09:30 Wera Hobhouse (Liberal Democrat)

Those rises will heap considerable pressure on millions of people who are still feeling the pressures of inflation over the past few years. That is simply unacceptable, and it is a crisis that we cannot ignore. The effects of high energy costs extend far beyond the immediate financial burden; the cost of electricity in the UK is also holding back our efforts to decarbonise the economy and to address the climate crisis, and we must not shy away from that debate.

At present, UK households pay roughly the same for both gas and electricity bills—around £850—despite using more than four times more gas than electricity, making electricity in the UK four times more expensive than gas. That price imbalance is not only creating financial hardship for consumers, but actively deterring them from making the switch to cleaner, more efficient heating systems. The UK currently relies on 25 million fossil fuel boilers to heat its homes, accounting for 16% of the nation’s entire CO 2 emissions. Decarbonising our heating sector is a significant opportunity for the UK to cut down on carbon emissions.

The disparity in energy prices between gas and electricity is not just a domestic issue; it is part of a broader trend in which the UK is falling behind other nations in the transition to low-carbon heating. In the first half of 2024, gas prices in the UK were 22% below, while electricity prices were 27% above, the EU average. In fact, the UK had the highest ratio of electricity to gas unit prices in the entire EU at that time. That pricing imbalance places the UK at a competitive disadvantage in terms of decarbonisation.

As the rest of Europe steams ahead with its effort to electrify heating, the UK is lagging behind due to our higher costs of electricity, something that not only affects individual households and businesses, but significantly undermines the UK’s position as a world leader of climate action. To achieve our statutory net zero goals, we need to make sure that the transition to clean energy is as affordable as possible for everyone. The current energy pricing structure is holding us back, and that must change.

I welcome the Government’s inclusion of the local power plan in the Great British Energy Bill, which marks a welcome step forward for the community energy sector. The plan intends to deliver an ambitious target of 8 gW of renewable energy projects by 2030, in partnership with local authorities and communities across the country. To achieve that target, significant scale-up of local and community-owned energy will be required and we will need a support programme in place for community energy organisations in England, drawing on successful models from Scotland and Wales.

Bath and West Community Energy, a community benefit society, has reduced carbon emissions by an average of 3,300 tonnes per year with its around 31 renewable energy projects. Let us make sure every community across the country has something like Bath and West Community Energy in its patch. As we have repeated many times, community energy reduces bills, creates local jobs and accelerates the transition to a low-carbon future.

Home insulation is another key area to reduce energy costs, particularly in my Bath constituency, where much of the housing stock is old and in dire need of insulation. Insulation remains one of the most effective ways to reduce energy demand, lower bills and cut emissions, but the Government have significantly delayed the implementation of their warm homes grants. The scheme was not implemented this winter and will only operate from next winter. The Government must tackle the efficiencies of these schemes head-on, ensuring that residents receive retrofit measures that provide value for money and stand the test of time. The Select Committee on Energy Security and Net Zero will look into those issues tomorrow, and I hope people will listen very carefully.

I hope the Government consider the points outlined today. We need long-term solutions that will make clean energy affordable for all, meet our net zero targets and lift the pressures on families of rising energy costs.

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09:44 Mike Reader (Labour)

It is a pleasure to serve with you in the Chair, Mr Western. I thank the hon. Member for Bath (Wera Hobhouse)—a fellow member of the Energy Security and Net Zero Committee—for introducing this important debate. We have been doing a lot of work over recent weeks in the Committee on energy pricing and the cost to consumers, so it is very timely.

It is clear that the Government have an ambitious plan to achieve clean power by 2030. For families in my constituency and across the country, that mission is really about lowering energy bills. Quadrupling offshore wind, tripling solar, doubling onshore wind and getting projects such as Hinkley over the line and operational are all critical things that will ensure resilience in our energy markets. Importantly, they will also protect UK consumers from volatile foreign markets, taking back control from Putin and petrostates, and placing the power of energy in the hands of British people. Those targets represent the biggest expansion of renewable energy in our history, and could save families hundreds, if not thousands, of pounds a year on their energy bills.

