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Lessons for regulation and policy makers from the current energy market crisis


Keith Anderson, ScottishPower CEO, delivered one of the prestigious Beesley Lectures this year at the Institute of Economic Affairs.  Every year eight thinkers in government, industry and academics are invited to deliver their views on critical issues affecting utilities.  You can read his full speech below where he covers how the UK energy industry ended up here and why the approach to the retail market exposed cracks and weaknesses in the system that only made the situation worse. 


Good evening, everyone.

It’s a real pleasure for me to join Michael Pollitt, our Chair for the evening and David Newbery, who will respond, to explore some of the lessons of the current energy market crisis.

Lessons not just for regulators and for policy makers, as the title suggests, but also the lessons for consumers, communities, and companies such as mine.

When drafting what I would say tonight, I thought it was going to be straightforward enough to focus on one cap – the energy price cap, and the identity crisis it finds itself in, now that the Government has stepped in to subsidise domestic energy bills with the Energy Price Guarantee.

But then today the Government has introduced emergency legislation in the Energy Prices Bill, which adds a cap on the revenues of low-carbon generators into the mix.

So I will aim to swap hats, or caps, at some point later to talk from the perspective of both a Retail and a Renewables business on the impact of these very different interventions.

But I want to start with a brief description of ScottishPower. Not as an exercise in product placement – I am not going to try to sign anyone up to a tariff tonight, I promise – but to illustrate the journey that we’re on as a company.

It is a journey – a transformation – that the entire energy sector needs to be on, if we are to get to a point where the role of market participants is recognised and rewarded in a sustainable way for how we deliver what are, in many respects, essential social goods.

Essential social goods like:

  • Secure and affordable energy for homes and businesses.
  • Access to decarbonised transport and heating for communities urban and rural, rich and poor.
  • And greener and more flexible forms of generation and storage to optimise our natural resources and energy use.

At ScottishPower, adapting ourselves to this cleaner electric future has been central to our strategy for the last 15 years.

Coal-fired and gas generation once dominated our production. No longer.

We were the first integrated energy company in the UK to ditch thermal generation and go 100% green.  All the power we generate – enough to power more than 2 million homes – now comes from our 40 onshore and offshore wind farms.

And we are unique in seeing right across the energy value chain.

We don’t just build onshore, offshore and solar farms. We develop battery storage and green hydrogen electrolysers to work alongside them.

The 70,000 miles of electricity lines across Scotland, Merseyside and North Wales that our network businesses own and operate don’t just ensure supply to three and a half [3.5] million homes and businesses. They also connect something like a third of all the UK’s wind power to the grid and are central to the mass take-up of electric vehicles.

As well as generation and networks, our Retail business provides gas and electricity to nearly 10% of the domestic market – more than 4 million customers. We know at first hand the challenges and pressures that families and businesses have been feeling as the increased prices of wholesale gas have hit people’s bills.

And so – right across these 3 businesses, Renewables, Networks and Retail – we have multiple customer touchpoints. And everything we do as a company is now determined through the prism of Net Zero and decarbonisation, in the name of green, affordable energy security.

For better or worse, that means we have multiple regulatory and government touchpoints as well.

All of this allows us to offer a perspective on the energy crisis and how it has unfolded and impacted every part of the energy system.

From the particular weaknesses in the UK retail market that exacerbated the challenges felt across Europe in the wake of the Ukraine crisis as wholesale energy costs spiralled… through to the peculiarities of our generation sector that now mean that low-carbon sources could end up being taxed at higher levels than upstream oil and gas.

Or, indeed, flexible gas generators and pumped hydro, which also seem to have been left untouched by the Government’s proposals today – for reasons no-one has yet been able to adequately explain to me.


  1. The UK’s response to rising energy costs

The cost of energy – how its price is set, how it is paid for, and who is going to help, and by how much – it is no overstatement to say that this has been one of this year’s central domestic preoccupations.

