insulation, so I will not belabour that point, other than to say that it is right and we need to do more about it. We can do something about it and the effect will be instant for householders. There is a problem with supply and getting enough skilled people to install the rotten stuff, but if we can get that solved—we should start now—it is the sort of thing that will happen much faster than the time it takes to build an offshore wind farm. We should have begun already.

Equally, the energy security strategy has a gaping hole when it comes to the review of electricity market arrangements, or REMA. Onward has today published a good report on what needs to be in that review. In summary, everybody has been saying for several years that the cost of renewables is falling. In fact, the cost of offshore wind is a fraction of what everyone expected it to be today, which is excellent news. The problem is that none of that is showing up in our energy bills because our energy market, particularly our electricity market, is a slave to the international price of gas. That is what it tracks and that is what dictates the bills that we all get. We need to reform that market and allow those lower renewable costs to feed through to customers. The money is there. It does not require windfall taxes or Governments to intervene through the benefits system or council tax rebates. The money is there if we can just get the flipping stuff to feed through a different market mechanism—an open market mechanism—and land in the bills on people’s doorsteps

A lot of renewable energy sources—offshore wind farms, for example—have been built under contracts for difference, which the Minister and his predecessors have been very good about. A lot of those contracts for difference are now massively in the money. In other words, they are a great deal cheaper in relation to the power they produce than the charge that we are all getting on our bills. We could take the green energy levies, which are already on our bills and which add to them, and say, “Those could be negative—they could be discounts.” Everybody could receive a rebate on their bills if we let the negative price differential between the contracts for difference, which have been signed up to, and the real price today feed through to our energy bills. That is just one example of the kind of change we could make. It could happen fast and it would prove to people that green levies do not always have to be expensive. In fact, they could be beneficial and create great retail buy-in to the notion of green power.

Finally on these short-term measures, later this year the existing energy price cap legislation will come up for either roll-over or renewal. I want to make an urgent and earnest plea to the Minister: rather than just rolling the thing over, we should instead reform it dramatically, because it was originally introduced to do something entirely different from what it has been doing. It was introduced originally to try to get rid of the loyalty penalty, which penalises people who do not switch. People were being ripped off left, right and centre if they did not switch, and that added cost to the market overall, which is mainly focused on people who are loyal, but it was spread across the entire market and ultimately raised overall prices.

The cap is hideously expensive to administer and imposes enormous complexity and hedging costs on energy market firms, many of which have gone bust because they did not get their hedging right. If we can simplify that cap, change it dramatically and change how it works, we can strip out all that cost. If we strip out all that cost, that rebate, discount or reduction in costs can be fed through to the customer. Again, that could result in a lower overall cost to our hard-pressed constituents, all of whom are struggling now and all of whom will be struggling even more.

There is a lot to admire, to applaud and to support in the energy strategy, but an awful lot is missing. We need to address that quickly and urgently, and it needs to happen now in order to make a difference to all our hard-pressed constituents as soon as possible.