David Prosser: In search of a coherent energy policy

Outlook There is much to commend in Ofgem's burst of activity of late. Its announcements yesterday of an investigation into Scottish Power's price promises and the go-ahead for energy market reforms already trailed were both sensible. Yet one cannot help but feel these matters are trivial compared to the big question facing Britain's energy industry – the one publicly posed by the regulator more than a year ago, to which we have yet to hear a satisfactory answer.

That question is this: as Britain's ageing power stations near the end of their operating lives, how do we ensure that the lights do not go out while also keeping the pledges we have made about cutting carbon emissions?

When Ofgem posed that question in February 2010, it said there was a limited window of opportunity in which there was time to act. Some 16 months later, Britain has yet to agree an energy policy for the next decade and beyond and the window will soon close. Centrica's chief executive, Sam Laidlaw, will say today that he thinks we have only a year left in which to agree a strategy – if we do not, we will not be able to deliver both energy security and our carbon commitments.

What is not in doubt is that it will be bill payers who pay for the revamp of Britain's energy infrastructure. On Ofgem's own figures, we could be talking about an average annual increase in bills of anything between £250 and £600.

Are people willing, or even able, to accept those costs, particularly since bills are already rising so quickly for commercial reasons? Centrica's research suggests the answer may be no – it points to a survey in which only one in four people said the Government should go for low-carbon solutions if that meant higher bills.

A vital part of the energy policy challenge will be affordability. For while the moral case for doing everything possible to addressclimate change is crystal clear, the more mundane questions about cost have yet to be answered – indeed, for many households, they have yet to be posed.

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