"Energy price caps do not work. We need strategic reform and investment in the energy market"

September 2, 2017 12:59 PM
By Marko Scepanovic; Chair of Crawley Liberal Democrats

Earlier this summer, British Gas announced further rises to their energy bills. With rising food prices, wages still stagnating and a continued fall in the pound, this was the last thing the public wanted to hear.

The policy response from Labour and the Conservatives would however only make the situation worse. Both have stated that some form of price cap ought to be brought into the energy market to limit rising costs. Whilst capping costs may sound like a good idea at first, the harm comes in the long term.

The British energy market is reliant on private businesses and their investment to thrive. Introducing a cap will ward off future business investment into the energy sector, particularly in renewables, an area where now more than ever investment is needed. This would mean in the long run that once the cap is lifted, costs will rise again due to a lack of profitability and limited competition.

Without long-term private sector growth in the renewable energy market, as a nation we will continue to remain reliant on imports from abroad and any future instability in the international oil markets could make the British public more vulnerable to higher costs in the future.

One of the Liberal Democrats less well known achievement during the Coalition years was to introduce reforms in the supplier side of the energy market, increasing the number of major suppliers from 3 to 15. Also, government led incentives and joint private-public investment from the Green Investment Bank meant that the renewable energy sector became one of the fastest growing in the UK.

The Conservatives, after winning their majority in 2015, cut renewable energy incentive schemes and sold off the Green Investment Bank. In reducing government funding, the Conservatives are increasing energy insecurity for our homes and businesses. There has to be a return to greater renewable energy investment to attract further private sector involvement.

A focus must also be on the National Grid, and improving energy infrastructure because as a nation, we are using more electricity but running on older grid systems which will not be able to cope with future business and consumer demand, especially electric cars.

Energy policy is no longer an issue the government of the day can kick into the long grass. If we get this wrong, we will condemn future generations to higher energy prices and an overreliance on overseas supplies, leaving the British public and economy vulnerable.