23 episodes

Professor of Economic Policy, University of Oxford
Fellow in Economics, New College, Oxford
Interests include Utilities, infrastructure, regulation and the environment. Concentrating on the energy, water, communications and transport sectors primarily in Britain and Europe

Helm Talks Podcast Helm Talks Podcast

    • Business
    • 5.0 • 5 Ratings

Professor of Economic Policy, University of Oxford
Fellow in Economics, New College, Oxford
Interests include Utilities, infrastructure, regulation and the environment. Concentrating on the energy, water, communications and transport sectors primarily in Britain and Europe

    The first net zero energy crisis

    The first net zero energy crisis

    Energy price crises are usually triggered by external events. But the UK has been hit particularly hard by the global gas price increases, and for mainly home-grown reasons. This is the first net zero energy prices crisis and, unless action is taken, there will be many more to come. There are two main reasons: the energy system is not designed to handle the intermittency of the renewables; and the legacy costs from past subsidies on renewables confront consumers with rising prices when costs are falling. They both need to be urgently addressed, because the 2035 target to completely decarbonise the electricity system is a mere 13 years away.

    The key steps were set out in the Cost of Energy Review in 2017: socialise the legacy costs, split out the system operators so that they can oversee the pathway to the net zero targets, move away from wholesale markets to Equivalent Firm Power so that those who cause intermittency have to pay for it, and make the polluters (ultimately you and me who buy the power) pay the costs through proper carbon energy pricing. Short-term sticky plasters, such as abolishing VAT, will make matters worse, and abolishing the price cap (or even shortening the period) will encourage a return to some of the appalling behaviour in the supply market before the cap was introduced and avoid the obvious necessity to regulate the market properly. Better to get on with the fundamental reform as set out in the Cost of Energy Review and tell the public the truth: that net zero is going to cost, and, without reform, it is going to cost a lot. And if politicians are not prepared to say this, then admit that all the hype at Glasgow from the UK side was just that - hype.

    • 12 min
    Are the wheels falling off the electricity model?

    Are the wheels falling off the electricity model?

    30 years after privatisation, the electricity model looks to be in deep trouble. In addition to the collapse of 25 suppliers, and the knock-on increases in bills that customers will have to pay for what has, in some cases, been very poor management, and, in regulation, serious failures to scrutinise the businesses, several thousand people have been cut off from the distribution networks for over a week. That a storm could find the local distributors with so little resilience raises all sorts of questions about their behaviour since they agreed at the last price review that they had sufficient funding to meet their licence obligations (they did not appeal). This begs all sorts of questions about what they have and have not spent, and more generally about the highly geared financial structures that private equity has put in place.

    None of this bodes well for the complete decarbonising of the electricity industry by 2035 - in just over 13 years from now. It's time to get serious about the reforms in the 2017 Cost of Energy Review.

    • 13 min
    COP26 – progress or just more blah, blah, blah?

    COP26 – progress or just more blah, blah, blah?

    Is COP26 the “real deal”, marking the point when we “turned the corner” on climate change, or is it what Greta Thunberg calls “blah, blah, blah”? To succeed, COP26 would need to slow down and stop the increase in carbon in the atmosphere – something all the previous COPs have failed to do. For the last 30 wasted years, that concentration has gone up by roughly 2 parts per million per year, including last year, despite the great coronavirus lockdowns.

    COP26 is all about territorial carbon production emissions; it does nothing about carbon consumption, the real carbon footprints. That’s why deindustrialising, service-based economies like the UK look good, and yet still cause climate change by importing emissions and then not counting them. The world cannot wait for China (representing nearly 30% of global emissions) to peak in a decade’s time and then take another 30 years to reach “carbon neutrality”. To avoid 3˚C warming, and unilaterally stop causing climate change, the targets should be on carbon consumption, include imports, cover agriculture as well as heating and transport. We would also need to have a much bigger fiscal transfer to the developing countries. Simply setting net zero territorial targets, and mostly for 2050, is not enough, and risks the world moving on after December to other things, as it did after Copenhagen, Durban and Paris.

