Utility Week

12 | 13TH - 19TH DECEMBER 2019 | UTILITY WEEK Election 2019 Analysis By the time this issue of Utility Week hits the streets, the sound and fury of the general election campaign will be subsiding and a new government will be setting out its stall. Whoever has won, as part of our UW manifesto campaign we call for the energy sector to get the attention it so desperately needs. E nergy prices were put back on the gen- eral election agenda when shadow chancellor John McDonnell promised that a Labour government would slash household bills, including those for utilities. One of the factors that has helped to keep energy bills high is making customers pay for subsidising new low-carbon generation, via their bills, rather than finding the cash from general taxation. And the system of billpayer-subsidised levies, which was established under the coa- lition government, has stimulated consider- able investment in renewable power by providing the sta- ble prices that have bolstered investor confidence in what were until recently barely proven technologies. The contracts for difference (CfD) auction process alone has delivered nearly 20GW of offshore wind capacity. In its election manifesto, Utility Week is calling for a national conversation on the costs of reaching net zero. This includes whether consumers would prefer to fund some of the long-term investment to reach a greener future through taxes rather than bills. Josh Burke, a fellow at the London School of Economics Grantham Research Institute, Be honest about funding net zero sees increasing concerns across the political spectrum about the impact of these funding mechanisms on the level of consumers' bills. A report issued by the Conservative sup- porting thinktank Onward this month esti- mated that the total cost of low-carbon subsidies would work out at £370 per house- hold per year if the burden was not shared with business customers. On the Labour side, meanwhile, the GMB union's general secretary, Tim Roache, recently compared the existing support regime for low-carbon generation with the controver- sial flat rate local gov- ernment tax introduced by Margaret Thatcher's administration in 1990 – the infamous "poll tax". He said: "We support a progressive tax system that funds the transition to net zero, ending the poll tax that the poorest pay through their energy bills." Burke says: "Most people would see that as quite a regressive means of funding. Moving those things into general taxation would be a good thing. Most parties, and cer- tainly Labour, would accept that the levy on consumer bills is a regressive policy." The manifestos provide few clues for the future of the CfD process, which is unsurprising given its technical nature. But Jonathan Marshall, head of analysis at the Energy and Climate Intelligence Unit, sees a broad direction of travel towards greater support from the public purse for decarbonisation. As an example, he cites the Conservatives' manifesto commitment to plough £9.2 billion into energy efficiency measures. For its part, Labour has committed a total of £250 billion of investment in low-carbon generation through its proposed National Infrastructure Bank. And the party's pledge to renationalise the energy networks and the big six suppli- ers (see facing page) inevitably means that taxpayers would be on the hook for new investment in upgrading the energy network. Onward's report claims the government has signalled that it sees the CfD as a tran- sitional mechanism, and that it would prefer renewables to be delivered through "subsidy- free market-based approaches". But Marshall is sceptical that there is much appetite for moving away from the CfD regime, given its recent success in delivering offshore wind and the amount of interest it has sparked across the world. "I can't see anyone taking seriously the idea of getting rid of the CfD," he says. This, along with other questions about how the net zero journey is funded, must be top of the in-tray for the next government. "Would consumers prefer to fund some of the long-term green investment through taxes rather than bills?"

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