- Ed Miliband claims that a recent report from the National Energy System Operator (NESO), commissioned on his instructions, vindicates both his plan to decarbonise the power grid by 2030 and his claim that this will be cheaper for consumers
- But analysis of the NESO paper by the Centre for Policy Studies shows that its underlying assumptions – particularly on gas and carbon prices – are deeply questionable
- To make Miliband’s numbers add up, NESO assumes a gas price of 101p/therm. But this is produced by taking the upper range of two independent price estimates and treating them as the central forecast
- In fact, the central forecast produced by Miliband’s own department is only 72p/therm. Most other forecasters expect UK and European gas prices to be even lower: the International Energy Agency talks of ‘an LNG glut’
- The report also assumes a carbon price that is 2.7 times the current figure, including an extra £25 carbon levy imposed on gas-fired power stations
- NESO states explicitly that, on the prices modelled by Miliband’s own department, his plans would cost consumers money, in contradiction to his repeated claims
Ed Miliband hailed a recent report from the National Energy System Operator (NESO) as vindicating his plan to decarbonise the grid by 2030.
But a new analysis from the Centre for Policy Studies, ‘The Great Grid Gamble’, shows that the NESO report is built around a series of assumptions designed to cast Miliband’s plans in the best possible light, rather than reflecting the reality of the energy markets.
As other critics have pointed out, the NESO report says that ‘several elements’ of Miliband’s plan are ‘at the limit of what is feasible’. For example, it envisages building twice as much transmission network capacity in the next five years as was built in total over the last decade, with zero delays.
Far more alarming, however, is that the NESO justifies Miliband’s plans by forecasting high gas and carbon prices – substantially higher than market projections, or even the numbers produced by his own department.
The figures for gas prices, for example, have been produced by treating the highest estimates of various independent consultancies as the central price scenario. The result is a price range of between 72p/therm and 290p, with a central estimate of 101p.
But the energy department itself forecasts a range of 42p to 114p, with a central estimate of 72p. Meanwhile, the International Energy Agency is predicting an ‘LNG glut’ which sends gas prices in Europe to a third or half of today’s levels by 2030.
Likewise, NESO assumes a carbon price that is 2.7x higher than today’s figure, including an extra £25 tariff to deter power stations from sending non-green energy overseas.
Using the central price forecasts produced by Miliband’s own department, his plans would make UK electricity more rather than less expensive. The counterfactual scenario modelled as an alternative is a strawman, where we make pitiful progress this decade. And the numbers only add up if ‘clean power’ is defined as a grid that is 95% decarbonised, rather than 100% – a definition the Government has yet to confirm it will adopt.
The report argues that when making hugely important decisions about the future of Britain’s energy system, politicians need to be guided by the best available evidence, rather than picking the evidence to fit their existing ideological beliefs, and warns that the Energy Secretary appears to be failing this test.
Robert Colvile, Centre for Policy Studies Director, said:
‘We at the Centre for Policy Studies support the transition to a clean, secure, abundant energy system. But it is vital that we do so on the basis of the best possible forecasts. It is therefore deeply alarming that the NESO report is being used to claim that the 2030 target will be cost-free for consumers, when that claim rests on an extremely dubious set of assumptions.
‘Coming after Ed Miliband repeated his frankly bogus claim that his plans will save households £300 a year on their energy bills, Britain’s energy policy seems to be being driven increasingly by spin and ideology rather than data and evidence.’
Dillon Smith, Researcher for Energy & Environment Policy at the CPS, said:
‘The CPS has been a strong supporter of free-market policies to help reach Net Zero, and the decarbonisation of our power sector is a vital step on this journey. However, if the Labour Party’s dash for 2030 ends up raising prices rather than lowering them, not only will it undermine economic growth, it will also make the wider transition to Net Zero harder.’
ENDS
NOTES TO EDITORS
- ‘The Great Grid Gamble’ is available to downloaded here.
- For further information, please contact Josh Coupland, Digital & Communications Manager, on 079124856555 or [email protected]
- The Centre for Policy Studies is one of the oldest and most influential think tanks in Westminster. With a focus on taxation, economic growth, business, welfare, education, housing and green growth, its goal is to develop policies that widen enterprise, ownership and opportunity.
Date Added: Friday 29th November 2024
