This afternoon, Ed Davey will give a major speech at the Institute for Public Policy Research in London.
We’re used to hearing from the right that our high energy prices are all to do with nasty net zero. Ed will tackle that nonsense
As an alternative, he will set out a plan to dramatically slash bills for families and businesses still struggling through a cost-of-living crisis.
He will call for “a Liberal Democrat energy policy in service of the British people, not a Nigel Farage energy policy in service of Vladimir Putin”.
He will set out a plan to break the link between gas prices and electricity costs, so people get the benefits of cheap, clean power. As well as accelerating investment in cheap renewable power and home insulation, the plan would move older expensive renewable projects to cheaper Contracts for Difference – which were pioneered by Ed Davey when he was Energy Secretary. Experts have estimated that this move alone could cut bills by around £200 a year for a typical household.
Here are some snippets that the party has released ahead of the speech:
After nearly a decade of criminally negligent energy policies under the Conservatives, that pushed up everyone’s bills, I believe the right policies now could cut energy bills in half – at least – within ten years.
That should be the goal. Nothing less. A Liberal Democrat energy policy in service of the British people. Not a Nigel Farage energy policy in service of Vladimir Putin.
On the sky-high bills facing families and businesses
Families and pensioners are being clobbered with bills that are still more than £50 a month higher than they were five years ago. So many people, who were already struggling to make ends meet, having to find an extra £50 a month – just to keep the lights on, or keep their homes warm this winter.
And businesses are suffering too. Even with the welcome extra help promised in the new Industrial Strategy, parts of British industry will continue to face some of the highest electricity prices in the OECD. We have to get those prices down – to boost living standards and grow our economy.
Addressing the myths peddled by the likes of Farage and Badenoch:
The narrative – seized upon by Nigel Farage and Kemi Badenoch – says the reason energy bills are so high is that we’re investing too much in renewable power. And if we just stopped that investment – and relied more on oil and gas instead – bills would magically come down for everyone.
The experience of record high gas prices in recent years shows that’s not true. And even when gas prices are softer, the long history of volatility in fossil fuel prices means it’s only a matter of time before high prices return. So we know that tying ourselves ever more to fossil fuels would only benefit foreign dictators like Vladimir Putin – which is probably why Farage is so keen on it.
But refusing to engage hasn’t stopped his myths from spreading, from gaining traction in the new world of fake news. So we must change that.
On breaking the link between gas prices and electricity costs:
People are currently paying too much for renewable energy. But not for the reasons Nigel Farage would have you believe. Because generating electricity from solar or wind is now significantly cheaper than gas – even when you factor in extra system costs for back-up power when the wind isn’t blowing or the sun isn’t shining.
But people aren’t seeing the benefit of cheap renewable power, because wholesale electricity prices are still tied to the price of gas. 97% of the time in 2021, the cost of electricity was set by the price of gas.
And what does that mean for families, pensioners and businesses? It means we’re all paying that higher gas price in our bills, even though most of the energy we’re using comes from much cheaper sources. Not only is that manifestly unfair, but it is also undermining public support for the investment we need in renewable power.
So we have got to break the link between gas prices and electricity costs. It might be difficult, but we have to do it. We can’t afford not to. Not when the price is Nigel Farage.
On switching to new renewable energy contracts that cut bills for households
If all renewables were on Contracts for Difference, the electricity market would be a lot fairer and people would see the benefits of cheap renewables in their bills when gas prices are high. The problem is, only about 15% of renewable power is generated under Contracts for Difference.
The rest is still governed by the old Renewables Obligation Certificates scheme introduced by the last Labour Government all the way back in 2002 – when ministers didn’t have the foresight to realise that renewable power would get so much cheaper over the next two decades. Unlike Contracts for Difference, companies with ROCs get paid the wholesale price – in other words, the price of gas – with a subsidy on top. Subsidies paid through levies on our energy bills – costing a typical household around £90 a year.
It shouldn’t be this way, and it doesn’t have to be any longer. The Government should start today a rapid process of moving all those old ROC renewable projects onto new Contracts for Difference. It’s an idea from academics at the UK Energy Research Centre that they call “pot zero”. And in 2022 they estimated that it could save around £15 billion a year – not only encouraging the end of those Renewable Obligation Certificate levies, but in the process cutting the typical household energy bill by more than £200.
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22 Comments
I saw the interview and frankly, was disappointed. It started well but soon went off into an anti Farage rant which was irrelevant. Must do better.
I am a member of a co-operative that has built and now runs a wind-farm in south-west Scotland. Last year, because it was our first year of operation, we were offered the choice of opting for contracts for difference or staying on our original terms. A large majority of the co-operative opted to stay on our original terms, even though CfD could have given us a higher income. Most people who commented on this on our internal forum, gave their reason as wanting to future-proof their cost of electricity, not to make extra income. HMRC monitors this closely and it is the reason why individuals in a co-op like ours cannot contract for more than 120% of their electricity consumption at the time they become co-op members.