    • 13 min
    The gas and the electricity price crisis - fundamental causes and big consequences

    The gas and the electricity price crisis - fundamental causes and big consequences

    The gas crisis is very predictable and has caught the government and the regulators asleep at the wheel. Virtually no storage, suppliers without proper contractual cover, and a flawed model of competition have left the UK exposed to the intermittency of wind without proper back-up and with customers picking up the bill. Russia, low wind output, old-fashioned twentieth century wholesale market pricing, and inadequate scrutiny of the suppliers are the immediate causes. But the fundamental problem is the short-termism of the market. Just like Northern Rock, the shift from a longer-term contractual basis to a real-time spot market means volatility, not stability. The price cap is a longer-term contract (or at least six months) and should have forced a consequential response by the companies to go long too.

    Just like Northern Rock, limited liability allows the companies to escape, leaving customers to pick up the tab. The Cost of Energy Review in 2017 proposed a reshaping of energy markets to firm capacity, and the Equivalent Firm Power (EFP) auctions. As with the other recommendations in that review, the government ignored this, and it is now reaping the consequences. The ostrich approach will not save the government: the market is flawed, not simply going through a bit of turbulence.

    • 14 min
    Do electricity prices really need to go up?

    Do electricity prices really need to go up?

    Why are electricity prices going up? Why is the price cap being reported raised by Ofgem? Do prices really have to go up, or should they be coming down?

    The answer given by Ofgem and the industry is that the price of gas is going up. That’s true. But gas is only one part of the generation of our electricity. In fact, our electricity is increasingly coming from renewables, with some contribution from nuclear. And the renewables costs are going down. We should all be benefiting from these lower costs. But because it is the marginal cost of the gas at the peaks that drives the wholesale price, and hence our bills, we don't see the benefits of the falling costs of other forms of generation. Since we will need some gas for a couple more decades at least, we face the prospect of it setting the peak price for a long time to come.

    The right way to sort this out is to move to a capacity-based approach, and pay for the costs of the different technologies – their costs plus a reasonable return. We should have a strategic gas reserve, pay for that insurance, and for the gas – the actual gas used – when it is used. Put this together and we should see prices coming down, and sharply over the next decade. Decarbonising electricity, and ever-lower-cost renewables, should mean lower bills. It is urgent: even if many people might be willing to pay these ever-higher bills, many won’t be able to pay. Time to address the cost of energy properly, and implement the reforms set out in my 2017 "Cost of Energy Review".

    • 9 min
    Net zero and greenwashing electricity

    Net zero and greenwashing electricity

    It's about time the government and the regulators took a good hard look at so-called green and renewables-only electricity contracts. Consumers – you and I – might want to do the right thing, and buy only low-carbon electricity so we reduce our carbon footprint. But none of us – unless we really are off grid and use no diesel or gas back-ups – actually consumes only renewable energy. Why? Because what comes through the wires is a mix of gas-, nuclear- and coal-generated electricity and wind- and solar-generated electricity. There are no specific separate green-only transmission and distribution wires.

    "Green" contracts are, at best, from suppliers who buy their electricity to put into the system only from renewable electricity generators. At worst, they are just a bundle of financial contracts. So you are paying a premium to renewables generators – an extra subsidy. Nevertheless, you might think you're making a difference by doing this. But does even more subsidy make a difference to how much renewable electricity is on the system. Not really, because the government decides how much renewables there will be and how much all of us will pay for it. If you really want to pay more to help get to net zero, there are much better, and greener, things you could spend your money on.

    • 10 min

Customer Reviews

5.0 out of 5
5 Ratings

5 Ratings

Mike Mellor ,

Informative & accessible

These podcasts are an excellent supplement and update to Dieter Helm’s “Net Zero”. They are informative and thought provoking as well as accessible to a non-economist! Thank you for making them.

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