It has become a feature of our daily lives and news bulletins in ways that few would have imagined even a year ago, when cracks in the UK energy retail market began to be exposed with the first wave of supplier failures.

And in case we forget, these cracks date back to August and September of last year – a good six months before Putin’s invasion of Ukraine.

The 15 months since then have been severely challenging:

  • for companies like ourselves…
  • for the 30 or so poorly capitalised and poorly hedged suppliers that have gone to the wall…
  • for Ofgem…
  • …but most of all for consumers, who have had their faith and confidence badly rattled in how energy is provided and have had to shell out around £100 per household on top of rising power prices to cover the cost of supplier failures.

As policy-makers have grappled with their response, the enduring short-term focus on the retail market has created points of significant tension as we have lurched from one issue to the next.

To understand why this is the case –

  • why price signals have, until recently, been something of a novelty in the UK, making us unprepared for high and volatile wholesale energy prices…
  • and why the UK has layered additional risks onto its response to the energy crisis

– we need to look the origins of the energy retail price cap and how its application has been represented to consumers.


  1. The origins of the price cap

Let me take you back to 2016, and the outcome of the CMA’s Energy Market Investigation.

The CMA found that as a result of weak market engagement from customers on default tariffs, consumers had paid £1.4bn per year more than they would have done in a fully competitive market. This was ascribed mainly to supplier inefficiency, but also to excess supplier profit.

And although this £1.4bn has since become part of the regulatory narrative, it was highly contentious at the time. Many commentators, not least Stephen Littlechild, have pointed out the gaping holes in the reasoning behind it.

The CMA decided to impose a price cap on prepayment meters, where there were technical constraints on competition. With the exception of a dissenting opinion from Martin Cave, the CMA decided not to impose a market-wide price cap, but to instead strengthen competition.

Even before the prepayment price cap came into effect in April 2017, energy pricing had become a political issue. Prime Minister Theresa May called for further intervention, encouraged by parts of the media and by MPs across the political spectrum, all the while trying to distance herself from Labour’s pledge to freeze energy prices.

You don’t need to be that astute to detect in here an echo of today’s policy debates, where a Conservative Prime Minister who opposes windfall taxes needs to contend with Ed Miliband’s calls for their introduction on generators.

History seems to be repeating itself with ever-greater frequency these days.

But back to 2016.

At that point, the term ‘loyalty penalty’ was widely used to refer to the fact that consumers who didn’t shop around usually ended up paying more than those who did.

The Conservatives’ 2017 election manifesto contained a clear commitment to intervention, with newspapers promising that customers would save ‘up to £100’. A year later, the Domestic Gas and Electricity (Tariff Cap) Act came into force, committing Ofgem to implement a cap from January 2019.

In a nod to the CMA’s £1.4bn detriment figure, the Act focused on driving down supplier costs as well as protecting existing and future consumers, encouraging switching and allowing suppliers to finance their activities.

At the time, many of us warned of unintended consequences. But none of us imagined then that annual bills could be heading for £4000 or more, or that the combination of the price cap and sharply rising markets would cause the failure of so many suppliers, at a cost of more than £6 billion to consumers and taxpayers.

The experience of the last 18 months has comprehensively debunked the myth that energy supply is a relatively low risk business. But that’s what the CMA concluded, estimating an appropriate EBIT margin of just 1.9% – well below other asset light sectors, which it justified by reference to the capital asset pricing model and some fairly opaque assumptions about capital employed.

This 1.9% allowable margin was subsequently adopted by Ofgem for its price cap. But with everything that has happened since to increase risk –

  • the price cap itself…
  • new market entrants, both the strong and the weak…
  • and the inevitable market exits of the latter…
  • the prospect of escalating bad debt in the face of bills that households simply cannot afford…
  • unprecedented market turbulence requiring ever greater collateral calls…
  • geopolitics and the weaponisation of energy

 – it is astounding to me that some diehards are now questioning whether even that 1.9% margin may be too high.