It is all very well for politicians, even Ed Davey, to blithely state that we could fix the problem of high electricity prices by pushing all renewables generators on to CfD, but those of us who joined a co-op in the belief that we could both do our bit for the environment and stabilise our electricity bills will feel short-changed. We need to be reassured that this will not lead to HMRC dipping their hands into our pockets once again.
Agree with David Raw
Mmm, I really do wish we were more honest about some of this. The rather brutal reality is that the transition to net zero will be expensive, I am not arguing for not doing it, but we can do it better. For example, clearly there are “extra system costs for back-up power”, right now that is gas, so what is our plan to replace the gas back up with something cheaper? Also, the most recent CfD auction in 2024 provided a guaranteed price that was about 30% above current wholesale prices for 15 years. That doesn’t sound very cheap. Then there are grid re-balancing costs and additional transmission costs (power will be generated in different places, far from where people live). Just applying basic common sense tells you that completely reconfiguring the entire energy system of the UK is not a small undertaking and will have costs. Lets please be honest and adopt polices that mitigate it as much as possible: SMRs for back up, regional pricing for location (recently ruled out by Labour), more interconnectors.
The UK privatised energy market is just a disastrous fog. For a business once in a contract it is impossible to get out of it. The concept of marginal cost pricing of electricity which is making it so expensive is very difficult to explain and Ed needs to get better briefed on this before he talks to the media.
Ed Davey’s underlying speech can be found in the link below. I think it is interesting and exciting reading at a time when the Prime Minister is being rightly critocised for having no vision, a d rhe vision of rhe right is divisive and introverted.
I have suggested that one of the challenges for the party is fusing the ideas of the economic liberals with those of social liberals. This speech has a stab at it .
To sum it up in the word of probably the most aucesaful Liberal leader: “retrench and reform”.
https://www.libdems.org.uk/news/article/my-liberal-vision-for-a-thriving-economy#read-or-watch-eds-speech
One of the best speeches from Ed in a long while. Long over due that someone took on Farage and high energy prices. If Governments had insulated houses and promoted renewable energy since 1974, when the issue first really arose, the UK would have been net zero for years. Badenoch says the UK can’t hit the targets, hardly the spirit of Churchill. Others keep saying China has more carbon emissions than the UK, the same one then moaning china dominates the renewable energy market.
Ed Davey is going to “cut energy bills in half”, primarily by financial wizardry. So why hasn’t this speech dominated all the headlines?
Because nobody is going to believe Davey’s pitch. Complex financial issues can’t suddenly be resolved by finding a simple magic solution, as several commentators above have made clear.
It’s a shame to spoil a speech which contained a lot of good sense by including grotesque and non-credible overclaims
Every time Farage gets a mention he rubs his hands with glee.
David, I fear you are mistaken. It is well known that the UK energy market is the most expensive of all for consumers. This is because repeatedly governments through total green naivety chose to encourage Green suppliers of energy by throwing the most generous pricing model to suppliers that it was possible to envisage.
Now it may or may not have been particularly successful in its aim of speeding a green rollout, but in reality it has crippled British manufacturing to the extent that every high energy use industry requires perpetual bailing out or closing down. Huge amounts of industry has been offshored cutting our national emissions but increasing the world’s because many foreign suppliers plants are no more and often less efficient than ours and then add transport costs and loss of national revenue.
All in all, like many green initiatives, it has in fact been pure, virtue signalling greenwash. As we all know brits are always a soft touch for a well crafted sob story and pretending we are being green has become the new national religion.
And don’t get me onto Ed Milliband and Carbon capture. That is scientific dreamland on steroids.
Ed Davey is is in danger or doing for Farage, in 2025, what Nick Clegg did for him in 2014……
So the usual doom merchants think that rather than tackling Farage and Reform UK, Ed should shut up and hope Farage goes away? Perhaps those who think this should have a look at BlueSky and other social media where Ed’s comments have been enthusiastically received
@Mick Taylor 18th Jul ’25 – 11:51am….So the usual doom merchants think that rather than tackling Farage and Reform UK, Ed should shut up and hope Farage goes away?…
So you think that Nick Clegg’s plan to tackle Farage in two debates was a success? As has been said “Farage feeds on controversy”.. Give Farage publicity and, in the the UK’s almost entirely right wing media, it will be played and replayed..
@ Mick Taylor “So the usual doom merchants think that rather than tackling Farage and Reform UK, Ed should shut up and hope Farage goes away ?”
