Comment by Guy Newey, CEO, at Energy Systems Catapult.

Energy consumers are struggling. The increase in the price cap has left billpayers wondering if energy costs will ever fall to pre-energy crisis levels. The decision to cut the Winter Fuel Payment for millions of pensioners put the government on the back foot. Industrial and commercial consumers, who don’t enjoy the protection of the price cap, are battling with competitors in cheaper international markets. So, what would a Budget to deal with those pressures look like?

First it should set out a medium-term aim: we want an energy system that provides cheap, clean, abundant energy. Every decision should then be looked at through that prism. What might a supporting policy package look like? This is the package I would push for:

1. Get better at working out who needs help with their bills and get help to them fast

One of the lessons from the energy crisis is that the government has failed to set up systems that effectively target the most vulnerable energy consumers. This is both expensive (the energy crisis cost the government the best part of £100 billion) and wasteful. The Winter Fuel Payment was another badly targeted scheme. Blanket payments were made to pensioners with little regard for ‘need’. This is why the Chancellor chose to cut it. The government should ensure that the most vulnerable households get tailored help suitable for their needs. Programmes such as Warm Home Prescription®, which uses health data to identify the most vulnerable and gets help to them fast – either through bill support or energy efficiency measures, should be scaled nationally and properly-funded. This will ensure support reaches those who need it without relying on emergency measures every winter. We cannot afford to revisit this issue year after year.

2. Cut the price of electricity

The electricity system is going to become much more important in our economy, probably doubling in size over the next 30 years. If we’re going to encourage people to drive electric vehicles and warm their homes with a heat pump, then it needs to be an attractive, cost-effective choice, but right now, we’ve loaded the costs of innovation support for renewables over the past 10 years onto energy bills. Renewables are essential to our clean energy future, but paying for them through bills disproportionately affects low-income households. Moving these costs to general taxation would help level the playing field. At the same time, we can use tools like a rising carbon tax or expanding the Emissions Trading Scheme (ETS) on heat to recoup costs fairly and further drive the shift to cleaner energy (and hopefully assuage any opposition to adding extra costs into general taxation).

3. Adopt zonal pricing

Perhaps the toughest, most controversial debate in UK energy policy for 20 years, but our view is clear; zonal pricing is necessary if we’re to cut consumer energy bills. The idea is simple: the cost of electricity would reflect the cost of generation and delivery in specific regions. Done right, we’d cut bills, especially in areas with an abundance of cheap, renewable power such as in Scotland. Without this new structure in place, it feels hard to see a credible path to ensuring the transition leads to lower bills (and that you get public support for new infrastructure).

4. Move fast

Delays to building energy networks – whether grid connections for offshore wind, or new interconnectors – are a handbrake on the clean energy transition. The previous government committed to the recommendations of the Electricity Networks Commissioner, we need to go even further and faster to drive growth and cut emissions. That is about new planning at national, regional and local level (this feels like a missing part of GB Energy’s remit) to make it clear what needs to happen, get public buy-in, and then build, build, build.  Ratcliffe-on-Soar coal-fired power station closed recently. When it was built, it had a three-month planning process and energy was being produced less than six years after the first spade in the ground. And that was a 2GW coal-fired power station – we need to remember how to do big infrastructure fast if we are to strip out unnecessary cost on the way to our 2030 ambitions and beyond.

5. Don’t overlook non-domestic buildings

It’s not just households struggling with high energy costs. Non-domestic buildings – offices, factories, and public sector buildings – are all facing huge financial pressures and high energy costs. There’s an opportunity here to help these buildings reduce their energy consumption and bills, building on the work of the Public Sector Decarbonisation Guidance (PSDG) and other initiatives. This is a chance to promote the use of innovative solutions, such as digital tools and energy management systems, that can help businesses save money and cut emissions.

6. Innovation is the engine for change

In the medium term, innovation is all that matters if we are to have a chance of delivering cheaper, cleaner energy (and getting the rest of the world to follow our example). The UK has an incredible opportunity to lead on a wide range of technologies – whether it’s advanced nuclear, long-duration storage, or hydrogen production. This is likely to require public funding both in the Budget and in the upcoming spending review. But innovation isn’t just about new upstream technologies; perhaps the greatest opportunity to drive down costs comes from the demand side.

That means building a flexible, digitalised energy system at the same time as building lots of new generation and networks. Smart meters, flexible tariffs, and demand-side management can all help people reduce their bills by taking advantage of these new technologies and the intersection of digital technology and energy (where the UK has some brilliant new companies desperate to provide new services). And this should not just be about the well-off. Vulnerable consumers, who often pay the highest energy prices, should be the first to benefit from cheap, off-peak electricity. There’s a huge opportunity here to work with partners in industry and the third sector to ensure that flexibility is inclusive, accessible, and affordable for everyone.