Reform needs to Reform Energy Policy

The Reform Party needs serious policies, not piecemeal soundbites, if it is to gain power and deliver for the people of Britain.

Introduction

The Reform Party deserve congratulations for being the only large party to fight the last election on a platform of scrapping Net Zero. A couple of weeks ago, Richard Tice and Nigel Farage held a press conference to flesh out more details about Reform’s energy policy. Whilst there were some good points in their policy announcements, such as the effective declaration of war against intermittent renewables, most of the detailed policy announcements fell well short of a coherent energy policy.

This has led to people who are nominally on the same side of the Net Zero argument as Reform to express their dismay about Reform’s energy policy direction. Richard Tice has not taken well to the feedback and lashed out at critics on X.

Successive Labour and Tory governments since the Climate Change Act of 2008 have acted to subsidise, tax, complicate and add cost to our electricity and broader energy systems. The solution to this problem is not to add further taxes and regulations, but to take a chainsaw to the bureaucracy, taxes and subsidies and let the market decide which is the best way to deliver cheap and reliable electricity.

The only policy I could potentially support is the commitment to apply a windfall tax on renewables generators. Some might think that simply stopping the subsidies is the answer, but these subsidies are enshrined in contracts and if we want English Law to remain pre-eminent, then contracts should be honoured. A windfall tax is a kludge but is probably the only way of clawing back some of these subsidies. However, even this policy is at risk of falling foul of the “Qualifying Change in Law” or QCiL provisions embedded in Contracts for Difference standard terms. Developers might be due compensation if changes in the law are found to be “discriminatory.” However, Reform’s announcement might make developers think twice about participating in this year’s Allocation Round 7 because of the increased political risk.

The other policies of imposing solar farm taxes on farmers, banning battery storage and forcing new transmission cables underground are just piecemeal soundbites. More taxes and more regulations are not the solution to the energy problems we face. Reform’s proposals look suspiciously like the other side of the same big government, high tax coin that has been imposed upon us by the main parties, not a radical, reforming policy agenda.

What might an alternative energy policy look like? The following ideas might be used as a basis to form a comprehensive and coherent energy policy. The primary objectives should be immediate cuts to energy bills and building an energy system that delivers cheap, reliable energy abundance.

Declare an Energy Emergency

First we must acknowledge that we have the highest electricity prices in the IEA and UK/EU gas prices are far higher than in the US which is causing immeasurable damage to competitiveness and leading to deindustrialisation. We are spending hundreds of billions to subsidise expensive, intermittent wind and solar power and biomass, tens of billions more to subsidise the backup plants to be there when the wind is not blowing or the sun is not shining and even more billions to partially protect industry from the resulting high energy prices. We then tax hydrocarbons to make them look like they’re more expensive than renewables. Energy intensive industries are collapsing and expensive energy is acting as a drag on the whole economy. Our energy consumption is falling and GDP per capita is at best stagnating. Our energy policy is a mess and since energy is the economy, we need to declare an energy emergency to push thorough a comprehensive programme to deliver cheap, abundant and reliable energy.

Cut Energy Taxes

First on the agenda ought to be to cut energy taxes. Gas-fired electricity is handicapped by the Emissions Trading Scheme carbon tax. This should be abolished so the wholesale cost of electricity will fall immediately. There will also be a knock-on effect that generators funded by Renewables Obligations Certificates (ROCs) will receive less revenue because their revenue is the sum of the wholesale price plus their ROCs. Generators funded by Contracts for Difference (CfDs) will receive the same revenue but more subsidy which could possibly be fixed if a non-discriminatory windfall tax can be designed.

The current 5% VAT charged on energy bills should also be cut to zero to deliver a further immediate saving to energy consumers. Any thoughts of a Carbon Border Adjustment Mechanism (CBAM) should be consigned to the dustbin of history and the Climate Change Levy should be scrapped along with Air Passenger Duty.

Eliminate and Mitigate Subsidies

The first step in dealing with renewables subsidies could be the aforementioned windfall tax on the excess profits of renewables generators. If such a tax could be implemented, the proceeds should be used to reduce bills by offsetting some of the green levies. In addition, all new subsidies for renewables should be stopped by abandoning any further Allocation Rounds. The absence of subsidies will probably stop any new wind farms or solar farms on agricultural land being built, so there is no need to penalise farmers with extra taxes for solar farms. There may also be a case for cancelling existing CfDs for projects that have not begun construction.

