Britain will no longer pursue green energy at all costs and will instead make keeping the lights on the top priority, Amber Rudd, the energy secretary, will vow this week.
Households already face paying over-the-odds for energy for years to come as a result of expensive subsidies handed out to wind and solar farms by her Labour and Lib Dem predecessors, Ms Rudd will warn.
In a major speech setting out a new strategy, the energy secretary is expected to say that from now on, policies will balance “the need to decarbonise with the need to keep bills as low as possible”.
“Energy security has to be the first priority. It is fundamental to the health of our economy and the lives of our people,” she will say.
But Ms Rudd is also expected to make clear that eking out more power from Britain’s ageing and polluting coal-fired power stations is not the solution to keeping the lights on, and new gas and nuclear plants are needed instead.
The energy department is understood to be considering announcing a closure date for Britain’s remaining coal plants – potentially requiring a shutdown as early as 2023, although policy details were still being thrashed out this weekend.
Any such move would be highly controversial as coal power stations produced 29 per cent of UK electricity last year and the closure of some plants has already increased the risk of blackouts.
But Ms Rudd is expected to warn that the remaining old coal plants are becoming increasingly unreliable, highlighting breakdowns at several plants earlier this month that forced National Grid to resort to emergency measures to keep the lights on.
While coal will have a role in the “short term”, she will say that “longer term, it seems obvious that the risks from relying on ageing coal plant, which requires heavy investment just to maintain the plant, will increase”.
The energy secretary will disclose she has asked the National Grid to review the old coal fleet to “assess whether coal reliability is worsening”.
Although the Government wants gas plants to replace coal, Ms Rudd is expected to admit that the UK electricity market is now so distorted by subsidies that “no form of power generation, not even gas-fired power stations, can be built without government intervention”.
She will say that Labour in 2008 heralded a shift in policy where the Government “set prices and provided a subsidy for every technology regardless of its costs or contribution to energy security and carbon reduction”.
Under that approach, “success was measured by how fast renewable energy could be installed, not by how cost-effective our carbon cuts were or what the impact on energy security would be”.
In what will be seen as criticism of her Lib Dem predecessor, Ed Davey, Ms Rudd will say that “contracts were signed with no competition and could have offered better value for money” – an apparent reference to subsidy contracts handed out to offshore wind farms in early 2014.
Only in the final months of the Coalition were subsequent offshore wind projects forced to compete for the payments – revealing they could be built with far lower levels of subsidy.
“This matters because the people who pay the cost of these decisions are families and businesses. They got little say over any of this, but they will be paying the price for years to come,” she will say.
Since being appointed energy secretary Ms Rudd has moved quickly to curb subsidy schemes for onshore wind and solar farms and for rooftop solar panels after the costs spiralled to a forecast £1.5 billion more than planned by 2020.
The energy industry has been awaiting the promised “policy reset” that is supposed to set out a vision for where Britain will source its electricity needs in years to come.
Ms Rudd will say: “New, clean technologies will only be sustainable at the scale we need if they are cheap enough. When costs come down, as they have in onshore wind and solar, so should support.
“Subsidy should be temporary, not part of a permanent business model. We need to provide a level playing field, where success is driven by your ability to compete in a market, not on your ability to lobby for subsidy.”
Critics are however likely to point out that onshore wind and solar are two of the cheapest forms of renewables, although still requiring some subsidy – so ending support for them could see consumers left to fund more expensive types of green energy instead.
Critics are also likely to question how the principles of competition and temporary subsidies will be applied to nuclear. Ministers have so far negotiated a bespoke subsidy contract for one new plant at Hinkley Point in Somerset and the technology is expected to remain reliant on subsidies for the foreseeable future.
Richard Howard, head of energy at influential think tank Policy Exchange, said he did not believe an energy policy reset would herald “a complete change of direction”.
“I think the objectives stay the same: we still have carbon targets which the government has said it’s committed to; energy security will remain a very high priority and the same with energy affordability,” he said.
But he said there should be a “break from the past” in order to “meet objectives in the most cost-effective way possible, with the government getting out the way and letting the market prevail where it can”.
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