Yes, the margin may have increased in absolute terms as bill values go up, and some recent interventions like the move to a quarterly cap and the Government’s Energy Price Guarantee have stopped things getting even worse. But in my view, it’s clearly still too low.

Ofgem needs to encourage suppliers to carry more risk capital, not less. To do so, it needs to make the sector attractive to investors. At 1.9% margin, even with today’s high prices, few investors will consider it worth the risks that still remain.

Even from this brief retelling, we can discern two arguments that we really need to test:

  • Firstly, what was the price cap actually intended to do, and what was it presented as doing?
  • And secondly, how effective has it been in delivering, on both these original and perceived intentions?


  1. Thesis #1: What the price cap is, and what it isn’t

If we go back in time to the CMA investigation and the legislation that followed, we can see the cap was meant to be a very specific tool to address perceptions of a ‘loyalty penalty’ and that there was surplus cost in the supply industry. Hence the Default Tariff Cap Act’s focus on Ofgem needing to drive suppliers to cut costs.

But that’s not been the dominant narrative in the years since the cap’s introduction. Very few people would say today that that is what they think the cap is there to do.

That’s because a combination of wishful thinking and political shorthand began to misconstrue the cap early on.

A relatively specific regulatory intervention has been turned into a political argument that it was there to protect struggling families from rising energy costs.

As time has gone on, the discrepancy between what the cap is, and what it is presented as being, has grown wider and wider.

With every increase we have seen over the past 2 years, and with every alarm bell about affordability that has sounded, we have heard BEIS, and increasingly Ofgem, fall back on a stock response that the price cap is there to protect customers by keeping prices low.

They have hidden behind the cap, rather than act to address vulnerability or the need for more sophisticated price signals into the market to incentivise energy efficiency and demand reduction.

Action has been delayed when more could have been done – both in generation and in the way we supply the market through longer-term hedging. And it has delayed action against weak suppliers too.

We have strayed a long way from the original purpose of the cap – to create a ceiling, under which excess costs would be driven down, and to prevent people from having to pay an undue loyalty penalty through inertia or an inability to access more competitive deals.

The cap was intended to foster value and choice overall through interplay with products that were priced differently and hedged over different time horizons.

It was never expected to become a refuge for the entire country.  

With the need for the Government to step in with its Energy Price Guarantee in September, we have now come full circle – and a rather vicious circle at that – to where the price cap is no longer seen as the panacea that provides all the answers to helping families afford energy. But, of course, it was never intended to provide those answers in the first place.


  1. Thesis #2: Has the price cap done its job?

On the much narrower, technical – and forgotten – question of whether the cap has achieved what it set out to do, the report card is mixed. Let’s go back to the tests set down in the Act.

In terms of supplier efficiency, excess costs have well and truly gone from the sector, believe me. Although I would argue that much of this was already happening or had been achieved, before the cap’s introduction.

And consumers have been generously protected – if anything, too generously, judged by supplier losses. The mechanism practically encouraged customers to play the system by removing all risk and dispensing with any pretence of caveat emptor.

But on the flip side, incentives for customers to switch have not been maintained. Competition has ground to a halt, at least temporarily.

And supplier financeability is certainly not ensured.

To voice an inconvenient but important truth, pretty much every energy supplier, with perhaps one or two exceptions, has been operating at a loss in this sector for several years.

This is one of the cap’s great unintended consequences, and it should concern us all deeply. Any supplier wishing to grow, or even maintain market share, had to sell products at a loss, thus eroding already thin margins still further.

That is simply not sustainable as a business model, nor responsible in a regulated market, over the long term.

Since the introduction of the price cap in 2019, ScottishPower’s retail business has made a loss every year – something in the order of £400m of losses on our domestic customer base over the period, which pretty much equates to losing £50 per customer per year.

And all of this has been at the cost of true innovation and meaningful investment.

