The Energy Secretary’s pledge is not politically stupid, but the target date is so far in the future it’s almost meaningless
26 November 2024 Daily Telegraph
There were many victims of the post-Covid cost of living crisis, but among the biggest are the governments unlucky enough to have been in power when it happened.
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Think about it: Joe Biden gone and his supposed Democratic successor, Kamala Harris, slaughtered at the polls; Rishi Sunak gone; Emmanuel Macron still clinging to office but effectively not in power; likewise Olaf Scholz, awaiting his own imminent demise; and so on.
No doubt there were myriad other factors at work, but the one constant is the steep rise in prices that took hold after the pandemic.
No political leader can be directly blamed for the inflation that swept Western economies back then; yet they have all been punished for it none the less.
Mr Sunak’s undoing was Sir Keir Starmer’s making. But now in power, the Labour leader is wrestling with some of the same issues.
It’s true that the inflationary spike that reached its apogee with the energy price shock of war in Ukraine has now subsided.
Yet voters still feel the cost of living crisis in their pockets, and complain loudly about prices being so much higher than they were. The price reset of 2021-23 will not quickly be forgotten.
Try telling the average pensioner that inflation is now a thing of the past, when they have just had their winter fuel allowance axed. That’s either £200 a year or, depending on your age, £300 effectively added to your cost of living.
By coincidence, £300 happens to be the amount Ed Miliband, the Energy Secretary, has promised to shave off the average household electricity bill by 2030 relative to today, a miracle he naturally attributes to his own net zero policies.
Politically this is not as stupid a commitment as it might seem, not because there is any realistic prospect of it being met, but because the target date is so far in the future as to be almost completely meaningless. Governments cannot be properly held to account for promises that stretch beyond a single parliament.
The saving is also based, as some commentators have already pointed out, not just on out-of-date information, but also flimsy, back-of-a-fag-packet analysis.
The claim was originally made in October last year by Ember, a green energy think tank that is funded by various climate change charities, and has been repeated by Mr Miliband on a number of occasions since, including as recently as the Cop29 global warming conference in Baku, Azerbaijan.
What may have been true a year ago, when fuel bills were still at historical highs because of the war in Ukraine, is certainly not the case today.
The price cap has since come down markedly, reducing the price advantage that renewable energy momentarily enjoyed over hydrocarbon forms of power generation.
But the key point is that the calculation doesn’t fully recognise the humongous investment costs of decarbonising the Grid. Both Mr Miliband and Sir Keir have suggested that the transition can be achieved in a largely cost free manner. For good measure, Sir Keir has added that it is “not about telling people how to live their lives”.
But how, then, is it to be done? That question encapsulates virtually everything the Government is trying to do, not just on climate change, but on infrastructure renewal, public sector reform, planning liberalisation, growth and much else besides.
Ministers are only too eager to set worthy aims, ambitions and destinations, but almost completely devoid of a credible plan for delivering them.
The idea that the extra investment needed to decarbonise the grid is somehow going to be magicked out of thin air at no cost to the end user, which in essence is what is being suggested, is delusional.
It’s obviously true that some of that investment spending would need to be made in any case simply maintaining the current system of energy provision. But what’s proposed is a massive step change.
Much of the old generating capacity will also have to be maintained alongside the new to deal with the problem of intermittency in wind and solar, even though it won’t be needed most of the time. Logically, this must double up the costs of renewable generation.
In any case, delivering net zero in a manner that allows the Government to keep its promise of lower electricity bills is quite an ask, and very likely an impossible one, as many opposition Conservative MPs have come to appreciate.
They sense blood as they seek to open up clear dividing lines with the Government on net zero objectives.
Dale Vince, a green energy campaigner and the boss of Ecotricity, suggests an altogether cruder way of reducing household electricity bills – simply cap the amount that offshore producers are allowed to charge for their gas.
Since it is the internationally determined price of gas which tends to set the wholesale price of electricity, this would quickly bring prices down to more tolerable levels, he argues. Simples: job done.
Alas, it is not as easy as that.
“We economists don’t know much, but we do know how to create a shortage,” said Milton Friedman as long ago as the 1960s.
“If you want to create a shortage of tomatoes, for example, just pass a law that retailers can’t sell tomatoes for more than two cents per pound. Instantly you’ll have a tomato shortage.”
It’s the same for oil and gas. Introduce price controls, and rationing soon becomes a necessity.
This might of course be part of the intention if Mr Miliband was to go the price control route. Capping the price of production would soon result in zero North Sea oil and gas investment and eventually production, which after all is the aim.
But it would also punch a mighty great hole in the balance of payments, with the UK increasingly forced to source its gas needs overseas instead. Moreover, it would cast a pall over inward investment in general. Nobody is going to invest in a country where output is prevented from commanding the market price.
In any case, Mr Miliband has made himself a hostage to fortune by promising lower electricity prices. He may get lucky; wholesale gas prices might return to former levels. But if he does, it won’t be any thanks to demanding net zero targets. And if he doesn’t, he’ll go the same way as all the other politicians felled by anger over squeezed living standards.
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