New research from the University of Aberdeen warns that UK electricity bills are unlikely to fall under current arrangements and urges policymakers to consider structural reforms to protect consumers while delivering the energy transition.
The independent study undertaken in the Centre for Energy Transition, part of the University’s Interdisciplinary Institute, highlights that wholesale electricity prices in the UK are often set by gas-fired generation, leaving consumers exposed to global gas market volatility especially during times when the country is reliant on gas for its base load.
Rising network and infrastructure costs, increasing standing charges and the impact of supplier failures have compounded the problem.
Ofgem’s Clean Power 2030 initiative and other regulatory priorities require significant investment in transmission infrastructure - costs that will ultimately be borne by bill payers and/or taxpayers.
The paper sets out a number of policy recommendations:
- Rebalance cost recovery: In the short-term, network upgrade costs should be moved from consumer bills to general taxation, with a phased return once balancing costs decline.
- Energy security as defence: Treat parts of grid investment as national security expenditure, aligning with the UK’s commitment to increase defence spending to 5% of GDP by 2035.
- Strategic gas licensing and storage: Develop a new licensing regime for domestic gas fields and invest in storage to dampen price spikes during high-demand periods.
- Maintain public support: Ensure affordability during the transition to avoid undermining consumer confidence in decarbonisation goals.
'Energy security and affordability must be viewed together,' said co-author Professor John Underhill, University’s Director of Energy Transition in the Interdisciplinary Institute.
'Consumers need confidence that the energy transition is both affordable and secure. Our research shows that strategic cost allocation and investment planning can deliver resilience without eroding public support for the energy transition.
'These investments align with decarbonisation in the energy transition and national energy security. Some costs could justifiably be treated as defence spending rather than solely as decarbonisation or consumer energy costs.'
The report concludes that without structural reform, the UK’s exposure to global energy prices will continue and bills are unlikely to fall soon, as future system costs must still be recovered.
Investments in grid capacity and resilience should be considered not only as climate policy but as a critical component of national security with a phased approach offering protection to vulnerable households while maintaining public support for decarbonisation.
'System actors are calling for the exclusion of certain costs from bills, depending on their vested interest and position in the system. But these costs will ultimately still need funding, so the logical decision is to deal with costs which can be accounted for as assets elsewhere,' added co-author and independent energy analyst, Matthew Porter.
'Dealing with the network upgrade costs and system resilience investment outside of the perimeter of consumer bills fits this thought process.'
Source: University of Aberdeen