Moving to clean power is essential, and we must take immediate action to protect vulnerable households. That is why I support the move to a social tariff; a discounted energy scheme for low-income households would make sure that we build a fairer, greener and more sustainable energy system for everyone. At its core, a social tariff is a targeted discount on energy for people on low incomes, which would act as a vital safety net and ensure that nobody must choose between heating and eating. A social tariff could provide a guaranteed below-market rate for eligible households, with automatic enrolment for those who qualify. There would be no complex switching around or shopping around, just straightforward help for those who need it.

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09:52 Helen Maguire (Liberal Democrat)

Russia’s assault on Ukraine has made clear the dangers of energy dependence, and we can no longer afford to be dependent on fossil fuels. Investing in home-grown renewable energy is about not just cutting bills but safeguarding our energy security to protect ourselves from geopolitical shocks. Climate change is an existential threat, with global temperatures driving wildfires, floods and droughts. With those come food and water insecurity and displacement, which in turn fuels conflict.

We need a Government willing to make tough choices to invest in clean energy and to ensure that the UK is not left behind in the global transition. Many areas require urgent reform. We need incentives that cover the real costs of installing heat pumps, as my hon. Friend the Member for Bath (Wera Hobhouse) outlined. We must also create a rooftop solar revolution by expanding incentives for households to invest in solar panels. That includes a guaranteed fair price for electricity sold back to the grid, which would tackle the twin cost of living and climate crises.

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09:55 John Milne (Liberal Democrat)

The part of the solution that I want to focus on today is community energy. It is welcome that the Government are getting behind renewable energy projects, but they are paying little attention to gaining public consent. The great advantage of community energy is that it is generated locally, requires no unpopular transmission systems and benefits the very people who have to put up with the local infrastructure and the potential loss of green space. The best way to get local consent for a new solar or wind farm is to let local people benefit from the energy directly.

Encouraging community energy is the democratic way to determine local land use. When local communities directly reap the rewards from community energy projects, it not only puts power—in every sense of the word—in the community’s hands, but demonstrates the benefits of a greener energy transition, which is important for our net zero targets and the planet.

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10:06 Edward Morello (Liberal Democrat)

It is a pleasure to serve under your chairship, Mr Western. I thank my hon. Friend the Member for Bath (Wera Hobhouse) for securing this important debate. I declare that prior to being elected, I spent the better part of a decade in renewable energy finance. While I would not claim to be an expert, I hope to bring some useful insights to this debate.

Between 2010 and 2021, the global average cost of electricity generated from a renewable energy source over its lifetime declined by 88% for solar, 68% for onshore wind and 60% for offshore wind. Yet, even as renewable energy has become drastically cheaper to generate, the wholesale cost of energy to consumers remains high. It is simply unacceptable that companies are making vast profits while households, particularly in rural areas, are struggling to afford the basic necessity of heating their home.

The Government could solve this problem by delinking fossil fuels and renewable energy pricing, as other countries do. Our wholesale energy price would then be the weighted average between the two, which would bring us on a par with the energy prices of other nations. Far more importantly, it would also reduce the cost to consumers. The Government must take decisive action to break the link between gas prices and electricity prices. The previous Government promised to review electricity market arrangements, and this current Government should do so. Creating a separate market for renewables and fossil-fuel generated electricity would make energy fairer and more affordable to consumers.

I will make one other appeal for action by this Government. It is a trope often repeated that we need to put more solar panels on roofs and car parks, rather than farmland. I do not disagree, but the trope fails to recognise that doing so is commercially unviable. If utility-scale solar—this is an oversimplification—costs 50p per unit to build, commercial rooftop is double that, and carports double that again. The value paid by energy companies for exported renewable energy is often as little as 5p or 5½ p per unit, so utility scale is the only solar that works as a pure export model. That unit of electricity is then sold under a green energy tariff to consumers at a vastly inflated price. The only people who benefit are the energy companies.

Again, the Government have a relatively straightforward fix at their disposal: mandating a minimum export value. Yes, energy wholesalers will make less money, but I can live with that. More importantly, it would unlock investment in rooftop and carport solar, end the competition between food production and net zero, and ultimately reduce costs for consumers. Those are easy wins for a Government who claim to be committed to fighting climate change. Instead of following the advice of industry, the Government have chosen to axe winter fuel payments, stripping vital support for many of the poorest pensioners at a time when energy bills remain high—a decision that should be reversed.

