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BEIS to ‘sort facts from the myths’ of energy costs through fresh review

The Department for Business, Energy and Industrial Strategy (BEIS) has commissioned an independent review into the whole system costs of energy in the UK.

And professor Dieter Helm, tasked by BEIS with leading the review, has said he will aim to “sort out the facts from the myths” regarding the absolute cost of energy from generation to consumption.

Announced yesterday (Sunday 6 August), the review builds on a pledge within the government’s industrial strategy launched at the start of the year. Its task will be to examine costs incurred by all facets of the supply chain, including generation, transmission, distribution and supply.

“The cost of energy always matters to households and companies, and especially now in these exceptional times, with huge investment requirements to meet the decarbonisation and security challenges ahead over the next decade and beyond.

“Digitalisation, electric transport and smart and decentralised systems offer great opportunities. It is imperative to do all this efficiently, to minimise the burdens. Making people and companies pay excessively for policy and market inefficiencies risks undermining the objectives themselves,” Helm said.

It is hoped that the review will uncover opportunities to reduce costs in each of the four elements while also analysing the prospective roles of new and emerging technologies including electric vehicles, storage, robotics and artificial intelligence.

Helm is to be assisted by an advisory panel including; Terry Scuoler, chief executive at the Manufacturers’ Organisation EEF; Nick Winser, chairman at the Energy Systems Catapult; Laura Sandys, CEO at Challenging Ideas; Isobel Sheldon, engineering and technology director at Johnston Matthew Battery Systems; and Richard Nourse, managing partner at renewables investor Greencoat Capital.

The review is to put forward various recommendations and is due to complete before the end of October.

Business secretary Greg Clark added: “The review will consider how we can take advantage of changes to our power system and new technologies to ensure clean, secure and affordable supplies over the coming decades. Professor Helm will bring invaluable expertise to the review, and I look forward to seeing his recommendations.”

Helm will however be a controversial choice to lead given his previous opposition to renewable technologies such as wind and solar. Writing in late 2014, Helm said that wind and the generation of solar panels on the market at the time presented “little challenge” to oil.

“They [wind and solar] cannot generate enough useable energy in a dense enough form at a low enough cost to make much impact. But new technologies might do the trick, and if they did then demand for oil may gradually decline, leaving a lot of the deposits in the ground,” he wrote.

Given that solar, wind and battery storage technologies have witnessed significant cost reductions since then, Helm has been implored to fully consider their role in the future power market.

Lawrence Slade, chief executive at trade body Energy UK, said in a statement: “We welcome greater transparency over the cost of energy as we transition to a smarter, more flexible, digital and decarbonised energy system which puts consumers and industry in greater control of their energy.

“We must ensure we deliver an industrial strategy based on a low carbon economy and where the billions of investment needed can be delivered competitively via a range of technologies at the lowest cost to consumers. Using our energy as smartly as possible is critical so energy efficiency must be a national infrastructure priority.”

Such a review is also particularly timely given the controversy surrounding Centrica’s decision to increase electricity prices by 12.5% from September.

Last week the British Gas owner said that it was to increase its prices for the first time in three years because of an “underlying increase in policy and transmission costs”, however this was rounded upon by various stakeholders, many of whom pointed out that such costs would not amount to such a price hike.

Hayden Wood, co-founder of independent utility Bulb, said that it was disappointing that it had taken the government so long to commission such a review, adding: “A review into the industry should also finally put to bed the myth that green energy has to cost more.”

But Martin Chitty, director of energy analysis at consultancy PCMG, said increases in the regulated parts of electricity bills would continue to be a major challenge to end users.

“We expect all of these non-commodity charges to rise further over the next three years, by an average of 50%, and this is likely to be coupled with a rise in wholesale costs too,” he said.