Price caps and cash handouts, while vital, address symptoms of the problem. Without treating the disease, we’ll just need more cash – cash which will turn into taxes down the line. Helping wean the country off fossil fuels is treating the root cause of our current crisis.
Our new Prime Minister has not had any time to settle in at number 10. A cost of living and energy crisis not seen since Edward Heath was Prime Minister and then the sad passing of the UKs longest serving monarch. For Liz Truss, there is no honeymoon period.
Very quickly she announced dramatic measures. A capping of domestic energy bills predicted to cost roughly double the ‘unprecedented’ help made by her opponent in the leadership race Rishi Sunak. You may imagine such largesse from the state would be adequate to solve the problem the population faces. But it won’t. Even with the price cap the average energy bill is still double what it was 12 months ago, an over £1,000 increase. And while gas and power get all the focus, petrol and diesel remain around record highs, the Bank of England is expected to raise interest rates again and inflation is in double digits.
Even with the help from Government, for many this winter will feel more like a choking stranglehold on household budgets, not just a squeeze. Further commitments of help, Government intervention is at best going to help people get through. With all these unprecedented interventions, and as we run towards a general election, something more is needed.
As we go through a really difficult winter, the Government has the power to signal long term solutions, to be the light at the end of the tunnel. They can start to tackle the cause of the problem at the heart of this crisis.
Investing to get off fossil fuels has never been more economically attractive – renewable power is now nine times less expensive than gas, the rise in household heating bills halves the payback on energy efficiency measures and the full life costs of electric vehicles is now cheaper than fossil alternatives. And, as the economics continue to improve the cost to the government of intervention falls. Of course there is nothing new here – the voices calling for action on energy efficiency, renewables and other interventions are many, but this is more than just economics it’s about sentiment – the sense that there is a way through.
When policy is used to send long term signals it can accelerate investment plans, bringing them forward. Business can respond enthusiastically when there is clear investable policy direction. This was best seen in wind where the Government’s commitment to the wind CfD saw Siemens invest in a turbine blade factory in anticipation of the coming demand.
The government has a whole suite of opportunities awaiting them. A strategic programme to retrofit homes with efficiency over the next decade is a route to jobs up and down the county. Committing to existing plans for carbon capture will unlock investment and jobs in the north west and north east and help stimulate the hydrogen economy. Accelerating renewable deployment will retain and grow the UK’s global leadership and expertise. In each of these areas a long term plan will also stimulate the supply chain. Companies will invest in infrastructure to serve those meeting the polices; just like the blade factory.
And it’s surely what we need. As we head into a challenging winter, the promise of new good jobs driven by investment, tacking the core of what is causing the pain offers hope. Knowing your home could be made more efficient and that it will create local skilled employment for the long term offers a promise of better times. Seeing carbon capture pipelines being laid and a new generation of skilled workers being invested in offers the prospect of regeneration; tackling the challenges of climate in the exact same communities where the oil industry has, for so long, provided. So while policy makers rightly look to address the immediate financial burden facing people, serious thought needs to be given to how we signal long term investment to move away from fossil fuels and drive decarbonisation to tackle the cost of living and generate the economic recovery sought by the Prime Minister. Winston Churchill once said ‘an optimist sees the opportunity in every difficulty’. In the heart of a deepening crisis, this Prime Minister has an opportunity to seize real opportunities to transform the energy future for everyone.
This opinion piece was published in Business Green on the 23rd of September 2022.
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