Ed Miliband’s eco-socialism is costing us a fortune

Soaring energy bills for households and industry continue to keep inflation high and create a straitjacket for growth.

John Flesher | Deputy Director

Labour’s arbitrary and unnecessary 2030 Clean Power Target continues to undermine the urgent mission to cut bills. And this has been laid bare yet again today. 

Some might have hoped that the seventh allocation round (AR7) for new renewable energy projects would bring some welcome news for hard-pressed billpayers. But with the results of the auction, we now know the minimum amount the Government has agreed for billpayers and taxpayers to pay for the electricity produced by these new projects. The outcome isn’t pretty, with an unwelcome increase on last year’s price.

Wind has been – and can continue to be – a significant opportunity for Britain. It is our largest source of electricity generation, bringing high-paying jobs in the construction and maintenance of turbines, and is crucially a domestically produced energy source, not susceptible to control by hostile powers in the same way that fossil fuel prices are. Along with nuclear and other renewables, it should remain an important part of our energy mix, with gas as a back up when the wind doesn’t blow.

But AR7 has been a highly uncompetitive auction round, with the Government agreeing to pay £65 per mWh (in 2012 prices), compared to £54 per mWH last year – a significant increase at a time when we urgently need costs to come down. This locks both billpayers and the Government into unnecessarily high prices for electricity produced by these new wind projects for the next 20 years.

Wind has the potential to provide affordable, domestically produced power, still driving down the wholesale cost of energy. But, due to higher interest rates and a constrained supply chain, wind energy is unusually expensive at present. And the Government is making it worse.

There is a clear reason for this: the Government’s 2030 Clean Power Target, which aims to have 95% of the UK’s energy generation come from clean sources by the end of the decade. This may be a noble ambition in theory, but it is causing significant economic harm in practice. 

To hit his target, Ed Miliband has to back wind power no matter the price and approve every project on offer. Instead of taking a truly competitive approach to this auction round to ensure good value for money, he has put an arbitrary goal ahead of lower bills for consumers. 

This approach will continue to hurt our ability to ease the cost of electricity prices, which have been crippling both businesses and households for far too long. 

The debate surrounding decarbonisation is fast becoming toxic, with people questioning whether wind really is the best bet. Agreeing to unnecessarily high prices for new wind projects is both politically and economically foolish. 

Additionally, there is an environmental disadvantage. If electricity prices remain high, it will make it harder for consumers to make the switch to cleaner technologies like electric vehicles and heat pumps, which should be cheaper to run than their fossil fuel equivalents. If consumers don’t see the economic benefits, why would they make the switch? 

Labour must urgently rethink its approach to energy. Instead of a

myopic focus on the 2030 Clean Power Target, ministers should be looking at how they can cut costs for wind development and encourage a switch to cleaner energy that is driven by market forces rather than government diktat. 

A major part of this will be streamlining and reforming planning and environmental regulations, which are needlessly increasing the time and cost of building not just wind energy, but other infrastructure projects like new nuclear. This is driving up the cost of energy and keeping strike prices unnecessarily high. 

Wind power has much to offer the UK – protection against unstable oil and gas prices, a boost to economic growth and jobs, and greater energy security as we produce our own energy rather than import it. It should be a key part of our energy mix.

But building as much wind as fast as we can does not mean we take advantage of its benefits. If we are to get a grip on energy prices and decarbonise, we have to be realistic. And that starts with ditching the Clean Power Target. 

First published by CapX. John Flesher is the Conservative Environment Network's Managing Director.