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Climate speech stresses need for cheaper business energy

Secretary of State for Energy and Climate Change Amber Rudd, has set out her position on climate change and renewable energy. What does it mean for SMEs?

Calling climate change “one of the greatest long-term economic risks this country faces” and stressing that “we are committed to meeting our climate change targets”, Rudd’s speech claimed that the Government would ensure that “climate change action is pro-growth, pro-business.”

Storage and reducing energy demand will be prioritised, Rudd said, alongside generating more energy. Her talk of energy efficiency, which she said would “help keep bills down for people and businesses”, may suggest a reticence to apply further regulation to business energy suppliers.

Cheaper commercial energy bills

This ‘light touch’ reform was also hinted at in her mention of “decarbonising at the least cost”. Still, she candidly stated: “The transition to a clean economy here in the UK does mean making up-front investment supported by the tax-payer – and in energy – from bill payers. Let’s not pretend it doesn’t. This is used to develop clean energy supplies and to help people cut their bills by cutting energy waste.”

Rudd highlighted the Levy Control Framework as a way to support the growth of low-carbon energy – renewables, nuclear, biomass and other budding technologies such as carbon capture and storage – but noted that it is paid for through energy bills.

“[W]e have to control public subsidies – taking tough decisions on what schemes and projects are supported,” she added. “The latest projections from the Office of Budget Responsibility show that we are likely to breach the Levy Control Framework cap by around £1.5 billion by 2020.”

Cutting energy costs

To control the costs of energy reform, Rudd said, the Renewables Obligation for small scale solar farms will be closed early in the same way the Government has already done for onshore wind, although she stressed that existing investment will be protected.

Rudd’s speech received a varied response from different stakeholders.

Rhian Kelly, business environment director of the CBI, a confederation of 140 trade associations, urged a sure and stable policy environment to enable businesses to invest and innovate. “Firms operating in the sector have seen a number of piecemeal changes on onshore wind subsidies and the Green Deal.”

“It’s right that the Government ensures consumers’ bills remain affordable, but it needs to work closely with industry in order to provide long-term value for consumers.”

As regards energy suppliers, Juliet Davenport, chief executive of the renewable-focused Good Energy, agreed on the importance of climate change. “[Rudd] is also right to say that bills need to be affordable, so it makes no sense to be pulling the rug under innovative technologies which can deliver both lower bills and energy security in the long term.”

“Innovation and enterprise are key to helping us move away from an unhealthy reliance on fossil fuels, and British industry has the opportunity to be at the forefront of providing that solution.”

But those in the ‘green lobby’ were far more critical. Friends of the Earth Chief Executive Craig Bennett said that the Government’s credibility on tackling climate change “is hanging in tatters”.

“Amber Rudd appears to have been wheeled out to say a few warm word on tackling climate change as window dressing for a vicious Treasury assault on the environment,” he said. “This government will be judged on action not words – and far from being one of the greenest governments ever, it seems set to be one of the greyest.”

Speaking to the BBC, John Sauven, head of Greenpeace, agreed: “We are deeply shocked by the vandalism of the government which appears to be driven totally by ideology. Their policies will not lead to the low-carbon society they claim they want … they are destroying the UK renewables industry just at the point where it’s almost competitive – it’s madness.”

Cheap business electricity

What does this mean for small to medium sized companies? In the short term, commercial electricity prices will likely be unaffected. In the medium term, fewer subsidies could be a downward pressure on business electricity prices. If renewable energy generation is as adversely affected as Rudd’s critics claim, the longer term may see electricity prices fluctuate and a heavier reliance of carbon fuels such as gas.

For SMEs, Rudd’s emphasis on energy efficiency is correct – many managers may not realise how much some straightforward changes can save. Yet the easiest and quickest way to save money remains a compare and switch business electricity suppliers. Given the research that shows the number of SMEs confused by commercial energy bills, taking 20 minutes to get a no-obligation comparison by filling in the form at the top right of this page or calling 0330 010 0251 could be the best decision you make all year.

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