Let the public benefit from our cheapest form of electricity

This post is by Alastair Harper, who has worked on housing, energy and youth policies and advised the Mayor of London. This post represents his own views.

We are staring down the barrel of historically unprecedented energy bills in 2027. It turns out, the UK can’t pull up the drawbridge from the rest of the world. Or can we?

In his budget, the chancellor signalled the continued prioritisation of clean power for our grid, recognising it as “key” to achieving “cheaper bills”. He’s spot on, but the public wouldn’t know it when looking at their electricity statement. Bills are going up whatever the weather, and it’s partly because of outdated policy design. When he was first a cabinet minister, Ed Miliband started the process (completed by Ed Davey in the coalition government) of reforming our electricity market to give a guaranteed return for investment in renewables. Back then, the idea of the electricity grid being majority powered by carbon-free energy, produced regionally and without exposure to an international energy market, felt a long way away. Now it’s our reality and the chancellor’s budget reaffirmed the commitment of removing the market link between renewables and fossil fuels. It’s fantastic, but it’s time for the government to make sure those savings are given to, and are visible to, the public.

The largest cost on our electricity bills is still the fossil fuel capacity backup for when we don’t have enough clean electricity on the grid. The cheap bits are the solar panels and windfarms. Over time, we will see that backup capacity decrease as more renewables come online. So why not let the public see this happen on their bills now? Imagine an approach that would reflect the way the electricity market works. We are no longer predominantly burning a priced fuel; we are riding an abundant supply that will one day not need much backup from the old system. In the same way we no longer pay per text message but for a monthly amount of data on our phones, paying extra if we go over, we should do the same with our electricity bills.

Specifically, imagine default tariffs that offered a baseline amount of energy: the public’s renewables abundance bonus (call it what you will: ‘clean energy discount’, ‘net zero bill’, ‘Miatta’s Marvellous Meter’). When the public goes over their allowance, they are effectively using the backup gas supply and so would pay extra for the more expensive fuel. Over time, the public would directly see their initial baseline allocation of ‘free’ or ‘net zero cost’ grow as more renewables come online and reliance on fossil fuel backups decreases. This approach saves on bills, and also links the public directly to a positive change in the entire system, solving our energy issues for the long term.

This, not coincidentally, reflects how many progressive energy companies already offer discounted tariffs for when electricity is powered by renewables. But a simpler version of an upfront ‘net zero’ allowance would also be more socially equitable, reflecting the work of campaigners such as JRF who have called for a ‘social tariff’ to be rolled out. By taking some energy levies off bills and putting them into general taxation the chancellor has started the process of making energy bills fairer for all of us. By offering a baseline of essential use from renewables and charging for any extra use of fossil fuelled capacity, the government could make bills even fairer.

Finally, this policy would reflect something Andy Burnham has proved excellent at. When the prime minister made his long term commitment to end all homelessness through a new era of social housing, he also showed the public a short term solution to the hardest end of homelessness: tackling rough sleeping this winter. He knows the public aren’t daft and big solutions will take time, but he has also proved adept at breadcrumbing a trail to that solution.

The public have had enough of stop-start crisis mode. Short term relief measures can and should contribute to the long term solution. Rather than a one-off bung in harsh times, as the chancellor has offered, this new pricing policy would both protect the most vulnerable from choosing between heating and eating, while also directly linking to the long term electricity system insulated from global shocks.

This proposed approach would show people the change that is coming. They know their bills are exposed to a global market ridden with uncertainty. They know we need to invest in our own clean and secure grid. This way, they could see the reality of that transition and immediately benefit from it.