PA Consulting - Is the government right to intervene in the energy market?


Energy is generally considered a basic human right and access to it is essential for an adequate standard of living and to promote health and well-being. In that context, the chancellor’s intervention is appropriate and necessary, as without his package of support, millions of British households would be in fuel poverty.

It does, however, provide only short-term protection for consumers by subsidising and smoothing the impacts of the forces affecting the current energy market. It does nothing to protect them in the longer term.

Given the price cap is currently reviewed every six months and that the wider global forces that have pushed up prices are significant and outside of our control – it’s difficult to imagine that these issues will be resolved in time for the next review.

Consumers will undoubtedly face further price shocks as the global supply and demand balance adjusts and the demand for gas as a transition fuel from coal to clean energy persists. That means the next price cap will bring more of the same and more sticking plasters will need to be applied.

The provision of energy has been largely taken for granted. What has become clear is that, with recent events, energy is now part of the public conscience in a way that it has never been before and this raises the question of what value do we as society put on it. We should be striving to deliver a cost effective and efficient system that is affordable and meets our net zero ambitions.

Our energy system can only be insulated from the worst of global macro-economic events if we become more self-reliant, and more efficient in our use of energy. Maintaining our longer-term security of supply has and always will be a political issue and one lesson from today’s situation is that we need a faster path to home-grown renewable energy generation.

This has been the focus of government policy for at least a decade and there has been laudable focus on decarbonising the energy system, but we now face an acute crisis where we need swift action to also protect our longer-term energy security, and provide affordable energy.

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