Should we look to Robin Hood to help transform energy use in buildings? New proposed reforms to how energy is priced could hold the key to discouraging excessive energy use, stimulating retrofit and driving down carbon emissions, argues Toby Cambray.
UK politics is in a sorry state at the moment; not only has the current administration lurched alarmingly to the right, it has also poisoned our discourse with the three Ps of populism, polarisation and post-truth. Recent by-elections do however indicate the electorate are ready for change which in my echo chamber at least, is to be celebrated. It is therefore frustrating that we are not seeing more bold proposals from the presumed government in waiting, although this does make strategic sense. At the risk of revealing my second favourite podcast, Keir Starmer is carefully carrying the Ming vase of victory across the marble floor that is 2024. It’s straight forward to make it to the other side, just don’t do anything silly, like a radical consumer energy policy.
Fortunately, I have no intention of attaining high office, and no qualms about sharing with you some thoughts on what might be done to address fuel poverty, energy security and climate change simultaneously.
In March, the New Economics Foundation published a proposal for a policy which in my opinion deserves a lot more press than it has thus far received: a National Energy Guarantee. The concept is relatively simple, and there are many variations on the theme, so it can be refined to get the best outcomes.
The idea is proposed as a counterpoint to the existing policy: a subsidy that was introduced to soften the blow of the dramatic price cap increases we saw in the autumn of 2022, which became necessary in light of international price rises. This blanket subsidy missed several opportunities that the NEF proposals have the potential to address.
The proposal is that up to some basic level of energy consumption, the cost per kWh is either zero or a small amount. Above this, prices per kWh are higher. The amount of free or low cost energy is set at a level that represents a minimum necessary for a basic standard of living; extravagant energy use is therefore costly. A refinement is the addition of one or more intermediate levels, or perhaps even a simple continuous function, so that the increases in cost per kWh is graduated to some extent. In my version, at the top end there is no energy price cap.
This is more equitable, and sets up more powerful incentives to avoid unnecessary energy consumption, without incentivising inappropriate reductions in energy use, in particular related to avoiding heating and under-ventilating. It therefore tilts the playing field in favour of investment in retrofit and other energy saving measures, and consequently carbon emissions reductions.
This is obviously an overtly progressive policy that I’m sure will be dismissed out of hand by the current administration; but structured the right way it need not cost the treasury anything, let alone the £5.5 billion that the current blanket approach did, because revenue from the upper tiers funds the free/low cost lower tiers. Careful setting of breakpoints and prices would mean the average consumer sees little or no net change in their cost, because their higher tier usage funds all their consumption. If Robin Hood dealt in electrons he would be taking from the profligate and giving to the frugal.
As with building physics there are of course unintended consequences to be mindful of. One is that some individuals have needs that dictate high energy use, such as heating to higher temperatures or large volumes of laundry for health reasons. People in such circumstances must be provided with appropriate support; several vouchers and benefits already exist and could be re-calibrated or integrated with the policy via e.g. bespoke consumption thresholds.
A second issue is potentially more tricky, and relates to the need to more towards more flexible models of energy (specifically electricity) consumption, the icon of which is the Octopus Agile tariff, effectively allowing consumers to purchase on the half hour market (and occasionally even ‘sell’ their consumption). These two types of tariff can coexist as happily as they do currently, but a key rationale with flexible tariffs is that they implicitly link our consumption less with the number of kWh, and more with the infrastructure needed to deliver them. As we move towards a system dominated by renewables, heat pumps and EVs, the ability to match demand to supply, (not the other way around as is currently the case) will become increasingly important, and the National Energy Guarantee in its current form does not directly address this.
Nonetheless, it would be relatively easily implementable via smart meters, and an improvement on the current policies with regards to equality and incentivisation of energy sufficiency. You can read the NEF proposal in full here.
