UK Committee Probes Energy Market

The House of Lords Economic Affairs Committee has launched an inquiry into the economics of the UK energy market, as it believes it is not functioning as it should.

The accelerated closure of coal-fired plants, and subsidies for renewables, have been the principal means of securing decarbonisation. But consumers' prices have risen while there has been under-investment in baseload capacity, so “continuity of supply is now seriously threatened. This suggests a dysfunctional energy market or a conflict of government policies,” it said July 21.

The committee will consider whether the present mix of policy interventions and subsidies in pursuit of those objectives have led to failures in the energy market. It will look at what measures are required to correct these failures.

Among the issues the committee will consider are the key economic challenges for the energy market which the government must address over the next decade, the shifts in technology and how to promote research and development. It also seeks views on what should be the balance between the roles of the public and the private sector and whether further expertise is needed within government to understand the issues and to negotiate with external investors and suppliers.

Lord Hollick (image credit: Twitter/@clivehollick)

Committee Chairman Lord Hollick said that the committee’s report into the economic impact on UK energy policy of shale gas and oil in May 2014 had concluded that “there had been a lack of clarity and consistency in energy policy over many years. This failure of policy had left the UK dangerously close to lacking sufficient electricity generating capacity. Over two years later, little has changed. Coal power stations are being closed and old nuclear stations are coming towards the end of their life. But it is not clear how they will replaced and at what cost. The core question for the committee is are there failures in the energy market and what measures are needed in the future to correct them?"

He added that the energy market involves an "extraordinarily complicated mix of policy interventions and subsidies. Every investment in electricity generating supply is effectively determined by the government. This inquiry will seek to investigate whether current policy is delivering the best deal for energy users and whether it is striking the correct balance between private and public sector involvement."

William Powell