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Britain’s Power Failure

Danny Fortson, The Sunday Times

The average household energy bill has risen to £1,344 a year, up from £954 in 2007. The increase has come despite a steep drop in fuel prices caused by America’s shale revolution.

[…] On a Tuesday in late July, Amber Rudd sat down for a grilling by the Commons energy and climate change committee.The MPs wanted to know how the department would change now that it was free of Liberal Democrat influence. Her coalition predecessor was the Lib Dem Ed Davey.

“The difference in terms of approach under a Conservative majority government is that value for money is always going to be at the top of the decisions that I take,” she told the committee. “Keeping bills as low as possible, this is very much a theme for me and indeed for the government too — making sure that families do not get badly impacted by the policies that the department is taking on.”

Her answer shocked no one. Rudd had the month before announced the end of subsidies for new onshore wind farms. A month later, she slashed solar payouts to the bone. The latter came just five years after the solar support scheme was introduced, making Britain briefly the world’s top destination for developers.

Such meddling has led to falling investor confidence, plummeting share prices — see the example of Drax — and failed businesses. Mark Group, a family company in Leicester, last year generated a £14m profit on turnover of £214m by installing solar panels and home insulation. A policy change on insulation hurt it. The solar cuts killed it. The 41-year-old business filed for administration this month, putting 600 people out of work.

“The UK had the potential to be a world leader in green energy and the government should have continued investing,” said Jon Ashworth, Labour MP for Leicester South. “We are now seeing what the subsidy cuts mean on the ground.”

The turmoil stems from the Gordon Brown era. As prime minister, he steered through the Climate Change Act 2008, which committed Britain to cutting greenhouse gas emissions by 80% (from 1990 levels) by 2050. That legislation paved the way for the Energy Act 2013, a bewildering mix of financial penalties for polluters — coal-fired power stations — and incentives for more expensive replacements, such as offshore wind and, of course, nuclear.

The legislation was meant to provide the framework for the grand reshaping of the industry. It has not gone to plan. By the time Rudd took office in May, the average household energy bill had risen to £1,344 a year, up from £954 in 2007. The increase has come despite a steep drop in fuel prices caused by America’s shale revolution.

Household charges have defied gravity largely because of green subsidies, which have doubled from 8% of the average bill in 2007 to 16%, according to RWE Npower. The Office for Budget Responsibility forecast that payouts to green energy producers would overshoot government targets by £1.6bn by 2021.

The chancellor made it clear he would not countenance such a splurge. It fell to Rudd to bring the industry to heel, a job she took on with gusto. From the outside, however, it appeared increasingly that she and Osborne were remaking the rules on the fly.

The investment bank Investec accused the government in a recent note of “remonopolising power in the hands of the state” by “picking winners, instead of relying on the market to select the technologies that can assure low-carbon secure output”.

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