New Business and Energy Secretary Jacob Rees-Mogg is to review which companies should be prioritised for energy support, prime minister Liz Truss told the Commons. Truss announced measures to contain energy costs for households and businesses, and to bring inflation down by five percentage points.
An Energy Price Guarantee will mean “a typical household” will pay no more than £2,500 a year for each of the next two years, so “saving” £2,000 over the current forecasts for the next two years. In addition, the £400 Energy Bills Support Scheme, the mandatory loan announced by Rishi Sunak in the spring Budget, remains.
The wholesale price for energy will be capped. Renewable and nuclear generators will move onto “Contracts for Difference” to end the situation where electricity prices are set by the marginal price of gas, such that “generators receive a fair price, reflecting their cost of production”. There will be no windfall tax on energy companies.
As households are helped, “an equivalent guarantee” for six months will be available for all firms, after which further support will be available “to vulnerable sectors, such as hospitality, including our local pubs”.
Business secretary Jacob Rees-Mogg will conclude a review of where the further support should be targeted within three months. “In the meantime, companies with the wherewithal need to be looking for ways they can improve energy efficiency and increase direct energy generation,” Truss said. Details of the six-month business support scheme are not yet available.
As predicted, new North Sea oil and gas production is to be encouraged, with 100 new licences available. The UK shale gas sector will be revived.
The Bank of England will set up a £40 billion scheme to ensure that firms operating in wholesale energy markets have the liquidity they need to manage price volatility.
Truss said that, for decades, there has been too little attention paid to securing energy supply. Regulatory structures have failed, she said.
She announced a review of energy regulation, but also of how “to ensure we deliver net zero by 2050 in a way that is pro-business and pro-growth”. This review will be led by Chris Skidmore (MP for Kingswood, who switched to Truss from Rishi Sunak during the leadership campaign).
“We are delivering a stable environment that gives investors the confidence to back gas as part of our transition to net zero,” Truss said. She promised an end to short-termism.
Subsequently, Business Secretary Jacob Rees-Mogg promised “to resolve the underlying problems in the energy market and ensure the British people enjoy affordable and plentiful energy in future”.
Jack Semple added the following comments to this note: the support comes as electricity prices were forecast to remain high at least into the middle of the decade and food inflation is expected to peak well into 2023.
Truss’s return to gas, criticised by Boris Johnson last week, will infuriate environmentalists and it is not clear whether there might be a legal challenge.
The PM’s focus on local pubs may be politically popular but if support is to be prioritised the engineering and manufacturing sector is more important, economically. They are usually part of a complex supply chain and jobs, IP, and tax revenues, once lost, more difficult to restore.
Business needs to see the detail of the support schemes as soon as possible. If there are any planned restrictions on power supply this winter, firms need to know well in advance in order to plan.
Truss’s commitment to end short-termism is welcome. UK industry was already paying far more for energy than even its European competitors, and that long-term, structural cost disadvantage needs to be addressed to encourage investment in the UK.
Energy supply needs to be more secure. Short-term, there are worries about lack of supply this winter; longer-term, we need to ensure the infrastructure can meet demand, not least when new factories are planned.
EAMA is making these points to government.
Firms are already trying to save energy, but ideas are always welcome. It would be great to hear from firms how they are doing that. EAMA member, the British Compressed Air Society, currently has a campaign (“Taskforce 10”) showing how better procurement and operation can bring savings. Ten percent of all industrial electricity in the UK is used to power compressors.
Many firms that own their premises or have long leases are using solar panels. The government should require solar on all new roofs. It has been quiet on that subject for too long.
The PM made no mention of the electric vehicle programme. However, at a time of stress on the system, one wonders if the current race to EVs might be re-thought.