On the wider, and misconstrued, position, that the cap could somehow magically prevent increases from ever hitting home, I think events are now showing that that idea has given up the ghost.

The only thing the price cap protected people from was from the inevitable – and only that for a while.

But does any of this help us very much, when thinking about the way forward?

The Default Tariff Cap Act said the cap should be removed when the conditions for effective competition are met, or else by the end of 2023. The question is whether we are any closer to that goal today.

After all the reversals and bankruptcies of the past year and a bit, we are now back to a place where there are a small number of players in the market. Fewer than before, perhaps, but still well above the minimum number that any economist would say you need to foster healthy competition.

For the moment, the previous proxies that have been used to denote competition in this market have dried up. Switching is at all-time lows – having collapsed by 90% in a year. The ratio of customers on Standard Variable Tariffs will soon eclipse those on long-term deals by 9 to 1.

In trying to address the perceived ‘loyalty penalty’, the regulator ushered in a market where no value at all was placed on loyalty. I can think of no other market in the UK which operates on this principle or considers it a value-adding thing to do.

And now, of course, the Government has skin in the game in a way that it never did before. How that translates into the setting of future cap levels, and the methodology used, will be important to watch.

Through the administration of Bulb – a cost of £4bn and counting – and the introduction of the Energy Price Guarantee and the Energy Bills Support Scheme, which the Chancellor has forecast will cost £60bn for the first six months, the taxpayer is now shouldering a hefty chunk of the burden previously borne by billpayers.

Government is now inherently linked to regulatory decision-making. Which gives it an interest in minimising its exposure – through greater targeting in future iterations of the schemes, say, or through greater emphasis on energy efficiency and reducing consumption, although I understand that such things are apparently controversial.

Or, I suspect, through bearing down even further on the ability of companies such as mine to recover their legitimate costs.

I have not looked in any great detail at the clauses of the Energy Prices Bill, which just landed this afternoon. But one thing that caught my eye are the striking new provisions on the Default Tariff Cap legislation in Schedule 3 of the Bill, which include a new obligation on Ofgem to take into account public spending impacts when setting the cap level, in light of information provided by the Secretary of State.

While I have welcomed the Prime Minister’s swift, decisive and necessary intervention to support domestic and non-domestic customers, where does this leave the price cap, I wonder?

Now that it is giving the wrong – or more precisely, an unacceptable and unaffordable – answer, the cap is really only a reference price for determining how wrong, unacceptable and unaffordable it itself is.

If, under the cap, an average home’s gas and electricity bills were to go to £4000 in January, then today’s received wisdom is that that is the wrong answer by around £1500. If it were to go to £4500 or £5000 in April, then it’s out by even more.

Don’t get me wrong. It was crucial that the Government acted, because the problem had grown much bigger than any one company or any one industry could deal with.

But in the process, the line between Ofgem’s regulation of the market and the Government’s appetite to intervene – always a contested frontier – has been over-run pretty comprehensively.

And as we know all too well in this country, today’s received wisdom can be easily junked tomorrow.


  1. A very British crisis: attitudes to risk

I’ve spent quite a lot of time exploring the origins and the application of the price cap. To be clear – I’m not for a moment saying that it is to blame for the current energy crisis.

All it has done is make the crisis worse.

And the reasons for that reside principally in how the received wisdom that energy supply is a low-risk business combined with a lax regulatory approach to the capital adequacy, liquidity and the sheer bona fides of market participants.

While the impacts of high and volatile wholesale prices have been felt across Europe, it was the UK’s unique genius to compound it with a raft of supplier failures.

The only people for whom this was low risk was for the new entrants encouraged into the market, with no capital at risk, no upfront costs, and who lived off customers’ credit balances. Structures and rules created an illusion of prudence – but led to people taking risks with other people’s money.

I will not rehearse the findings of the Oxera report, commissioned by the Board of Ofgem and published back in May, into the way regulation had been approached in the sector, over many years.

Competition in the market found a proxy in switching and churn for churn’s sake.

