Radical simplification of energy market urged

Dieter Helm, a Professor at the University of Oxford, has called for a radical simplification of Great Britain’s energy market in his Cost of Energy Review report.

His review, which was commissioned by the UK Government in August, said that market forces should be allowed to find the cheapest ways to decarbonise the power grid.

He argued that successive government policies – including Contracts for Difference, Feed-in Tariffs and Renewable Obligations Certificates – have distorted the market.

‘Unintended consequences’

Dieter said: “The scale of the multiple interventions in the electricity market is now so great that few if any could even list them all, and their interactions are poorly understood.

“Complexity is itself a major cause of rising costs, and tinkering with policies and regulations is unlikely to reduce costs.

“Indeed, each successive intervention layers on new costs and unintended consequences.

“It should be a central aim of government to radically simplify the interventions, and to get government back out of many of its current detailed roles.”

Decentralised energy

Energy UK Chief Executive Lawrence Slade said his trade body shared “Professor Helm’s goal of ensuring that the transition to a low carbon energy system comes at the lowest cost to customers” and agreed the right policy framework needs to be put in place.

RenewableUK Chief Executive Hugh McNeal noted that the report said “wind energy can make a contribution to security of supply” and described renewables as the “new conventionals”.

But James Court, Head of Policy and External Affairs at the Renewable Energy Association, warned: “This report hints at the evolution of the industry, but perhaps doesn’t fully recognise the fundamental shift that is happening from centralised and inflexible generation to a smarter, more connected and decentralised energy system, and the policy framework needed to make that happen.”

> Download the report