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Tuesday, September 24, 2013

Is Ed Miliband's "energy price freeze" compatible with the UK's EU commitments?

How will Ed Miliband's new Energy policies go down in the EU?
At our fringe event today at the Labour Party conference - that we organised together with IPPR (write-up to follow) - we sought to answer the question, how Labour should respond to a changing Europe. Well, here's a potentially interesting twist to that question.

Ed Miliband in his leader's speech earlier today promised to freeze energy prices for 20 months after 2015 if he is elected Prime Minister. Furthermore he also seemingly promised to reduce carbon emissions from the UK's energy sector to zero by 2030. Interesting ideas, both brave and potentially effective with the electorate (they can also count as real policy announcements). However, we wonder whether he has thought through the EU implications of all of this.

First, it's impossible to discuss energy policy without considering the EU dimension. Although UK governments - Labour and the Coalition - have no doubt added extra requirements, much of the cost of reducing CO2 and other emissions are now locked into legally binding EU agreements. Incidentally, Ed Miliband was Energy Minister from 2008-10 when many of these policies were being developed. Capping price increases while keeping the underlying policies will do nothing for long term energy affordability. Meeting the renewables target is costly and requires significant investment - this will not be forthcoming under a price freeze and the UK is already behind schedule in terms of meeting its target. UK energy companies may also find it impossible to stomach the cost of managing both policies at once.

The real question then is whether Miliband is also ready to go to Europe to renegotiate these policies to achieve affordable energy in the long-term?

Secondly, is it possible for the UK to unilaterally freeze prices in the UK while championing an integrated EU single market in energy? An integrated single market is one real way to help reduce prices - and is something that we believe Labour has rightly called for in the past.

Some have already questioned whether the move would be legal under EU competition law. We believe it might, just. Since there is currently no single market to break in energy but also because UK firms receive no competitive advantage from the move. Any imported energy would also face the same price cap since it is applied at the consumer level. Given the problems above though, tinkering along the edges of the plan seems likely (possibly to reduce the impact on UK energy firms) this could well create legal issues with the EU.

Thirdly, did Ed Miliband really mean to commit his party to reducing UK energy carbon emissions to Zero (its worth noting he made similar suggestions last year)? The EU's already ambitious targets are to cut carbon emissions by 85 - 90% by 2050, so bringing that forward to 2030 would add a huge cost to the UK's energy bill. We wonder whether he actually means 100% of UK electricity (note, not total "Energy") should be carbon free? That could technically be possible (just), but likely at an incredible cost, and require vast amounts of investment in both nuclear and renewables.

Perhaps we have been here before. When Tony Blair signed the UK up to a binding 15% of energy, it was thought by some he believed he was signing up to 15% of electricity. Former UK scientific adviser Sir David King for instance suggested that Blair and the other EU leaders did not understand what they were committing themselves to when agreeing the target:
"I think there was some degree of confusion at the heads of states meeting dealing with this. If they had said 20% renewables on the electricity grids across the European Union by 2020, we would have had a realistic target but by saying 20% of all energy, I actually wonder whether that wasn't a mistake."
It's an interesting idea - and credit to Ed Miliband for actually trying to address an issue that will be very important to people for years to come - but we would like to see more details.

But more fundamentally, it's also a reminder that, not matter how it tries, Labour won't be able to escape tough decisions on how to approach EU policy - in all its various shapes and forms.


Rik said...

Simply opposition rhetoric.
look at the practical problems in germany with the EEG (Energywende).
Looks even there simply unaffordable. Imho they will see a lot of problems overthere because of that with both consumers/voters and business/industry.
And that is with cutting excess potential from 40 to 20% (while alternatives are much more unstable).
There is no free lunch.

Not even to mention when you combine it with subsidies. Makes it even more expensive.

Probably when having to answer the questiones attached to it (say obo the German disaster) he wil make a similar mess of it as with the referendum.

Simply looks like a guy under heavy pressure in the Hans Brinker mode moving his thumb from one hole to the other.

Rollo said...

Just part of Miliband's comic act. Best ignored

duncan said...

Even the existing target is insane. Making it even tougher will achieve nothing except more expense and guaranteed failure. Not to mention bringing UK industry to a halt.

Is there any other country in the world promising this? No? Well maybe that's a clue.

And Ed seems to have overlooked (if he ever understood) the extent to which rising prices are the direct result of his past policies.

Mally said...

Don't worry, if the energy giants are as bad as Labour say they are, they will jack up the price meanwhile to cover the freeze. Who wins? Nobody

Anonymous said...

Most British energy is now owned by foreign companies in the eussr so the unelected commission of the democratically deficent eussr won't let him freeze the charges anyway, just electioneering BS again. The only way he could do that is to leave the evil empire and renationalise the power utilities.