By Paul Homewood
Via Net Zero Watch:
Liz Truss has taken office as Britain’s new prime minister and will on Tuesday finalise a £100bn package to address the UK’s energy crisis by capping the cost of gas to bring down bills for households and businesses.
The measures are the priority for Truss, who was appointed by Queen Elizabeth at the monarch’s Balmoral estate in Scotland on Tuesday after beating her rival Rishi Sunak for the Conservative leadership.
Under the plans being worked on by the Treasury, the UK government would subsidise the wholesale cost of gas allowing suppliers to cap the price of energy to households and businesses, leaving taxpayers exposed to any further surges in energy markets.
Truss’s team said the package would provide protection from the biggest energy shock for decades, preventing mass corporate casualties and keeping millions of households out of fuel poverty. It is not clear whether the caps for households and businesses will be set at the same level.
One senior official confirmed that Truss’s team was drawing up the plans ahead of a potential announcement on Thursday: “There will be a cap, freeze or guarantee on the wholesale gas market,” he said.
She will address the nation as PM for the first time in a speech from Downing Street at about 4pm, after which she will begin to name her cabinet.
The rescue package will be a huge challenge for Britain’s straitened public finances since Truss has also promised tens of billions of pounds of tax cuts. It would be paid back either through consumer bills or taxation over the long term.
The relief package was discussed on Monday night by energy executives and Jacob Rees-Mogg, who is tipped to be the next business secretary.
Capping gas prices would lower wholesale electricity rates. About 40 per cent of Britain’s electricity is generated by gas-fired power plants, which tend to set wholesale rates for the rest of the market, even though other technologies such as wind produce power more cheaply.
In the long term, Truss’s new government wants to decouple electricity prices from gas entirely, a policy the EU is also pursuing.
Brussels is also recommending that EU member states take emergency measures to cap wholesale gas prices.
This is actually one of the options I have been considering. It has the great advantage that, by reducing electricity wholesale prices, it puts an end to the windfall profits being made by renewable energy firms and other non=gas generators.
As such it is a much cheaper way of subsidising electricity (and gas) markets than the solutions already put forward by both the government and opposition parties.
It is, of course, also a much simpler solution than radically remaking the energy markets in the way I have recently laid out. Though this is something which will need to be done sooner or later, it would not address the immediate problems.
In the long run, of course, we need to begin boosting domestic supplies of gas.