Moral hazard ended up being encouraged in the name of lower consumer prices.

Even before the dramatic shifts in the wholesale market, there were other signs of risk. Some of you may be able to cast your minds back to a time before the price cap, when supermarkets and retail brands – Virgin, M&S, Sainsburys, Tesco and the like – were all partnering with a utility to sell gas and electricity.

How many of those are left now? None.

Why? This is a very low margin business with very high reputational risk.

That brings me to one of the home truths about a market that is essentially focused on the provision only of a commodity.

How do you differentiate on a product that is homogenous in nature? It can only be contested on price.

As I have said, in a price war with only a ceiling, and where there have been low barriers to entry, the only way to compete has been to sell at a loss. To maintain or grow market share, suppliers had to charge below the cap.

And so price competition could only exist when wholesale prices were falling or relatively stable – as they were in the early years of the cap. But during any wholesale inflationary period, the price cap works against competition because suppliers cannot price below the cap without a loss.

That is precisely where we have ended up.

For all the desire to encourage switching, it is a bitter irony that over the past year or so Ofgem’s flawed approach has conspired to ensure the greatest enforced switch of customers we’ve ever seen.

Something like 20% of all domestic customers have found themselves – quite against their will and through no fault of their own – placed with another supplier when their original one went bust. Nine times out of ten, that new supplier has introduced themselves with a higher bill.

If we are to learn any lessons from this experience, it is that we need a properly calibrated attitude to risk, whether that is the financial implications of trading in the wholesale market or – bigger picture – operating in a market that is central to the shift from a high-carbon to a low-carbon economy.

Companies need to be able to effectively differentiate in ways other than price – such as in building long-term, trusted customer relationships to help navigate the path to Net Zero.

The UK’s focus on cost and price competition has actively worked against the ability of companies to deliver consumer propositions based on value in this regard.

For me, one of the most important spurs to action from this crisis is to shape a more effective market response to that other great crisis of our time – climate change – by incentivising companies to bring forward services and products that help customers to decarbonise and optimise their energy use.  


  1. Where next?

So, where next? What are the other lessons that we should learn?

There are, I think, three big questions.

  1. The future of the price cap

Number one – the future of price cap. What, now, is the real policy objective? The CMA’s original quest for efficiency savings expired quite some time ago.

And with the methodology now calculating energy bills that are beyond the reach of many in our society, the Government’s very welcome injection of financial support fundamentally challenges the role of the cap in the future.

The Energy Price Guarantee intervention has put people’s minds at rest and has provided them with warmth and light this winter and in the months beyond. But that cannot be an end to the matter.

As I think the Government must recognise, an uncosted, open-ended, universal discount on energy consumption is certainly not sustainable for very long.

We need to start thinking about how we want to protect the most vulnerable households as we emerge from the crisis and prices begin to stabilise.

We’ve always understood the importance of additional targeted support for the most vulnerable. Over time, we need to replace the current cap with a social tariff that provides subsidised energy to those who need the most help.

That could take the form of a tariff cap, set by government or Ofgem, at a level below the efficient cost of serving the eligible customers – with the costs borne by the remaining customers. When prices have fallen back towards pre-crisis levels, the social tariff could be targeted at a small but still meaningful group – perhaps around 10% of customers, which is about the proportion who currently receive the Warm Home Discount across the Core and Broader Group Schemes.  

But compared to existing help like the Warm Home Discount and the Government’s £400 Energy Bills Support Scheme, which provide one-off fixed amounts to recipients, the savings from the social tariff would scale with energy consumption and provide year-round targeted support to customers with the highest energy bills. And it would help address the iniquity of high energy usage in poorly insulated homes for the poorest in society.

For Government, the Price Guarantee and the exposure of the taxpayer to subsidising energy bills must surely make more urgent the need to target support much more clearly on those who need the help most.

