It’s time for an energy sector ‘shake-up’

There’s a tradition in British politics for paying little attention to where our power comes from. It’s one of the reasons why, as we shiver though another snowy cold snap in 2012, much of infrastructure that heats and lights our homes, cooks our food and helps propel us to work, dates from the 1970s or before.

Without major investments in our energy sector for decades, and years of cheap North Sea gas, we Britons got used to some of the lowest energy bills in Europe. And that’s just one of the reasons why fixing our energy sector is one of toughest challenges in British politics.

Few people vote for things that are going to cost them more. Even fewer for things that ruin their view with wind turbines and power lines. Fewer still for things that might not change much in their lifetime.

But unlike their predecessors, shaking up the energy sector isn’t something today’s politicians can ignore. That ageing infrastructure really can’t keep going for much longer and the fuels that supply it are becoming worryingly scarce and expensive. Now our climate is getting warmer with every extra tonne of coal or gas we burn, meaning there are now strict national and European emissions reductions targets to meet. The challenge is huge, and urgent.

Fixing our energy sector is one of the toughest challenges in British politics.

The Department of Energy and Climate Change was set up under the last government to ensure a secure, low-cost and low-carbon energy future. These are not so much pillars of some policy framework than balls that the new Energy Secretary Ed Davey has to juggle.

One of the toughest challenges, because it will make the greatest difference to most voters in the short term, is the government’s proposed Electricity Market Reform. It is designed to make the most polluting power sources, like coal, un-profitable and encourage industry to build more secure, low-carbon alternatives. The government said that without it annual bills could be £200 higher by 2030. But they admit their reforms will be adding £160 to the average bill by then.

Headlines like that are unpopular with voters, as well as with people like George Osborne who has made it clear “green taxes” should not hamper the British economy. It’s also gone down quite badly with many energy campaigners too. They argue EMR means breaking the grip of the vertically integrated “big six” that keep our bills high and innovation low. They say the current EMR proposals are written for the power companies and stifle efforts for small businesses and individuals to get into the energy game.

While the government must face down the power companies, it has to watch its step. Britain is powered almost entirely by the “big six”: EON, EDF, NPower, Centrica, Scottish Power, Scottish and Southern. As the ones with their fingers on the light switch, that gives them a certain amount of clout.

Then there’s the general admission that we will get little way towards as low cost and sustainable energy future without using less of the stuff. That however also involves bill payers spending money on insulation or buying more efficient equipment to run their homes and businesses. The current plan to achieve it, something called “the Green Deal,” has been widely criticised. Concrete proposals to compel us to use less power or force companies power us more efficiently are wanting.

A particular challenge for the coalition is supporting alternative sources of power like wind, tidal and nuclear power. Subsidy schemes that support wind farms are unpopular with may Tory MPS, but not as unpopular as wind farms themselves. More than 100 backbenchers recently attacked the energy minister over financial support for on-shore windfarms.

Read more: What is the UK's energy future?

Nuclear power is a headache for the traditionally anti-nuclear Liberal Democrats — even more so now the post-Fukushima regulatory environment makes it look more expensive than ever. The government has promised not to subsidise nuclear power, but tweaks to a pricing mechanism for carbon mean it is essentially doing exactly that.

Another problem that furrows the brows of DECC is the fact there is no “right way” to shape our energy future. And as Jim Skea points out in this special report, given the timescale in which the system must be overhauled they will have to run plans A and B in parallel in order to end up with something that works.

And on top of all that, any major decisions on energy will require more than just the support of the ruling parties. Investments on the scale of a new power plant or long distance transmission cable are over several decades, far longer than any term of political office. The companies expected to invest in energy infrastructure need to know the playing field is going to be the same under many political leaders to come.