josh robson energy markets
Energy markets: clarity required on the practical impact of policy aspiration

Energy is the front line. Energy is an intensely political area of business. It always has been. And it could be no other way given a fairly recent history where Government ran generation and supply centrally. Many of our existing energy assets were built under a centralised model.

This was changed through political consensus to embrace market structures, with the goal of keeping costs down for business and for people. But the cost of energy is increasing globally and in the UK, and people are worried about their bills.

Politicians are correct to recognise this, but they also need to be aware that focussing upon immediate costs changes the discussion that must be had about how to invest for the long term. Reform of any kind needs a long term view, and it needs a clear goal too.

The current debate about energy has lost the focus on fuel poverty, its effects, and what can be done to address it. The debate is also at risk of losing an ability to talk about the climate change agenda effectively.

A debate is raging between politicians and industry about how to make sure investment takes place.
Business is right to point out that stability is needed if politicians are to get what they actually say they want; clean, secure energy as cheaply as possible; tackling climate change.

Politicians are right to call on markets to do things in the best interest of society. Reducing complex needs that affect the way that people live their lives to simple cost transactions doesn’t work for our most important institutions; social services, schools, the NHS.

Markets do not do morals well.

Energy is something that people are concerned about, but the relationship that we have with it as a society is still developing. We have not figured out what energy really means to modern society. It is at the heart of the way that we now work, and the way that we live our daily lives. But when politicians talk about energy, and when we as a society talk about energy, we often don’t actually mean ‘energy’ at all. We mean heat to keep people warm, we mean TV and the internet to communicate and share common experiences, and we mean manufacturing to keep the economy moving. Energy does have a role in all of these things. But making the energy system work together at the most efficient cost to society is a separate challenge altogether.

This issue is very complex; the right messages are often distorted. And it is here that politicians have a responsibility.

Markets have clear and evident moral limits, but politics has limits too.

The practical impact of political messages and intervention has to be recognised and priced in to the aspiration that goes alongside it. This aspiration also has to fit the real challenges that we face.
Yes we need the right mix of clean generation, and yes the price that people pay is important. But politics must also provide a vision for the future. Technocratic arguments about market structures alone are not good enough.

We need new ideas to tackle the long standing problems that have not been dealt with over many decades: Fuel poverty; energy efficiency; getting communities and individuals interested in the way that energy works for them.

The role that energy plays in modern society is in front of us every day. But, as we rely more and more on it and the market that is needed to provide it, we must seek to answer the practical questions alongside the questions of social justice.

To try and answer each of these problems in isolation just will not work.

Josh Robson is the Chair of LFIG’s Energy Group

Energy Nexus: Where Aspiration for Social Justice and Real Limits Meet
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