By Kathryn Porter, Watt-Logic

Former Labour MP Gerald Kaufman famously described his party’s 1983 election manifesto as the “longest suicide note in history”. He was referring to the socialist nature of the policies contained in the document, which were out of step with the more right-wing mindset of the electorate which returned the Thatcher Government with an increased majority. With the General Election rapdily approaching, I will examine the energy policies of the three main parties in a short series of posts – starting with the Conservatives who have been in office since 2010, the main opposition Labour Party, and the much reduced Liberal Democrats.

For readers outside the UK, the Conservatives are generally regarded to be a centre-right party, Labour centre-left having moved away from the far-left days of the Corbyn leadership, and the Lib Dems are also centre-left. The UK has a “first-past-the-post” electoral system meaning that coalition governments are rare. This denies more fringe parties political power since they cannot act as king-makers. The Scottish Nationalist Party (“SNP”) was the third largest party in the recently dissolved Parliament, but its MPs are located only in Scotland and they do not vote on matters that do not pertain to Scotland (ie matters which are devolved to the Scottish Government meaning Westminster legislation only applies in England and Wales). For that reason I do not include the SNP in this analysis.

It is generally considered to be bad form for parties to depart from their manifesto commitments once in office, so the manifestos are expected to provide a clear indication of the policies the party would enact if elected. It is possible for manifesto promises to be jettisoned, but there tends to be a political cost to that.

The manifestos can be found here:

• Conservatives https://public.conservatives.com/static/documents/GE2024/Conservative-Manifesto-GE2024.pdf
• Labour https://labour.org.uk/change/
• Liberal Democrats https://www.libdems.org.uk/manifesto

The Conservatives have had years to get energy policy right but have failed to do so

The Conservative Party has been in Government since 2010, initially in coalition with the Liberal Democrats, and alone since 2015. In that time, Brexit (the UK’s exit from the EU), covid and the Ukraine war have affected the party’s plans and performance. Both Labour and the Lib Dems criticise the performance of the Conservatives over this period.

Labour recognises the impact of external factors but says that the Conservatives “simply do not accept that economic growth, energy security, lower bills, and addressing climate change can be complementary” and “they are ideologically opposed to using the role of the state, including public investment, to guarantee that they are”.

They also said that “the damage done by 14 years of chaotic ‘sticking plaster’ policies was exposed when Putin invaded Ukraine. The cost of fossil fuel energy on the international market rocketed. The Conservatives’ ban on new onshore wind, failure to build new nuclear power stations, and decision to scrap investment in home insulation landed British families with amongst the highest energy bills in Europe.”

The Lib Dems complain that the Conservatives have failed to address climate change with what it sees as the necessary urgency and say they “just don’t care” about high energy bills.

The Conservatives have belatedly started in the past year or so to think more deeply about energy policy. The result of the Uxbridge by-election which many saw as a referendum on vehicle pollution charging, indicated that the public was not entirely happy with the direction of travel on net zero, particularly as costs and direct personal impact in the form of new heating and electric car mandates began to loom. Both of these were then softened by the Conservative Government.

But even where people agree with the new approach they may feel it’s too little too late, and most people will think less about why energy has become more expensive and simply focus on the fact that under the Conservatives it did. They may accept much of it wasn’t the Government’s fault but fair minded-ness does not tend to drive what are often emotional decisions in the polling booth.

Leading with energy security

The Conservatives lead with energy security, saying they will continue to support new North Sea oil and gas licences, claiming that Labour (which is mentioned 41 times in the 80 pages of the manifesto) plans to end new licensing would cost 200,000 jobs and “billions of pounds of tax receipts”. Unfortunately the Conservatives remain committed to the mis-conceived windfall tax, although it will be suspended should prices fall “back to normal” before the current sunset date of 2028-29.

“In the last few years, we have faced the greatest shock to our energy security since the 1970s. Putin’s illegal invasion of Ukraine sent energy prices spiralling. Because of the decisions we had taken to boost domestic energy production and invest in renewables, Britain had little reliance on Russian fuel when the invasion began, unlike some of our European neighbours. But when global energy prices spiked, the Government stepped in to pay around half the typical household bill at the peak, saving families £1,500 on average. Bills are now coming down, and in July will fall to the lowest level in over two years. But the shock has reminded us of the importance of securing our long-term energy supply.”

In the electricity sector, there is a plan to become a net exporter of electricity, and plans to maintain energy security through the construction of new gas power stations, however this is simply a recognition that renewables alone cannot provide security in the absence of bulk storage, in the next few years. The party remains committed to a renewables-led system by trebling off-shore wind capacity “to deliver low-cost, home-grown energy and support the development of vibrant industrial clusters”. This will be expensive and will not deliver energy security without either bulk storage which currently does not exist, or alternative, likely conventional, generation which must be incentivised through the capacity market.

