Will Miliband deliver higher energy prices but still not hit net zero?
Ed Miliband is at odds with the Chancellor over how much money his department will receive in the rest of this parliament. Rachel Reeves is finalising her spending plans for the next four years, to be announced next week, and has told her colleagues that they will not all get what they want.
Indeed, apart from protected budgets like the NHS and an increase in defence spending, paid for out of the overseas aid budget, all Whitehall ministries face a hit if the Chancellor is to avoid putting up taxes.
But Mr Miliband is in a quandary because he has pledged to decarbonise the electricity grid by 2030.
His difficulty is that this timetable lacks any credibility. A report from the House of Lords industry committee says it will require 'building more energy generation and network infrastructure at a faster pace than Great Britain has managed in recent years'.
The committee suggests Mr Miliband could make his sums work through so-called 'zonal pricing'. Peers say this would enable better use of existing capacity and reduce the amount of grid – ie pylons and other connectors – thereby circumventing planning battles in the countryside.
This would involve splitting the single energy market into regions with the price determined by supply and demand within each area. It would mean increasing bills in London, the South East and the Midlands, where renewables are in short supply, while they would fall in Scotland because of its plentiful wind farms.
The likelihood, therefore, is that Mr Miliband will miss his targets while putting up the electricity bills of millions. That should go down well at the next election
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'It may work for incumbent energy generators but it doesn't work for households or businesses struggling with Europe's highest energy costs,' Jackson tweeted. The implication was that Scottish Power was defending its profits at the expense of customers. Zonal supporters such as Octopus and Ovo Energy, regulator Ofgem and the National Energy System Operator (Neso), say that the switch would shave tens of billions of pounds off the cost of the green energy transition by making more efficient use of the electricity grid. 'It's our job to push prices down in the supply chain,' Jackson has said. 'If that means taking the very big producers to task and working hard to squeeze them to be more efficient, so we can pass lower prices to customers, that is our job.' At the moment, the national pricing system keeps prices in some areas such as London artificially low and prices elsewhere – such as Scotland – artificially high, leading to all kinds of waste and market quirks. For example, Britain is currently spending more than £1bn a year on switching off wind farms in some locations because the grid is too congested to accept their power at busy times, while firing up gas power plants elsewhere to compensate. These 'constraint' costs are expected to balloon to more than £3bn a year under the existing system. Switching to a zonal system would eradicate these kinds of inefficiencies because when there is abundant wind power, prices in places like Scotland would simply plummet, with the inverse true in the South East during peak times. It would theoretically encourage solar and wind farms to locate much closer to where power is needed, dramatically cutting the amount of money that would need to be spent on grid upgrades. One study shared with the Government, seen by The Telegraph, puts these savings at up to £27bn. 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Other critics have rubbished claims that cheaper prices in some regions will really cause businesses to relocate. 'I love Scotland, but who's going to start a big factory there?', says Dale Vince, the multimillionaire Labour donor and Ecotricity tycoon. 'I mean, how do you get your workforce there? There's so many practical problems with zonal. I don't understand why it's still being talked about.' The question of zonal has suddenly taken on more urgency as lobbying ramps up in anticipation of a promised decision this month. Advocates say that without action now the problems under the current system will only grow more unsustainable. The amount of money being wasted on a daily basis by wind farms is now being tracked by a website, Wasted Wind. On Thursday it said more than £4.5m had been spent on switching off turbines and finding replacement power. 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Starmer's intervention appears to make that more likely. Downing Street is understood to have requested a further review of the costs and benefits of the policy – raising the prospect that the idea could be killed off or kicked into the long grass. 'If you really just don't want to do this now, you could just say let's put it to one side now and look again in the 2040s,' he says. Ducking the question may ultimately satisfy no one. But at least Mr Miliband will be able to keep careening forward, Mario Kart-style. Until, at least, the next flying obstacle approaches. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
