Prize freeze for consumers, deep change for industry

The headlines were understandably focused on the price freeze for consumers. Truss’ ‘Energy Price Guarantee’ means that a typical UK household will pay relatively normal energy bills for the next two years whilst the Government sorts the supply problems out.

There was concern Truss would sweep in with ‘band-aid’ actions but that she would fail to future-proof the UK from going through this again (as we are likely to, given that none of the factors causing the problems are going anywhere anytime soon).

But Truss’s announcement seemed to mark a sea-change in her thinking. She stated that:

“Decades of short-term thinking on energy has failed to focus enough on securing supply – with Russia’s war in Ukraine exposing the flaws in our energy security and driving bills higher. I’m ending this once and for all.

I’m acting immediately so people and businesses are supported over the next two years, with a new Energy Price Guarantee, and tackling the root cause of the issues by boosting domestic energy supply.

Extraordinary challenges call for extraordinary measures, ensuring that the United Kingdom is never in this situation again.”

The UK to introduce CfDs for existing renewables projects

Truss has confirmed that her government will introduce new fixed-price contracts for existing renewable generators.

She stated that wind and solar projects will be able to move to Contracts for Difference (a mechanism to incentivize investment in low carbon energy production) in a bid to divorce green energy prices from soaring gas rates.

New Energy Taskforce

The Prime Minister has also established a new Energy Supply Taskforce, led by Madelaine McTernan – the brains behind the UK’s world-beating Covid vaccination program. 

This Taskforce has begun negotiations with domestic and international suppliers to agree to long-term contracts that reduce the price they charge for energy and increase the security of its supply.

The Taskforce will also work closely with renewable producers to establish competitive prices.

Everyone will benefit

Responding to the announcement, RenewableUK’s CEO Dan McGrail said: “Everyone will benefit from the new Prime Minister’s clear commitment to speed up the roll-out of renewables.”

“We’re already working closely with Ministers and our member companies on proposals to break the link between the unaffordable cost of gas and the price of electricity.”

“Renewable projects which have gone live since 2015 are already on these ultra-low cost contracts which actually pay money back to consumers.

“A new scheme would see older renewable energy projects moving onto new fixed-price contracts, and this would be open to include as many generators as possible.”

Support for domestic supply

The Government has also confirmed that funding will continue for renewable schemes that received green levies under Boris Johnson’s rule. This is to ensure continuity of development for home-grown, secure renewable technologies.

Truss added the government will drive forward the acceleration of new sources of energy supply from wind and solar and that it will launch two energy reviews.

The first will focus on looking at supply and affordability in the long term and the second will review the government’s plan to deliver net zero by 2050 “in a way that is pro-business and affordable”.

Senior minister Jacob Rees-Mogg will set out a plan within two months to make the UK a net energy exporter by 2040, ensuring that our current vulnerabilities are firmly a thing of the past.

Relief

Companies leading the UK’s renewables industry such as Dulas, Tokamak, and Enertechnos must be breathing a collective sigh of relief. 

Truss’ appointment was very much a worst-case scenario for many across the industry but the severity of the energy crisis has triggered one of the biggest political u-turns in history. 

There is no excuse for the UK, one of the world’s biggest economies, to lag behind its European cousins in the energy stakes. We are a mountainous island, surrounded by tidal energy and covered in rivers. We have an abundance of natural energy at our fingertips.

If Truss genuinely commits to the promises of her first major announcement, she will preside over the greatest transformation of a developed nation ever seen. 

It’s a big challenge but the time for holding the future off has elapsed. We simply cannot continue to pay the price for political inertia.