We have been talking for years in the UK about developing the tools to match benefits and income data from the Department of Work and Pensions and HMRC with the support that companies can provide to their customers. This should be a spur to redesigning how vulnerable are treated and supported. Rather like the importance of ensuring we consume energy in the most efficient way, now that the taxpayer is on the hook for the bill, the pressure will grow in coming months for support to become more targeted.

  1. The future of the retail market

Big question number two is the future of the retail market. Where once people alleged an oligopoly in the form of the Big Six, now there are maybe ten or twelve medium or large suppliers.

The psychology that six equates to an oligopoly is another piece of received wisdom that some find hard to shake, even now. Again, show me another market where that would be the case.

So is it déjà vu all over again? There’s no reason that this should mean a return to the bad old days.

We should not ignore the fact that there has been some form of market reset. Messy, chaotic, expensive for billpayers – but a reset nonetheless.

We need to rethink the role of suppliers in the energy retail market, and the principles and priorities on which a market reset should be based.

Customer protection.


Fairness and redress.

But also, to borrow a term from another chapter of the Ofgem phrasebook, an appreciation that earnings should be predicated on incentives, innovation and outputs too.

Whether driven by the climate crisis or the Ukraine crisis, there is a clear strong secular trend across European economies towards electrification – beyond the power sector and into domestic heating, transport and industrial use of hydrogen.

We need, bluntly, to electrify the hell out of everything.

And in the same way as I deploy capital into renewables generation and networks – we are investing £10bn in the UK over a 5-year period – I want to be able to pursue decarbonisation opportunities that can be delivered through the retail sector.

For that to happen, it needs to be an investable proposition.

Through our existing customer relationships, we’re uniquely placed to help people decarbonise their homes and lifestyles, and make the transition towards net zero. 

Whether it’s switching to EVs, replacing their gas boiler with a heat pump, improving energy efficiency, installing solar panels and batteries, or responding to flexibility price signals, most households will look to their energy supplier as a key source of support. 

Earlier this year, ScottishPower launched the UK’s first nationwide installation service for air source heat pumps, solar PV and batteries – adding to our existing EV charging solutions.

Other suppliers have postcode checkers and will only tackle the easiest installations. We want to learn from the hard ones and we feel that’s the only way to truly bring costs down to parity with a gas boiler for all types of houses.

So we’re joining forces with market leading firms on Heat Pump Ready innovation projects to make the whole process of survey, design and installation much simpler, for installers and customers alike.

Of course, it’s a crowded market, and energy suppliers will have to compete with non-suppliers for this work.  But we believe that future consumers, beyond the early adopters, will be looking for integrated solutions and a single point of contact for support – to make it as simple as possible.

Customers need to be able to trust their suppliers to deliver bespoke solutions, save them money, drive energy efficiency, and invest in the systems that will deliver further value and efficiency – such as Time of Use tariffs, demand-side response, and flexibility services. 

In a nutshell, suppliers need to be energy optimisers not just energy providers. And looking beyond the domestic market, we’re now gearing up to help companies and industry get ready for Net Zero.

Electrification – through heat pumps, e-boilers, e-furnaces – is the best answer for the majority of industrial processes under 300 degrees Celsius. Beyond that, we hand the baton over to Green Hydrogen, which is just around the corner in terms of deployment at scale.

So rather than the textbook experiments in prioritising switching as a simple proxy for the competitive health of the retail sector, we should instead be incentivising customers and suppliers to develop positive long-term relationships that help promote the path to Net Zero.

Yes, there will be a continuing need to provide gas and electricity efficiently and with good customer service. But suppliers have a much more valuable role to play than just been providers of a commodity service. 

  1. The future of regulation

And big question number three – the future of regulation overall.

What is the role for the regulator in the retail market now? Fewer suppliers means there is the scope for a total reset in the relationship with Ofgem on the basis of more intelligent regulation. More principles-based than rules-based.

