Source of Miliband’s energy bill pledge casts doubt on savings

Energy Secretary Ed Miliband’s promise to cut energy bills by £300 could be “erased” by rising electricity costs, according to the expert behind the savings forecast.

Miliband’s promise, which he has stood by in the face of fierce criticism from his opponents who say it is unachievable, is based on the following: 2023 report by energy think tank Ember.

But the report’s author, economist Pawel Czyzak, told the BBC the analysis needed to be updated to take into account changes in the cost of offshore wind and other factors.

A spokesman for Miliband’s department said the UK government was “committed to striking down the law once and for all and delivering on our commitments”.

It comes as former Labor Prime Minister Tony Blair’s think tank called on the UK government to shift its focus from clean energy to cheaper electricity.

In a new report, the Tony Blair Institute says the transition to renewable energy “will fail both practically and politically if it continues to increase costs, undermine reliability and undermine growth”.

The report suggests the government’s Clean Energy 2030 plan should be recast as Cheaper Energy 2030 and argues that carbon taxes on gas should be scrapped to reduce energy bills.

The UK government insists its clean energy plan to meet 95% of electricity demand by 2030 will reduce bills by then.

A government spokesman said the mission was “exactly how we will deliver cheaper energy and reduce bills altogether”.

Miliband’s department insisted it had already delivered most of the policies called for by the Tony Blair Institute, including expanding nuclear power and accelerating grid connections.

Natural gas and electricity bills increased by 2 percent For millions of people in England, Wales and Scotland under energy regulator Ofgem’s latest price cap this month.

Last week Energy Minister Ed Miliband told the BBC that the Labor government stood by its promise to cut energy bills by £300 by 2030.

He said energy bills in the UK were high “due to our dependence on fossil fuels” and the rise in gas prices since Russia invaded Ukraine in 2022.

Energy prices rose dramatically in 2021 following the occupation, and although costs have fallen, they remain high by historical standards.

Energy experts say high wholesale costs are mainly due to the UK’s dependence on gas and its exposure to volatile prices on international markets.

Ember’s analysis first appeared in a Labor press release on the party’s energy policies in March 2024, and the Department for Energy Security and Net Zero (DESNZ) has since confirmed that the commitment was based on Ember’s forecast.

In its 2023 analysis, the think tank said UK households “could save £300 each year on electricity bills in 2030 if the government completes its transition to a mostly clean energy system by then”.

The baseline for measuring these savings is Ofgem’s price cap between July and September 2023, Ember said.

The analysis said savings from renewables “will far outweigh the total investment cost required.”

Czyzak told BBC Labor’s commitment could still be met in a variety of ways, including removing costs such as green taxes from energy bills or funding grid investment through increases in general taxes.

But when asked if the £300 savings forecast was still valid, Czyzak said it was “a very different situation than in 2023”.

It said the savings predicted in its analysis were due to a significant fall in the wholesale cost of electricity in a scenario where renewables became cheaper and became the dominant power source in the UK.

“I think the question now will be whether the high cost of offshore wind will disrupt some of these wholesale energy savings,” Czyzak said.

He said if the cost of upgrading the power grid increases and wholesale prices don’t fall that much, “it will be difficult to create savings.”

He added: “So yes, there is a risk of those savings being wiped out if we can’t get the real cost of electricity down, and that could happen if offshore wind becomes too expensive.”

Czyzak said Ember never said the £300 pledge was “the best solution for everything”.

“I think it’s quite a tricky situation in general because of the variability in everything. Everything in this market is very volatile. So if you’re just looking for a fixed, single number, it’s not that easy to present that,” he told the BBC.

While DESNZ acknowledges that market conditions have changed, it argues that new renewables are cheaper to build than new gas-fired power plants.

A DESNZ spokesman said reducing bills was “at the heart of every decision we make and why we’re signing off on record amounts of clean energy”.

They added: “By making Britain a clean energy superpower, we are steering the UK out of the ups and downs of fossil fuel prices and towards clean, domestic energy that we control.”

The cost of residential energy bills has become a key political battleground, with Conservatives and Reform England blaming net-zero policies for higher prices.

Both opposition parties say they will abandon climate targets and focus their efforts on making energy cheaper.

The latest report from the Tony Blair Institute has arrived former prime minister calls for rethink of net zero policies earlier this year.

The government has ignored his call and is opposing the think tank’s latest report backing net zero emissions by 2050.

Blair and his think tank have come under scrutiny over the clients they work with and their connections to oil and gas.

A DESNZ spokesman said the think tank’s report “rightly recognizes that clean energy is the right choice for this country”.

“Our mission is relentlessly focused on delivering lower bills to the British public to tackle the affordability crisis caused by our dependence on fossil fuel markets,” the spokesperson added.

“That’s why we’ve ushered in a new golden age of nuclear, unlocked record amounts of clean energy and welcomed the announcement of over £50bn of private investment into the UK – our mission is to deliver economic growth and good jobs across our country.”