Power politics – perplexing

The UK had an effective plan for consumers to save energy and save money. This week the UK Chancellor and the six biggest energy suppliers connived to kill it, and together they have handed a sobering message to the rest of Europe that if you want to save energy, don’t trust the energy companies.

Since the early 1990s, British energy companies were willing partners in the drive to improve energy efficiency.  They were a model for energy efficiency policy in Europe, particularly the 2012 Energy Efficiency Directive, which is based on the commitment and support of energy distribution companies to finance and implement energy efficiency measures.  A portion of energy company spending had to be spent on efficiency measures, and funding for the measures was collected through a green ‘surcharge’ on consumer energy bills.

Britain was one of only a few European member states that has used this model over the past two decades. But – led by Britain – where the plan worked, it worked well. The UK example gained global recognition as an example of authorities and companies working together to solve societal issues related to climate change and energy policy. For two decades, governments had corporate partners in energy efficiency, companies gained market share by commitment to efficiency, and consumers and the environment were better off.

But now the big six have baulked. They told the Chancellor that they would abandon the model and argued that the Energy Company Obligation should be more lenient and should be funded through taxation rather than through a percentage of energy bills. They put about the cynical spin that this would reduce energy bills for consumers. It was an effort to hoodwink the public into believing that the commitment to energy efficiency was the reason for rising energy bills – despite the fact that there had been no increase to the efficiency charges.

The Chancellor of the Exchequer, George Osborne, presented an autumn statement this week that caved to the companies. The UK government watered down the Energy Company Obligation so that the companies are allowed to achieve the energy savings over a longer period of time; and the government will provide funding for efficiency measures through general taxation rather than through energy bills.  This will save the average household £1 pound a week (€1.20) on energy bills.

It is populist political capital when the opposition party is promising to freeze energy rates until 2015. But what consumers will gain on their reduced energy bill, they will pay on their tax bill. And by far the more effective way to reduce energy bills is to invest in home energy conservation measures.  The Association for the Conservation of Energy estimates that efficiency measures could save a typical household more than £500 each year – 10 times more than the £50 Osborne is promising.

There was little evidence of a sustainable energy policy in the announcements this week. The British government provided more incentives to fracking and committed new financial guarantees for another nuclear plant. This was a week when the UK lost its leadership in an enlightened policy of public-private partnership in achieving a sustainable energy efficient economy.