I can see a model where the regulator has regard to companies’ fitness to operate and financial robustness, and where it monitors the types of products and services being sold to customers for any signs of unduly aggressive price-cutting behaviour. And where it finds areas of concern, it has the power to intervene and examine activity much more robustly.

Suppliers are reeling just now from the impact of wholesale markets and the price cap, and throughout this crisis I’ve been struck by the massive reluctance of regulator and government to even countenance the removal of the price cap and reset the market.

Playing round the edges will not help us to make this market attractive again to investors.

We’re not yet there with the price cap, and much more needs to be fixed, including Ofgem’s important review of the EBIT margin – which, as I’ve said, will be an important marker for the industry for how valued our services really are.

When it comes to launching new time of use tariffs, developing integrated solutions, working out how to make heat pumps work in different types of home – all of that takes time, care and money.

If suppliers are to develop into this vital new role, if they are to develop these valuable new market segments, they need the confidence and the licence to invest and innovate. 


  1. Conclusion

To conclude, then, it would be remiss of me not to touch on the Energy Prices Bill published today and undergoing Parliamentary scrutiny over the next few days.

We’ve worked closely with the Government to ensure the implementation of the support schemes for domestic and non-domestic customers in time for the start of this month.

This has been big, bold action, delivered at a clip. And it has been marked by a spirit of genuine partnership with the industry.

In his mini-Budget, the Chancellor forecast that these measures would cost £60bn or so over the next six months, although it is true that this figure may well be lower if wholesale energy prices continue to abate from previous highs. I saw one figure earlier in the week that suggested the bill may be half that amount.

But as the small print always tells us, prices can go up as well as down. It’s another stark reminder of the volatility and risks of being in this market at all.

All the more reason, then, to focus now on what comes after the end of March next year. Targeting of the Energy Price Guarantee on the basis of consumption or ability to pay are two obvious pathways to consider for minimising the Treasury’s exposure. And it would also be fiscally prudent to consider how best to ensure that consumers understand the importance of efficient energy consumption and how they can reduce their demand.

Beyond that, the Bill seems to want to elbow its way into some of the territory that’s more properly part of wider reforms to the wholesale market that would aim, over the next few years, to de-link the price of renewable electricity from the price of wholesale gas.

That process, the Review of Electricity Market Arrangements, has barely got under way, but it’s an essential foundation for a future wholesale energy market where the lower costs of generating electricity from onshore, offshore and solar power are more accurately reflected in the overall energy price.

Recent Auction Round clearing prices for new renewables assets make them the cheapest form of generating electricity in the country, bar none. At a fraction of the cost of current spot prices for wholesale power. That’s fantastic – and it’s precisely why we want to keep building more, at pace and at scale.

Where the Government needs to think carefully, though, is in the way it approaches other measures in the Bill that affect investors’ appetite for risk.

I’m worried that by rushing too fast – whether to plug gaps or to be seen to be doing something, I don’t know – the Government doesn’t take industry with it.

There are, for example, concerning suggestions that renewable generators are making extraordinary profits today on the back of the Ukraine crisis, when I can tell you for a fact that our power for 2022 has been sold, one or two years in advance, at much lower pre-war prices.

These forward contracts, with thousands of counterparties, have locked in low prices for customers that are worth hundreds of millions of pounds compared to current prices.

I’ll leave others to decide whether the Cost Plus Revenue Limit proposed in the Bill is a de facto windfall tax or not. That’s way too political for me. But I’m disappointed that such a significant market intervention has come with so little detail. All it does is create uncertainty.

And it does seem strange to me that in a crisis caused by the wholesale cost of gas, the solution seems to be to cap the price of low carbon generation and leave the gas sector untouched.

So my message, I suppose, is to be wary of the unintended consequences and perverse outcomes that can come from decisions taken in haste.

As we have seen with the origins and history of the retail price cap, picking up the pieces from the fall-out can last for months and years to come – to the detriment of consumers, communities, and investment in speeding up the progress to green energy security and Net Zero.

Thank you.