Any ideas about subsidies for carbon capture, batteries, hydrogen or biomass with carbon capture (BECCS) should be abandoned.

The mandates to phase out petrol cars and gas boilers should also be scrapped. The subsidies for electric cars and heat pumps should also be scrapped. These technologies should be forced to compete in the free market and if they are as good as their proponents claim, then people will adopt them.

A focus on cheap, reliable energy will also allow the extra costs and complexity of Demand Side Response and locational pricing to be eliminated, thus acting to drive down bills further.

Fix the Supply Side

We then need to fix the supply side of energy production. There should be a strategic commitment to drill, baby, drill to maximise the domestic resources we have in the North Sea and in onshore shales, such as the potential giant new discovery in Lincolnshire.

The Energy Profits Levy or windfall tax on oil and gas companies should be cancelled, new onshore and offshore exploration and development licenses should be granted and the moratorium on fracking should be lifted. We should also encourage our continental neighbours to exploit the gas resources under Northern Europe. More supply will bring down prices for everyone.

It remains an open question whether coal should be part of this change to the supply side. I am not a fan of coal because of the particulate, SOx and NOx emissions. However, new ‘super-critical’ coal plants may mitigate this problem. Any decision on coal should recognise that it will be better for the nation if we use coal rather than be cold and coal is probably more environmentally friendly than burning trees as biomass. With new gas-turbines being sold out for the next few years, then we may need to consider building new coal-fired power plants, fuelled by domestic coal.

Build new electricity generation infrastructure

Our existing gas turbine fleet is aging and most of our nuclear power plants are reaching end of life. It is essential that we build new reliable capacity to replace the worn-out machines and supply the expected burgeoning demand for extra electricity from AI and other new technologies.

We urgently need new gas-fired electricity generators now and should get on with it. However, in the medium and long term, natural gas supplies are likely to be finite, so we will need to replace that electricity generation capacity with a reliable and environmentally friendly alternative. Geography limits our use of hydro and the only proven, scalable alternative is nuclear power. However, new nuclear in the UK costs 2-4 times that in Korea. It is therefore essential that we overhaul nuclear regulation so that new plants can be built safely, but much faster and more cheaply. This should focus on new large plants at existing sites and small modular reactors on other sites with existing connections to the grid such as former coal-fired power plants. Advanced, fast reactors should also be part of the mix to generate value from our plutonium stockpile and other spent fuel rather than burying it.

The addition of more reliable generation sources will probably obviate the need for batteries to provide grid stability services or storage. We should not ban batteries; we should let the market decide whether they can provide competitive solutions in the future. The role of Government should be to simply regulate the safety of such installations.

Installing concentrated power plants, whether they be gas or nuclear, much closer to the source of demand than remote wind farms in the North Sea will dramatically cut the need for more transmission lines. Cutting the need for transmission lines is a much more effective solution than forcing extra costs on consumers by burying cables underground.

Dismantle the Green Blob

All of the above will be anathema to the green blob and any attempt to implement this programme will be mired in lawfare and judicial reviews. To neutralise this resistance, the legislative framework will need to be overhauled. This means repealing or substantially altering the Climate Change Act and leaving the Paris Agreement. There will be implications for other international treaty obligations, so a detailed piece of work will be required to think through exactly how these issues should be navigated.

As part of this overhaul, the Climate Change Committee should be disbanded. While we are about it, the senior leadership of DESNZ, Ofgem and NESO should be replaced and we should set up a Climate DOGE to defund the blob think tanks, academic institutions and NGOs.

Conclusions

Many people on the sceptical side of the Net Zero argument want Reform to succeed. Although Reform is having some success in opinion polls, to win power through the ballot box they will need a robust policy platform that will stand up to scrutiny from a hostile media. To deliver change, they need a proper plan for delivery when in office.

There needs to be a detailed programme of properly sequenced actions behind the policy, not just for energy policy but across the board. A serious policy team needs to be built to bring all this together. The piecemeal announcements so far do not instil confidence that the senior leadership understand what is required, even if their hearts are in the right place on the key issues. To succeed, Reform needs to reform its policymaking apparatus.

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Eigen Values now has well over 3,600 subscribers and is growing faster than ever before. If you enjoyed this bonus article, please share and sign up to receive more content. I was lucky enough to appear on Jacob Rees-Mogg’s state of the Nation on GB News last Tuesday. Here is a link to the segment talking about the energy price cap and the cost of renewables. The next main article will be looking at the Climate Change Committee’s 7th Carbon Budget.

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