Policy Exchange urges reform of the electricity market

by Paul Goodman

Britain’s electricity market is being hamstrung by too much regulation and uncertainty, according to a new study from Policy Exchange.

The research, compiled by Simon Less, finds that costs are being piled on consumers, with generators waiting for government to centrally plan - and regularly fine-tune - its proposals, rather than seeking out the best investments and innovations to secure supplies and reduce carbon emissions.

Extra regulatory risk for those seeking to build power stations is likely to add £1.25 billion a year to the costs of new investment – equivalent to almost £50 for every household in the UK.

Key recommendations in the report include:

• Radically simplifying current policy interventions.
• Instead of complex subsidies for large-scale deployment of preferred technologies like offshore wind, government should focus on developing a credible, long-term, neutral carbon pricing framework – allowing the market to provide low-carbon, low-cost power.
• Developing independent institutional arrangements to improve market confidence in the process of developing of climate-related regulation.

Simon Less said -

“The competitive electricity market in Great Britain has been a major success story, emulated around the world.  But the current road of incremental policy interventions is creating unmanageable uncertainty and gradually replacing market decisions and innovation with government planning.

“Unless reversed, such an approach will be much less effective in securing electricity supplies and lowering carbon emissions at least cost to customers.

“Unnecessarily raising electricity prices will harm UK competitiveness, increase fuel poverty and deter increased future electrification of the heat and transport sectors needed to meet climate targets.”