GGP: In-depth: The challenges facing the Dieter Helm UK ‘energy cost’ review
The statements, opinions and data contained in the content published in Global Gas Perspectives are solely those of the individual authors and contributors and not of the publisher and the editor(s) of Natural Gas World.
This is an excerpt from an interview originally published by The Carbon Brief on August 8, 2017.
The UK government has asked Prof Dieter Helm, an economist at the University of Oxford, to carry out an energy cost review and report back by the end of October.
The idea for a review was first mooted in the Industrial Strategy green paper published in January. This was later broadened in the Conservative Party general election manifesto, which set an ambition to have the “lowest energy costs in Europe, both for households and business”. The terms of reference for the review sets it in the context of meeting legally binding UK carbon targets.
Carbon Brief runs through the review’s terms and the wider political context, as well as revisiting Prof Helm’s strongly held views on energy policy.
Background
The cost of energy is a long-running debate in the UK. Climate policy is adding increasing sums to electricity prices. Yet it has also helped to cut demand, more than offsetting the impact of policy on household bills.
On average, households are spending a similar share of their incomes on energy as they were in 1990 and in 2010. Nevertheless, energy bills have continued to capture headlines, particularly after utility firms raised prices this year. Both major political parties went into the election promising to cap bills.
Another part of the debate is the UK’s largest industrial users, which face some of the highest electricity prices in Europe. However, this makes up a very small share of their costs, particularly as many are compensated for the costs of climate policy.
The Industrial Strategy green paper said: “Industrial gas costs are internationally competitive but electricity costs have moved out of line with other European countries…The government will set out in 2017 a long-term roadmap to minimise business energy costs. To inform this, the government will commission a review of the opportunities to reduce the cost of achieving our decarbonisation goals in the power and industrial sectors.”
This put the focus on “business energy costs”, in particular electricity, reflecting long-running concerns among some that UK manufacturing was being put at a disadvantage as a result of climate policy. Nick Timothy, then co-chief of staff to Theresa May who resigned after the election, was widely thought to have been pushing for a review to undermine the UK’s Climate Change Act, which he had called an “act of monstrous self-harm”.
In the Conservative election manifesto, partly drafted by Timothy, the review was expanded to include homes, as well as businesses, and an aim to have the “lowest energy costs in Europe”.
Read in full
The statements, opinions and data contained in the content published in Global Gas Perspectives are solely those of the individual authors and contributors and not of the publisher and the editor(s) of Natural Gas World.