The report, titled The customer is always right, played down the recent findings from the Competition and Markets Authority (CMA), which stated that energy companies had been wilfully overcharging customers.

Instead, Policy Exchange said the Government’s green initiatives are to blame for spiralling energy bills. The report said that businesses and households essentially just want affordable energy but the Government has been overly focused on decarbonisation and security of supply.

“There has been insufficient attention paid to consumer affordability in energy policy,” asserts the report.

Long-term trends show that retail gas prices increased by 185% in the decade to 2014, and electricity prices by 120% – making energy bills the number one concern for consumers.

Free spending

One of the symptoms of the Government’s ‘wasteful’ energy spending, according to the report, is the dwindling amount of money left in the Levy Control Framework (LCF), which puts a cap on the impact of green initiatives on the consumer.

The LCF has been exceed in each of the past three years, and Policy Exchange predicts there is “a significant risk” that the spending cap to 2020 (which rises to £7.6bn per year) will also be breached without policy overhauls.

Policy costs represent 7% of the average household energy bill and are projected to increase substantially to 2020.

Policy Exchange called for a decarbonisation approach that favours low-cost mature echnologies, like solar and onshore wind, and caters to need of the consumer (i.e. is affordable). Its suggestions include revamping the Green Deal, scrapping the 2020 Renewables Target and ‘significantly cutting’ the Feed-in Tariff (FiT).


The report generated a rash of wildly differing responses from around the renewables industry, thanks to its bold assertions.

The wind industry urged the UK Government to return its support to onshore wind, claiming it could cut the cost odf decarbonisation by £600m.

The solar industry also welcomed the reports headline support for cheap solar technology. However, the industry rejected the dismissed the idea that the FiT should be cut.

A Solarcentury spokesperson said: “Such a drastic move would immediately undermine the new Secretary of State’s public commitment to a household “solar revolution” and undermine a market that has remained relatively stable since the last major changes to the FIT in 2012.”


Lord Adair Turner, former chairman of the UK Climate Change Committee, said the Policy Exchange report was taking too short-term an approach. “The government should certainly strive to achieve decarbonisation at the lowest possible cost, but its focus must be on costs over the medium and long-term,” he said. 

“Investment cycles in energy are typically many decades in length, making forward-looking policy crucial. Building a robust clean energy system now will insulate people against volatile natural gas prices now and in the future.”

Brad Allen

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