Government must end battery rip-off and take control to lower bills, says Prospect
The government needs to play a much greater role in the roll-out of clean energy infrastructure in order to keep energy prices under control, according to a new report from Prospect.
Prospect, which represents tens of thousands of energy workers, has welcomed new Prime Minister Andy Burnham’s call for ‘greater public control’ of the utilities and has set out ideas for what this looks like in practice.
One of the central recommendations is that the government should take direct responsibility for building grid-scale battery storage, rather than leaving this to the private sector. Under the current model private investors fund battery storage, but this means they are able to repeatedly extract money from the state, including by ‘repetitive re-trading’.
This is where battery operators use excess energy to charge the batteries, and then immediately attempt to re-sell the energy to the grid despite knowing there is already too much energy in the system. They are then paid by the government not to sell their energy.
Prospect argues this has made batteries a ‘cash cow’ for private investors which is pushing up bills, rather than a tool for balancing the grid and keeping prices low. Instead, the union argues it is a ‘no-brainer’ that the batteries should be funded by the state through Great British Energy. They argue this would cost £550m per year, but would save government and consumers money over the medium-to long term.
Other recommendations in the report include:
- Government should rip up lucrative contracts for gas power stations and offer them a new deal on less generous terms. This includes changes to the capacity market, where power stations are paid to remain on standby in case they are needed. If current owners refuse, then the stations should be nationalised to enable government to control prices and plan for the transition away from gas.
- Government should take responsibility for delivering new renewable and nuclear infrastructure that the private sector in unwilling to fund, in order to minimise wider ‘system costs’ such as transmission infrastructure.
Earlier this month the Conservatives argued that the cost of additional grid connections, transmission, and balancing costs meant that the move away from gas generation was too expensive and should be abandoned. Prospect’s report rejects this approach, and sets out an alternative strategy for keeping bills under control which involves a much greater role for public investment, arguing that this would minimise the issues that opponents of Net Zero have seized on.
The report argues that there is in important role for private investment in the energy system, but the current over-reliance on private investment, while minimising immediate costs to the Treasury, is actually the most costly for consumers in the long term. It argues that:
“We have made the UK power sector an investors’ paradise, but this has not delivered a well-planned fleet of generation assets, quite the reverse. Moreover, private capital is now able to exploit this inefficiency with the rise of (heavily subsidised) storage assets, where market-based logics are clearly increasing rather than decreasing costs for consumers.
“More efficient outcomes and more affordable electricity bills depend on committing to a new understanding of what efficient delivery looks like. At the heart of that understanding should be the principle that we need a much a greater level of public control of generation assets, particularly those with the largest impact on wholesale prices, and that assets should be planned and built in a strategic way.”
Prospect Senior Deputy General Secretary Sue Ferns OBE said:
“The new Prime Minister is entirely right to argue that we need more public control in the energy system, and this report sets out a blueprint for action that would help us secure a future where energy is both cleaner and cheaper.
“The way that battery operators are currently ripping off the public is a clear example of a broken system that enriches investors and impoverishes the public.
“Ultimately we have to accept that if we want the energy system to work in the public interest, then large parts of the new clean energy infrastructure we need will need to be funded by the public sector.”
- Download the report from the Prospect Library.