No, Dr Taylor, it seems pretty obvious that you don’t give Farage the oxygen of the publicity he craves and thrives on. He just loves it. And, I don’t think Sir Edward should “shut up”. He should avoid embarrassingly silly stunts and instead put forward thoughtful radical Liberal ideas about a better future and a more compassionate liberal society. If he can’t do that he should let somebody else have a go.
What was good enough for Grimond and Ashdown should be good enough for Davey…. There’s a whole word outside London and the Home Counties waiting to be revived. I’ve been around long enough to know that 72 seats in “middle England” could evaporate when the tide changes ….. as it will.
I think Clegg’s plan was sound, but its execution was crap.
We cannot and must not allow Farage to be lauded and fetted by the BBC without pointing out his terrible policies and attempting to get the BBC to actually challenge him as they challenge other politicians.
Mick Taylor 18th Jul ’25 – 7:22pm…I think Clegg’s plan was sound, but its execution was crap…
That trite remark is just a cop out…. I’m sure someone somewhere, apart from General Melchett, thought that ‘climbing out of the trenches and marching slowly towards the enemy’ was a sound plan..
However, in real life, the first rule of any ‘planned debate’ is to remember that the other side gets a say and, so, don’t depend on getting the responses you expect…
Just for the record on debates with Farage, just over two years ago I posted this on LDV to Chris Moore.
If I remember rightly Tim Farron said at some dinner or similar that Nick did prepare for his debate with Farage, and Tim was the person who took the role of Farage in the practice debates. The punch line being that after one of the mock debates Nick Clegg asked Tim where did he get some of the stats he threw into the debates regarding waiting lists etc., the answer came “I made them up. That’s what Farage will do.”
P.S. Chris, If you are looking at this – I hope things are still going well for you.
Perhaps however the most important part was Chris’ response
“David, thank you for reminding me of that.
Probably not serious enough preparation or maybe, Nick was just an irredeemably poor debater.”
Indeed this is true. Nigel Farage is extremely good in a one-on-one debate at the ‘say something to get through the next five seconds and deflect the current point onto something I want to mention”. If you build your arguments around facts rather than soundbites as many Lib Dems do, you will almost always be massacred.
There are some in the Lib Dems good at that, but they are quite rare, and would on occasions be described as “tricky to handle”.
“If Governments had insulated houses and promoted renewable energy since 1974, when the issue first really arose, the UK would have been net zero for years”
That turns out not to be the case.
UK house heating demand is around 25% of UK energy demand. The other 75% being domestic electric, transport, commercial heating and industrial processing – cement/aluminium/ steel etc.
Renewables will struggle to meet the entirety of electricity demand due to intermittency, and cannot easily replace transport and industrial needs.
It would need a major switch away from aviation and motor transport to rail, and development of alternative industrial processes – for example hydrogen reduced steel.
@Jenny Barnes
“Renewables will struggle to meet the entirety of electricity demand due to intermittency”
Indeed. But one area where they could help more is in heating of some domestic dwellings.
I live in a rural area with no gas. I heat my house (and also bathroom water) with electric storage heaters running on off-peak electricity. They may be old fashioned technology but they do the job. If one heater developes a fault the others will keep working (unless the problem is with the electrical supply). The heaters don’t need regular servicing unlike a gas boiler. The electricity is cheap rate.
But however one heats one’s home it needs to be insulated properly first.
Mention of CfD prompts discussion of the recent non-announcement of a decision not to go for Zonal Pricing of electricity in the UK. Zonal pricing is jargon for liberal market economics. Electricity would be cheaper nearer the source, and where there are significant costs to move it to areas of high demand. There is reported discussion of pressure not to introduce this from the world of finance. Which is where CfD comes in. There is also mention of “certainty” and other words that mean the sentiment of financial people. That is voodoo to me, but I understand supply and demand.
There is an additional element of supply and demand, which is for data centres (DC) that exist and may exist. Where should they be located? The factors that apply are network capacity and latency, electricity cost, planning constraints, land, and not much else.
Planning constraints will be taken care of by the Business Friendly Starmer Government, no regulations on the neck of DCs. Land exists outside cities. Electricity cost has been national and will continue to be. Network factors pull them toward London and the main cable routes to the USA (South West England). So outside the M25 and toward the M4 (although there is an M1 corridor for secondary reasons).
In the technical press there have been reports of DC landlords leaning to sites outside the M25 to the north-west of London. The Tech Bros have priced in a national price in their DC planning. One would expect Downing Street to lean that way.
David Evans said: “It is well known that the UK energy market is the most expensive of all for consumers.”
There is probably much truth in this. Miliband knows something should be done. But he also knows that there is no clearly obvious simple solution. See e.g. Steve Wotton’s post above.
Ed Davey was not wrong to speak on this subject. But he was wrong to make the ludicrous, unbelievable overclaim that he could “cut energy bills in half”.