I’ve run Ofgem. This is how I would solve Great Britain’s energy crisis long term

theguardian.com:

Dealing with the energy crisis is today’s top political priority, and the government is preparing to apply a huge and expensive sticking plaster to the energy market, to protect consumers and the economy. On grounds of cost alone this crisis package is not sustainable. The question therefore arises, what sort of energy market do we want when the plaster is removed?

At some future point, we all hope to live in smart, energy-efficient homes where making the best (and cheapest) use of energy is automatically managed for us and where all energy is green. Sadly that utopian vision is many years away, so we need to work out what we do between now and then.

After privatisation, a small number of powerful incumbents ran the show and, despite the regulator Ofgem’s best efforts, there was little benefit for consumers by way of keener prices or improved service. The policy answer appeared to be more competition so effort focused on opening the market.

A two-tier market developed: some consumers shopped around and switched every year in search of a better deal. The majority stuck with their existing supplier. These sticky customers often found bills creeping up as their loyalty was exploited. Politicians responded with the retail price cap.

It turns out that the price cap cannot protect consumers from high and volatile energy prices and also distorts the market. We also now know that many cheap deals that looked so enticing on switching platforms were unsustainable, as were many of the firms offering them.

Learning the lessons of the past, it should be possible to design a market for the decade ahead that is more in tune with what consumers need and want, still allows competition to flourish and incentivises efficient energy use.

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