Energy reforms deemed ‘unworkable’ by green businesses

Leading UK renewable energy companies have told the government that their plans to reform the market in favour of lo-carbon energy are unworkable and could potentially destroy the sector leading to higher and more volatile prices for homes and businesses.

The group pointed out in a letter to energy secretary Ed Davey that by replacing current subsidies with long term contracts would deter investment and make it harder for the UK to meets renewable energy goals. The biggest winner with such reforms, according to the group would be nuclear generators.

Keith MacLean, head of policy at Scottish and Southern Energy predicted that households would suffer as a result: "This will expose consumers even more to price volatility. It's taking the risk of volatility away from the generators, who are best equipped to deal with it, and passing it on to consumers."

For small and medium businesses which are highly sensitive to volatility, the reforms seem to spell disaster. The cost of energy has increased significantly in recent years and for some businesses it has been the tipping point.

A spokesman for the Department of Energy and Climate Change said: "The white paper we published in July 2011, which followed the consultation published in December 2010, set out our conclusions that the contracts for difference (CfDs) will provide the most efficient long-term support for all forms of low carbon generation. The CfD controls costs for consumers, provides stable returns for investors, and maintains the market incentives to generate when electricity demand is high."

Dale Vince, founder of Ecotricity, said: "Contracts for difference, which are essentially a subsidy for new nuclear, could put small suppliers out of business and kill the independent market. This risk does not exist under the current Renewables Obligation."

Clearly there are contrasting arguments as to how the government should reform the electricity market. After all, the demand for electricity is only going to increase and our commitment to green and renewable energy will continue. Striking a balance is going to be real challenge but one that not just the UK, but the whole world needs to address.

In the more immediate future, businesses need to check they are getting the best deal from their supplier and that they are using the energy efficiently. Simple things like installing half-hourly meters will help record how much energy you’re using accurately and having a well insulated building will also significantly reduce energy costs.