The Conservatives also plan to scale up nuclear power, building on Great British Nuclear. Specifically, the Party intends to:

• approve two new fleets of Small Modular Reactors within the first 100 days of the next Parliament to “rapidly expand nuclear power, create well-paid, high-skilled jobs and deliver cheaper, cleaner and more secure energy”;
• halve the time it takes for new nuclear reactors to be approved, by allowing regulators to assess projects while designs are being finalised, improving join-up with overseas regulators assessing the same technology and speeding up planning and environmental approvals;
• deliver a new gigawatt power plant at Wylfa in North Wales and work with industry to deliver existing projects at Hinkley Point and Sizewell.

This is welcome, particularly the more flexible approach to regulation and collaboration with overseas regulators. Nuclear regulation has become excessively risk averse and is strangling the delivery of new projects. It is also pleasing to see a commitment to a new reactor at Wylfa where public support is very strong and existing grid connections can be leveraged.

There are also commitments to local energy schemes, with plans to:

• Ensure democratic consent for on-shore wind, “striking the right balance between energy security and the views of their local communities”. The updated National Planning Policy Framework will seek to ensure local areas that host on-shore wind are able to benefit directly, potentially through energy bill discounts.
• Support solar “in the right places, not on our best agricultural land”. The Conservatives have changed planning rules to protect the best agricultural land with a presumption that this is used for food production, while also making it easier for solar to be located on brownfield sites and on rooftops. New planning rules also prevent multiple solar farms being clustered in one area to help protect our rural landscapes.
• The current moratorium on fracking will be maintained.

I tend to be against on-shore wind. It’s low energy density, requires a lot of grid connection and is something of a blight on the landscape. The disadvantages likely outweigh the benefits, particularly when full supply chains are taken into account. Solar is somewhat different. Rooftop solar (assuming the panels are not sourced from China) have clear benefits in terms of reducing energy costs for the owner. The picture is less clear for grid-scale solar and there are legitimate concerns over land use. Installing solar panels on the roofs of industrial buildings makes sense, but stand-alone solar farms should be limited to genuine brownfield land and not on either agricultural land or land situated in national parks or areas of outstanding natural beauty, or sensitive habitats.

I disagree with the moratorium on fracking as it is motivated by scare-mongering around earthquakes. Fracking might deliver a useful source of hydrocarbons and their potential should be explored further. However, supporters of fracking should keep in mind that the potential is just that – unconfirmed potential and it may be the case that any resources may not be capable of being economically extracted.

Pragmatism around net zero

The Conservative Party says it will adopt a “pragmatic and proportionate approach to net zero” in contrast to Labour’s “dogmatic, top-down approach that will burden households with higher bills”. It plans to reduce the cost of addressing climate change and deliver net zero by 2050, by:

• Sticking to its “pragmatic, proportionate and realistic” approach that eases the burdens on working people, ensuring they are given time to make changes, and never forcing people to rip out their existing boiler and replace it with a heat pump;
• Guaranteeing a vote in the next Parliament on the next stage of the net zero pathway, with adoption of any new target accompanied by proper consideration of the plans and policies required to meet the target, to maintain democratic consent for the big decisions relating to net zero;
• Ensuring that green levies on household bills are lower and ensuring annual policy costs and levies on household energy bills are lower in each year of the next Parliament than they were in 2023;
• Reforming the Climate Change Committee, giving it an explicit mandate to consider cost to households and energy security in its future climate advice;
• Ruling out creating further green levies including a frequent flyer levy, alongside its commitment not to introduce road pricing schemes.

This is indeed pragmatic and probably more in tune with the public’s concerns over the costs and democratic deficits relating to net zero. Nigel Farage, who is, whatever one might think about his policies, is an astute political observe, has commented that net zero is similar to EU membership in that it has been progressively imposed on the public without any meaningful opportunity for the public to object. The Uxbridge by-election indicated that this deficit is something that ought to be addressed, and the Conservatives are attempting to do this. A little late in the day, but better than nothing.

The target of reaching a net zero electricity system by 2035 is not mentioned in the manifesto. Earlier this year, think tank Policy Exchange commissioned Aurora Energy to analyse different net zero target dates: 2030, 2035 and a “business as usual” approach. According to Aurora, reaching the Government’s target of a net zero power grid by 2035 could potentially be achieved, but would require immediate legislative reform, rapid development of onshore and offshore wind, solar, grid development and nuclear. On current trajectories the UK will not succeed in decarbonising the power sector until 2051 – 16 years later than current targets.

Protecting households

All the parties claim they will protect households from higher bills and profiteering by suppliers. The Conservative manifesto notes that energy bills are falling – down 63% since their peak. The Party plans to take steps to “ensure they are low as possible for families”, by:

• Maintaining the price cap, protecting millions of households from being overcharged by their supplier;
• Reviewing and reforming standing charges to keep them as low as possible;
• Delivering the “Pumpwatch” scheme that will force petrol retailers to share live information on their prices;
• Introducing more efficient local markets for electricity, which “expert analysis” estimates would save £20 – £45 per household per year;
• Giving households the choice of smart energy tariffs, which “can save them £900 a year”;
• Implementing the recommendations of the Winser Review, ensuring networks are able to buy forward with confidence and cutting waiting times to get a grid connection to deliver an estimated saving of £15 – £25 per household per year out to 2035;
• Recognising technological developments over the last decade, it will undertake a rapid review into the advantages of alternative network technologies, compared to overhead pylons, and consider moving to a presumption in favour of burying cables where this is cost competitive.

