Mind the energy price cap

It’s always with a sense of mild dread that I read BBC News push notifications on my phone – it’s rarely good news.

That made today’s announcement that Ofgem is reducing the cap on household energy bills to an average of £2,074 between July and September a welcome change. This is a £1,206 reduction on the previous quarter and comes in time for the government’s energy price guarantee to expire on 1 July.

While this is good news for hard-pressed consumers, it needs to be taken with a pinch of salt. Even as Ofgem has lowered the price cap, for example, its Chief Executive Jonathan Brierley has emphasised that it would only take one global event to bring them back up. That’s to say nothing about the UK’s legally binding commitment to reach net zero by 2050, and even further, its ambition to decarbonise our electricity system by 2035.

The degree of pressure on households from energy prices this year has meant that the way we power our homes and businesses is higher up the political agenda than it has been for many years. But it’s questionable whether the degree of challenge, or the degree of action required to meet it, is widely understood by the public.

The need to bring the UK’s energy transmission infrastructure up to date is a good example. National Grid, which owns and operates Britain’s electricity transmission system, is currently embroiled in a row after news that some new renewables projects face up to 15-year delays to connect into the grid due to a lack of capacity.

Even at the planning stage, burdensome obligations on developers and outdated National Policy Statements have left some applications waiting up to four years for a decision - meaning that projects submitted today risk not coming online until 2030 (if they have a grid connection).

National Grid has committed to spending £40bn on upgrading its infrastructure over five years – but this is just one area requiring investment. Failure to take decisive action will risk maintaining the conditions which will continue to contribute to high energy prices in the future.

Against this background, it was great to welcome James Heath, Chief Executive of the National Infrastructure Commission, to our offices today for an event under the Chatham House rule to discuss some of the infrastructure challenges facing the UK. The National Infrastructure Commission’s second National Infrastructure Assessment is due in October this year and will look at the UK’s infrastructure needs to 2050 and beyond.