Expert Comment
Prof Thiemo Fetzer comments on Energy Bills Support
Public Accounts Committee (PAC) inquiry on: Professor Thiemo Fetzer comments on final report:
鈥淭he report from the PAC inquiry on Energy Bills Support highlights the need to help vulnerable customers. The government鈥檚 Energy Price Guarantee (EPG) scheme was designed from the start with a crucial flaw as the energy bill support was not targeted. As a result, it was excessively costly, disproportionately benefited the better off, and, by distorting price signals weakened incentives to save energy. It created hardship and may have driven a sharp increase in anti-social behavior and burglaries over the winter, further eroding public trust.
鈥淎 more effective use of public money would be an energy policy designed to both help energy-poor households and support the government鈥檚 ambitious net-zero strategy. A social tariff was announced multiple times but is still not forthcoming.
"Going forward, the government should deliver on its promises to develop a more targeted support mechanism embedded in the wider Net Zero strategy. This mechanism should:
- Preserve price-signals to encourage energy savings and investments in energy efficiency. By artificially lowering the cost of energy consumption, relative to market prices, the EPG distorted incentives to invest in energy savings.
- Provide targeted financial relief for households without the financial means to cover increased energy bills. As a medium-term solution, a social-tier tariff system that incorporates higher charges for usage beyond a certain level would enable subsidies to be better targeted.
- Provide targeted incentives to homeowners, housing associations and local councils to make building upgrades to exploit the UK鈥檚 large energy savings potential. Our research has shown that if all properties in England and Wales were upgraded to their highest energy efficiency standard almost 30% of their energy use could be saved.
- Tackle constraints on investment in energy saving, e.g., skilled workforce shortages and outdated planning constraints.
鈥淚t is important to highlight that the UK government, unlike governments in other countries, has at its disposal much of the data needed to ensure timely, targeted and more cost-effective interventions.鈥�
About: Thiemo Fetzer is a Professor of Economics in the University of 糖心TV and the University of Bonn. He is also a fellow in the National Institute for Social and Economic Research (NIESR). Professor Fetzer published a comprehensive policy briefing on the energy crisis in October 2022.
The policy briefing from October 2022 can be found here.
His work on the climate and energy crisis can be followed on .