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10:11 Graham Leadbitter (SNP)

For decades, successive Governments have failed to tackle poor regulation. Ofgem has shown little interest in dealing with energy prices in the north of Scotland. Twenty years ago, we were less focused on decarbonisation issues than we are now. We were trying to get people on grid because there were so many people off-grid in the highlands and islands. The authorities would not look at getting gas into more remote areas; that was very low on the priority list. I am not advocating that we should do that now; new technologies have come in since then and we need to focus on decarbonising our energy systems. But it evidences that this has been going on for a long time, and that solutions have not been found.

As a consequence, we have big projects that would generate employment through their construction and would contribute to our net zero goals, but they cannot get over that hurdle, despite being consented and having passed all the other barriers. If they cannot get over that hurdle, those consents will fall and the projects will be lost. That needs to be urgently addressed, and I urge the Minister to do what he can to work with colleagues in the MOD to get some focus on that.

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10:17 Angus MacDonald (Liberal Democrat)

How can it be that households on renewable electricity pay four times as much as those who get fossil fuel gas? That is inappropriate, not least because the cost of electricity generation from onshore wind was one third of the cost of generating electricity from fossil fuels, yet electricity bills remain nearly four times the price of mains gas. To put that into perspective, my parliamentary flat in London, which runs on mains gas, costs 5.8p per kilowatt-hour to heat, while my home in the highlands costs 23.7p. That premium is paid not just in the highlands, but across the countryside and in rural Britain, and in high-rise properties throughout cities across Great Britain. It is an enormous and painful gap. We all believe that net zero is the way ahead—we all support that—but we do not think that the current pricing is just.

We have touched on the coupling of renewable energy and gas, and I do not think anybody would disagree that they need to be decoupled. I am sure that the Minister will talk about that. We have also touched on the environmental surcharges that are put on the electricity price, so 20% or more of an electricity bill, but just a fraction of a gas bill, is an environmental tariff. Ironically, it is people using renewable energy who are shouldering those environmental charges, not those using fossil fuels—mains gas.

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10:21 Joy Morrissey (Conservative)

We have also heard about the challenges in the highlands; I am sure that the Minister will be able to give further explanation about the plans and challenges for the highlands. Although they are producing renewable energy, and will probably produce even more, it will be interesting to see what capacity they will have.

From what I am hearing, the hon. Member is making an anti-renewables, anti-action on climate change speech. She mentioned that electricity prices are some of the highest in Europe, but her party had been in government for 14 years when the Government inherited those high prices. Could you confirm on the record that you think it is the Conservative party’s position that all levies on bills to support renewables should be scrapped?

I welcome the hon. Member’s contribution. It is wonderful to hear his commitment to the climate change emergency. We need to move forward as a country to make sure that our energy costs remain low. We did not commit to a £300 reduction in energy prices, nor did we commit to scrapping the winter fuel payment for pensioners. We went into the election without making those promises. I am simply holding the Government to account right now.

I, too, would like some clarification from the Opposition. Is the hon. Member saying that renewable energy is a solution to lower energy bills and gets us to net zero, but that we do not really want it because it is too expensive? I was not quite clear whether her argument was for or against renewable energy. Could she clarify that?

I apologise for arriving at the debate rather late, Mr Western. Needless to say, as a former Energy Minister, I take an interest in these matters. Anyone who shares that interest will understand that we need a mix of energy between renewables and non-renewables. Renewable energy has to be tested on the basis of whether it is cost-effective. Some renewables are and some are not; it is as simple as that.

I am struggling with the argument of renewable energy not being cost-effective. For the cost of the amount of generation that Hinkley C would deliver, we could deliver twice as much renewable energy generation. The strike price for offshore wind is far below any other source of electricity. So I am at a loss—across every single form of renewable energy, the generation price is below that of fossil fuels.

The hon. Lady talks about the previous Government being at the forefront of renewable energy generation, when they signed off new drilling licences for North sea oil. I feel I am living in cloud cuckoo land. There is no connection between what she is saying and the reality of market forces. Ask any wholesale energy price provider what their strike price is for renewables, and they will say that it is lower than for fossil fuels.

