25th Nov 2016 12:35
LONDON (Alliance News) - The UK Department for Business, Energy & Industrial Strategy will give evidence later Friday to back up its energy policy, as the Economic Affairs Committee begins to investigate the government's plans for the UK energy market.
The Economic Affairs Committee is one of the five permanent investigative committees in the House of Lords and is charged with considering economic affairs. Inquiries result in the committee publishing a report based on the evidence heard that sets out its findings and provides the government with recommendation going forward.
The Department for Business, Energy & Industrial Strategy is one of the newest departments within the UK government, created by Prime Minister Theresa May after she took power following the European Union referendum in June.
Tunbridge Wells MP Greg Clark was chosen to lead the unit. Amber Rudd, who was in charge of the now-defunct Department for Energy & Climate Change, was promoted to home secretary as May entered Number 10.
The new department effectively replaced the DECC and was one of the major structural changes made by May, alongside the formation of new departments for Brexit and for international trade and changes made to a number of other existing departments.
The government's energy policy has not undergone any significant changes since May and her new cabinet took charge, but Clark recently reiterated the government's energy strategy with a few minor changes while speaking at at the fourth annual conference held by the UK's trade association Energy UK.
In summary, the three sources of energy that are to be encouraged by the UK government are gas, nuclear and offshore wind, while investment will be made in new technologies, including energy storage - the next key step to make intermittently available renewable energy more useful. Clark has also set up the Energy Innovation Board chaired by Chief Scientific Advisor Mark Walport, tasked with finding something "cheaper and as reliable as coal and carbon free".
A move away from one central energy network, an area mostly dominated by National Grid PLC, was also suggested by Clark, referring to the trend toward smaller, more regional electricity distribution networks.
However, uncertainty looms over the UK energy market since the vote for Brexit, as gas and electricity generators and suppliers continue to worry about the relationship with the European energy market - with numerous inter-connectors running underneath the Channel allowing countries to trade, import and export power from one another.
That will be one of several topics of discussion at the evidence session to be held later Friday, when three officials from the Department of Business, Energy & Industrial Strategy will present their views on the UK's energy strategy and policy to the Economic Affairs Committee.
The Committee is chaired by Lord Hollick and the inquiry is looking into 'The Economics of UK Energy Policy'.
Director of Clean Energy Ashley Ibbett, Head of Energy Security Dan Manzani and Head of Energy Economics & Analysis Paro Konar-Thakkar will be the three representatives presenting evidence on behalf of the Department of Business, Energy and Industrial Strategy.
"The committee is exploring the present mix of policy interventions and subsidies in the energy market. The core question which it is seeking to answer is: 'What are the failures, if any, in the energy market and what measures are needed to correct them?'" said the Economic Affairs Committee on Friday ahead of the meeting.
Although the government believes it has sent a "clear signal" to investors and the market by outlining its energy strategy for the future, there are a number of issues that span back to before May became prime minister but still are prominent within future policy decisions.
The committee said it will ask for evidence from the UK government about how it negotiated the Hinkley Point deal - the GBP18.00 billion nuclear power station to be built by French state-controlled EDF Energy in Somerset in partnership with the Chinese government, which is paying for around one-third of the development.
The plant will be on par with the largest one currently operating in the UK, able to generate around 7.0% of the UK's total power need, but criticism of the project include the price that will be paid for the power, the construction timetable, and the security implication for the UK of the involvement of the Chinese government.
The committee will ask "what is plan B?" if the power station does not open on time, another huge concern amongst critics of the deal.
The two other major talking points on Friday will concern long-standing issues that have continued to pose a problem under the new government cabinet. Questions will be raised over the lack of correlation between the drop in wholesale electricity costs, the amount paid by suppliers, and energy bills. The committee intends to find out why bills have not "fallen further and faster", it said.
The lack of price cuts was one of the major reasons the Competition & Markets Authority conducted a two-year investigation into the UK energy market over fears it was uncompetitive and, whilst a swathe of new measures are being introduced, the CMA did not crack down on the energy prices.
The investigation itself did encourage a swathe of smaller, independent energy suppliers to enter the market, and the Big Six suppliers, including SSE PLC and British Gas-owner Centrica PLC, have all lost customers to new entrants over the past two years.
Most suppliers made cuts to their energy bills either very late last year or in the first half of 2016, but only by an average of around 5.0% - whereas wholesale prices at that time had halved on the back of drops in oil and gas prices.
The committee also plans to question the effect of subsidies and other measures that are used to encourage certain types of energy development on customer bills, and how they impact the wider industrial and commercial sectors.
Renewable energy has made huge strides over the past decade and officially started to generate more electricity for the UK this year than coal, which, after being integral to the country's energy mix, will be completely phased out by 2025. However, as the amount of renewable energy available increased, the economics of those projects improved hugely and prompted the government to slash subsidies.
Onshore wind farms and solar farms were the two renewable sources that lost the majority of their subsidies earlier this year, with only offshore wind continuing to benefit from government incentives. That decision was made under previous UK Prime Minister David Cameron and instigated by Rudd, who was head of the DECC at the time.
The session at the House of Lords will start at 1535 GMT.
By Joshua Warner; [email protected]; @JoshAlliance
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