There’s more to the Tories’ proposed energy policy than just a price cap on domestic energy
The Conservative’s Manifesto includes a number of dramatic energy initiatives; the biggest headline grabber has been the proposed price cap on household energy bills.
A business price cap. It’s easy to see why.
Unlike homes, most small businesses in Britain rely on electricity alone as their energy source, rather than a combination of electricity & gas. And if a business is on deemed or roll over rates – which 45% of them are – it can be an incredibly expensive form of energy. Deemed rates are what you’re on if you haven’t signed a new contract or switched when your existing deal expires.
It’s easy to see why the Govt doesn’t think they’re good for business. To illustrate; the current deemed rates charged to SMEs by one of the largest suppliers is approximately 21p/kWh. This compares to an average of 12p/kWh for a fixed contract price currently available through energy-scanner.com. For the typical small business using 20,000kWh per year, that’s a difference in costs of nearly £2,000 a year, or an extra £6,000 over 3 years for the exact same commodity and service levels!
It’s these deemed rates that the Govt has in its political sights with a potential price cap. Critics frequently argue a cap will stifle competition among energy companies and lead to higher prices; a claim they all make with a resounding lack of supporting evidence!
But why stop smart meters?
Smart meters seem to have a bad name in Britain, thanks largely to a botched roll out and a hapless PR campaign. But subtly curtailing the smart meter roll out is curious for a party which seeks to promote innovation and efficiency.
Smart meters, done well, have the ability to help unlock enormous energy saving initiatives for businesses. In their simplest form they can be used to show how much a business is unnecessarily wasting on energy costs – which must be a good thing. Used to their full potential they can enable a myriad of efficiencies, like ‘demand side load management’, reduced faults on electrical networks, and ‘peer to peer’ energy buying.
New Zealand, which has exactly the same power system design as Britain but much lower business energy tariffs, has completed a nationwide smart meter roll out program. The roll out has spawned a range of new initiatives benefiting business. A distribution company has helped businesses save on power by installing battery storage at their premises to avoid purchasing power when demand, and therefore energy and network costs, are high. The customer pays less because their power is cheaper and the distribution company doesn’t need to build more expensive lines to cope with the increased usage. That’s demand side management. And the same company can now diagnose faults faster and rectify them more efficiently meaning businesses are less likely to be affected by power issues.
Meanwhile in New York, businesses (& apartment owners) are clubbing together & forming micro-grids; effectively divorcing themselves from their reliance on energy suppliers and the national grid.
Closer to home, here in the UK, companies like Octopus Energy are rolling out ‘tracker tariffs‘ which give small businesses access to wholesale market pricing and transparency; something normally reserved for industrial consumers. These types of products are only possible with smart meters.
Saying no to smart technology, is like choosing to stay in the 20th Century.
Technology like smart meters are enablers for digital solutions to be created and delivered in the energy industry. So sure this might be slightly technical stuff but this is the stuff that means you get a cheaper and more reliable power supply.
Saying no to this is a bit like saying you don’t want a new more efficient car; that you’d rather stick with your 40 year old Triumph 2000 (remember British Leyland anyone).
Clearly the Conservatives are interested in lowering costs and helping small business, which is why they’re looking to cap the electricity prices charged to them. But it’s unfortunate to see the smart meter roll out in their sights too.
To compete in a global economy you’ve got to be efficient and lean, and that involves embracing enabling the technology that makes it happen. Could the UK energy industry be at risk of remaining firmly stuck in the 20th Century? Let’s hope not!