UK Government urged to prioritise energy demand

According to the Sustainable Energy Association, energy companies must do more to address the energy industry in order to drive efficiency and bring down energy bills for consumers.

With the general Election looming on the horizon, energy is going to be a big talking point, in the search for votes. All parties will be keen to lay out policies that are going to appear favourable to the consumer in the ensuing years. Much of the public debate seems to be about sustainable energy “going green” versus costs and affordability, whilst little is mentioned concerning managing demands for the consumer.

The ideal as far as the Sustainable Energy Association is concerned, would be to focus on integrated energy efficiency in buildings, with low carbon and renewable energy production. They feel that in this way the UK will become more industrially competitive, and more cost-effective, with de-carbonised energy systems. This will allow consumers to enjoy clean, affordable energy. Producing more energy directly from buildings, could create net savings to the economy, averaging £12.1bn per year from now until 2050.

Is the Government listening?

There seems to be some major sticking points. The Energy Bill will return to the Commons for its committee stage. MPs will discuss amendments to the legislation, which are at direct odds with the ideas of David Cameron and the Chancellor. These amendments require the Government to set deadlines for de-carbonisation by 2030. This does not sit well with George Osborne’s belief that gas is the future of power in the UK.

Being part of Europe, we also need to take note of the EU’s plans for a single energy market to reduce its reliance on supplies from countries such as Russia, which supplies a third of all gas needs in Europe. At present the import bill is some 400 billion euros. The EU imported 53 % of its energy needs last year.

The idea of an ‘energy union’ and single market may help energy security and have added bonuses in efficiency, reducing fossil fuels and increased research on alternative energy supplies.

Energy consumers’ point of view

It is pointedly suggested that energy suppliers have failed to adjust tariffs to reflect falling wholesale prices since 2013. As a consequence, homes on standard tariffs were £145 worse off in 2014, the total figure for the UK being £2.9bn. A big part of the problem is that the ‘big six’ still control a lion’s share of the market. The smaller concerns have not until recently been able to make it an even playing field, but this is changing, due to the increased numbers who are now energy switching.

Big six excuses

Large suppliers bought wholesale energy on the futures market, in order to protect themselves against price rises. How much and exactly when they purchase, is normally a closely guarded secret. These firms don’t tend to publish what is termed “Hedging Tactics”. However, they claim that their approach guarantees that the market is not volatile, and that it takes time to decide when to pass on reductions, in order to avoid future problems.

When the Competition and Markets Authority delivers the findings of its investigation into the issue, later this year, things may become a little clearer. Which says that recent price cuts in gas tariffs, which have been implemented by the main six companies, have not been sufficient. Based on wholesale prices at the beginning of the year, it recommends the cuts of up to 5.1%, should have been nearer the 10.3% mark. It also suggested that standard variable tariffs for electricity should be reduced by 15%.

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