UK energy too cheap, says study

The government must urgently establish a strategic authority to oversee the future growth of Britain's ageing energy infrastructure, a study argues on Tuesday .

Academics at Newcastle University challenge the government's market-based approach, saying the £100bn needed to secure energy security is not being delivered by a fragmented system that lacks central direction.

The academics, led by Prof Phil Taylor, argue that the country needs a "systems architect" and that energy, at least for the bulk of the population, is too cheap, which is leading to waste.

While the Labour party has already said it wants an energy security board, one leading figure in the industry has said that Taylor was highlighting that "nobody is in charge" of the country's energy policy.

Before Tuesday's launch of the university's latest energy briefing note, Taylor, who leads its Institute for Research on Sustainability, said: "The current pricing model does not accurately reflect the high economic and environmental cost of generating, storing and distributing energy. In fact, because of the way energy is sold today, it becomes cheaper the more we use. This is unsustainable.

"Although we must make sure people can afford to heat their homes, for the majority of us energy is actually too cheap – this is why we leave lights on, keep appliances running and use machines at peak times when energy costs more."

The research paper describes the energy system as fragmented and, while it does not mention the role of the National Grid, which looks after the pipes and pylons, makes clear there needs to be a new body above that, but below government, which can oversee planning and development.

It also wants the government to help find ways to store low carbon energy efficiently and effectively in times of high supply so it can be released during periods of high demand, or to keep the lights on after storms have damaged the power network.

The academics call on ministers to work with the energy industry to fundamentally change the way energy is priced. The briefing note says: "Energy providers should be rewarded for providing tools and techniques that help customers use energy efficiently and cost-effectively."

The leading industry figure, who asked not to be named, said: "This is all very sensitive. The assumption has been that the government and the National Grid are in charge but they don't provide solutions, just a framework for the market to decide. That has only produced multiple policies and regulatory intrusion. We cannot go on this way."

The industrialist said a systems architect could perform functions similar to those of a strategic rail authority or even the Bank of England, but that there was no reason why this could not be done by the private sector. The body would need to involve commercial, technical and environmental experts as well, perhaps, as social scientists.

Meanwhile, the university paper believes too much of the debate within Westminster has focused on issues of affordability and emissions reduction while ignoring other vital issues such as the energy sector's use of water.

"This thinking risks locking the UK into a future in which water availability could put energy security at risk, and power stations could be forced to reduce production or even shut down if there isn't sufficient water available to keep them safely operational."

These kinds of arguments are increasingly being raised in different forms around the industry. A group of energy experts set up by the Institution of Engineering and Technology (IET) warned before Christmas that "whole system" thinking was needed for the power grid to ensure the lights stayed on in Britain.