OVO Energy’s Corporate Affairs Director, Simon Maine during an ‘Ask me anything’ event in August 2021:
“The way we subsidise the energy transition at the moment is that it’s entirely levied on the electricity side of the bill and very very little on the gas side. Which means artificially gas is quite cheap in comparison to electricity.
That’s fine 10 years ago. Now we’ve all seen the incredible change on the electrical side of the equation on the grid, that’s now the cleaner part of the energy system and we can see a route to getting it even cleaner. So the idea that electricity, which is a fundamentally cleaner fuel, is somehow the more expensive one and gas is the cheaper one relatively speaking is a nonsense. We need to change that.
We actually collaborated with a few other energy suppliers to write a report on this earlier this year and its publicly available, here. Some people say that you should just move the energy costs from electricity to gas - just do a straight swap. Our concern with that is that you’re making gas very expensive at a time when many people are very reliant on it.
Either way it’s fundamentally regressive, people with less income pay proportionately more if you do it that way. So we’ve called for bringing it on to government taxation and then levying a carbon charge, a carbon tax to make gas more expensive than electricity but on a fair, per carbon basis. The idea is that by shifting the policy costs, proportionality back on to gas, you’ll actually create that incentive to switch.
It’s not just about the upfront costs of doing all the things that I’m sure you’ve done to your house, which can be expensive and they take time and commitment, but then there’s the ongoing costs. We want electricity to show that it’s the cheapest way of running a home as well as the cleanest.
The other thing to consider, and this takes me back to my days when we were financing solar farms and wind farms, is that all of the investment is upfront in renewable energy because the fuel is free, so the whole business model is about getting the capital together and then once you’ve managed to pay off the original capital then you’re just pure profit at the far end of the lifetime of a plant.
So government stepped in to securitise that profit, the return on investment at the beginning but once you get beyond that part of the cycle we’re gonna have wind farms that are 20, 30, 40 years old that are just generating essentially free energy - the capital costs would have been recouped decades before, so the power price in the market should come right down.
That’s where renewables can really do something quite interesting to the price of energy on the market and I know there are issues around how do you account for back-up generation and system level costs that go with that but I do think fundamentally once you're past the investment phase a mainly renewable grid should be an ultimately cheaper source of electricity.”