The price cap is something most industry insiders including Ofgem would like to see abolished. It does not satisfy consumers because they expect the cap to keep energy prices cheap, and it dis-incentivises competition because tariffs cluster around the cap and consumers feel less need to shop around since they believe the cap “protects” them. Also, there is no real evidence suppliers have been over-charging consumers. The consistent losses and widespread supplier failures of recent years would certainly not support that hypothesis.

While I’m sceptical of the savings that might be realised through flexible tariffs (likely to be more beneficial to affluent households with flexible assets) and local energy markets, there is nothing particularly wrong with exploring these options, although with flexible tariffs care will be needed to ensure vulnerable households are not dis-incentivised from cooking hot dinners or meeting basic heating needs. In the past Ofgem has mooted a volume of basic consumption that would be excluded from flexible tariffs for this reason. This should be explored further to protect poorer households from the adverse effects of time-of-use pricing. There are also considerations around fire safety that should be addressed eg not encouraging the overnight use of devices with electric motors.

According to the manifesto, almost half of homes in England now have an EPC rating of C (which is incorrectly referred to as an “energy efficiency” measure – the EPC only considers the cost and not efficiency of heating) up from just one in seven in 2010. The Conservatives plan to invest £6 billion in “energy efficiency” over the next three years to make around a million homes warmer. They will fund an energy efficiency voucher scheme, open to every household in England, to support the installation of energy efficiency measures and solar panels. As I have extensively addressed in the past, a greater reliance on an un-reformed EPC scheme will embed unfairness and dis-incentivise sensible investments eg repairs and the use of high quality materials (broken double glazed windows attract better EPC scores than un-broken single glazed windows which is clearly nonsense from a cost of heating perspective). However none of the parties recognises the limitations of the EPC, which is worrying.

Other plans include:

• Build the first two carbon capture and storage clusters, based across North Wales and, the North West of England and Teesside and the Humber, cutting carbon and creating tens of thousands of jobs in these regions, and progress the second tranche of projects in Aberdeenshire and the Humber.
• Invest £1.1 billion into the Green Industries Growth Accelerator to support British manufacturing capabilities, boost supply chains and ensure our energy transition is made in Britain.
• Implement a new import carbon pricing mechanism by 2027 to ensure that imports of iron, steel, aluminium, ceramics and cement from countries with a lower or no carbon price will face a comparable carbon price to those goods produced in the UK. This will reduce the risk of industry being displaced to other countries which aren’t taking action on climate change.

Carbon capture is beginning to take on mythical, status as a unicorn of the energy markets. £/$ billions have been invested in schemes around the world, but so far there are no large-scale projects that do not rely on hydrocarbon production or processing for their economics. In the power sector, capture rates have been lower and costs higher than expected, leading most schemes to be abandoned. The UK should let other countries take the lead on carbon capture and only invest further once technologies are proved (as an aside, all parties want the UK to be a world leader in most aspects of energy markets. This is unrealistic and, frankly, hubristic. The UK should certainly not try to lead in highly speculative areas into which £/$ billions have already been spent will few positive results.)

All the parties also want to promote “green jobs and supply chains”. Like motherhood and apple pie, this is not objectionable but also may be easier said than done. Boosting domestic manufacturing makes sense – whether £1.1 billion is the right amount is unclear – but limiting factors such as access to skilled workers and access to raw materials are likely to be difficult problems to solve.

The import carbon pricing mechanism is the UK version of the EU’s carbon border adjustment mechanism (“CBAM”). This is necessary if the country /region is serious about carbon pricing as it means that carbon intensive activities cannot simply be moved to countries with weaker environmental controls and the resulting goods re-imported into the country /region to the detriment of domestic manufacturers. However, it will be inflationary as cheap imports will either become more expensive as overseas producers are required to adhere to UK /EU emissions standards, or cheap imported goods will be substituted by more expensive locally produced goods. Just how committed the UK and EU will be to this policy when the inflationary implications manifest remains to be seen.

The pragmatism seems real, but too little too late

Overall the Conservative Party’s claim to be pragmatic in relation to energy policy does stack up. There are still problems, notably the belief that renewables are cheap, that the EPC should be used more widely, and the commitment to the price cap.

But the focus on energy security is welcome, as is the desire to increase the democratic mandate for net zero. The problem is that the Party has had almost a decade in which it could have enacted these policies, but seems to have only recently realised their necessity. Perhaps they could argue that they are listening to voter concerns that have only recently become apparent. Unfortunately at this point the electorate has stopped listening to them. They are unlikely to get the chance to put right their mistakes.

Original article   l   KeyFacts Energy Industry Directory: Watt-Logic