The government has been urged to abandon rigid targets to decarbonise the electricity supply market by a heavyweight committee of peers.
In a new report on reforming the electricity market, the House of Lords economic affairs committee has recommended introducing greater flexibility into its emissions reduction plan, which should “not be a rigid path to be achieved at all costs.”
“The government should use its powers to vary the pace of emissions reductions to achieve the target rather than adhering to the linear approach mandated by the carbon budgets,” says the report, which estimates that decarbonisation policies accounted for around 10 per cent of the average consumers’ electricity bill in 2013.
Since 2003, average domestic electricity bills have risen by 58 per cent, according to the committee, whose members include two former chancellors of the exchequer – Lord Darling and Lord Lamont.
The committee says that decarbonisation of electricity supply may be achieved more cost effectively when future technological advances “substantially” bring down the cost of renewable generation. As an example, the committee points to “dramatic recent falls” in the cost of solar and offshore wind generation.
Overall, the Lords committee calls for greater competition in the electricity sector and fewer government policy interventions.
The report says this competition can be most effectively promoted by running a single, technology-neutral auction for electricity supply. Within the auction, the committee says the desired level of carbon emissions and capacity would be fixed.
Securing sufficient electricity generation capacity should remain the “most important objective” of electricity supply, ahead of affordability and decarbonisation, the committee concludes.
It also recommended the establishment of an energy commission to provide greater scrutiny of policy decisions in the sector.
This independent advisory body would advise the business secretary of state on the best way for energy policy objectives to be delivered.
And the report recommends the establishment of a new National Energy Research Centre to investigate new methods of producing cheap, clean and commercially self-sufficient energy sources.
Commenting on the report, Lord Hollick, economic affairs committee chairman, said: “Poorly-designed government interventions, in pursuit of the decarbonisation, have put unnecessary pressure on the electricity supply and left consumers and industry paying too high a price.
“Affordability must not be neglected and decarbonisation targets should be managed flexibly.
We would like to see the Government step back from the market and allow all generating technologies to compete against each other.”