The time has come to have a much more sensible and serious conversation about the true cost of renewable-based systems, not just repeating again and again that renewables are the cheapest form of energy. That is why the previous Secretary of State, my right hon. Friend the Member for East Surrey (Claire Coutinho), asked the Department to produce a full-system cost of renewable-based systems. If we are intent on decarbonising the entire grid by 2030, as the Government want, we must have a detailed assessment of what it will cost, and what it will do to our constituents’ energy bills and our already high industrial energy prices. Since taking office, however, the current Secretary of State has scrapped that work. He is rushing headlong into renewable-based systems, without any idea of what it will cost the country and the economy.

More than anything, our heavy and manufacturing industries need cheap energy. They need stable and reliable energy, which does not rely on the whims of the weather. As with the shutting down of the UK oil and gas industry, seeing British industry move overseas will not change demand. It just means that domestic production—with all the tax revenue, British jobs and the investment that it brings—will be replaced by higher-carbon imports from abroad. Ministers say that decarbonisation cannot mean de-industrialisation, but if our industries, which are the hardest to decarbonise, cannot cope with the high cost of energy and therefore move abroad, that will be a disaster for our economy, devastating for our workers and their families, and will do nothing to reduce global emissions.

Ministers say that they want us to be global leaders. They want us to convince other countries to decarbonise, which is a noble goal. Climate change is a global issue, and there is no sense in our going it alone to cut our emissions when we produce fewer than 1% of global emissions. That is exactly why the Government need to change tack and stop our industrial energy prices rising any further. Countries around the world, which care deeply about holding on to their industrial and manufacturing base, are looking to the UK and other western nations to see what happens next. If they look at us and see industries being gutted by a misguided energy policy and see our people suffering from higher and higher energy bills, they will not want to follow us down the path to decarbonisation. We will be a warning, not an example, to the rest of the world.

The Government should be asking what arrangements will give us the cheapest, most reliable energy and how we get there. Instead, they are determined to decarbonise the grid by 2030 at any cost to meet a political target, even if that sends people’s bills through the roof, offshores our emissions to polluting countries and leaves us at the mercy of Chinese imports. When facing the electorate at the next election, they will not be able to say that they were not warned.

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10:38 Michael Shanks (Labour)

That is why we believe so firmly in our clean power by 2030 mission, which, by creating home-grown renewable energy, will help us to reduce our dependence on volatile fuel markets and will protect bill payers for good. Great British Energy will play a vital role in that mission by accelerating our deployment of clean energy so that Britain can become a clean energy superpower. Crucially, it will also invest in the supply chains that bring manufacturing jobs for renewable energy to our country.

The hon. Member for Epsom and Ewell (Helen Maguire) spoke very passionately about climate change. That is really important. The mission we are on is about building an energy system for the future that gives us energy security, but it is also about tackling the climate crisis, which we can no longer think of as a future threat. As we look around the world, we can see from just this year alone that it is a present reality. It is increasingly difficult to read the statistics and not think that we should be taking more decisive action.

On the point about rebalancing—how we move electricity costs, in particular, on to gas—that is also a challenge. We want the number of people who use gas to decline in the coming years, as we decarbonise. The challenge will be making sure that we do not put charges on to a dwindling number of customers. Potentially and inadvertently, some of the poorest people in the country might be those who are the last to convert from gas to alternatives. I do not, for a second, dismiss the points that have been raised; they are incredibly important. However, I want to be very clear that we are working relentlessly in this Parliament on how we reduce the wholesale costs, and we want to make sure that it follows through on to consumers’ bills.

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10:58 Wera Hobhouse (Liberal Democrat)

The bottom line is that energy costs and energy prices are too high for all our constituents and businesses. It benefits us all if we bring them down, not just to get to net zero and to bring costs down for consumers, but for the general prosperity of this country. Where will we be if we cannot make the costs at which we produce things and warm our homes and so on lower than they currently are? This is the beginning of a debate and there is much more to do. I thank the Minister and all Members for their constructive contributions; I am sure we will be here again soon.

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