The recent debate on energy prices was kicked off by Ed Miliband’s declaration that a Labour government would freeze energy prices for a while. Understandably this is attractive to some who are struggling with household bills but the proposal will not in the long run benefit anyone (except perhaps the Labour party). Energy companies can only control the prices they charge to a very limited extent; they would put up their prices in anticipation of a price freeze then raise them again when the freeze is over. Labour are attempting to bribe the electorate with their own money.
It now looks like Labour’s ‘initiative’ will have the effect of precipitating the Coalition government into policy changes that are driven by party political considerations rather than the national good long-term.
Let’s start with the basics: energy is expensive in historical terms, the planet has 7 billion people competing for limited resources. Energy is never likely to be cheap again in the foreseeable future. Having said that, energy is no more expensive in the UK than it is Europe-wide. Go to Europe’s Energy Portal and compare prices; we have about the cheapest gas in Europe and our electricity prices are middling.
What the Coalition has done in response to Labour’s pressure is a mixture of good and bad. Shifting the green levies from the energy bills to general taxation is to be welcomed. Green levies on the energy bills are almost a poll-tax; the burden falls on affluent and less well-off indiscriminately. This is the only part of the government’s proposals that are to be welcomed.
It is essential, long-term, that we insulate our homes and businesses better than we do now. Cutting back investment in insulation will not just cost jobs short term but also make it harder to achieve our carbon reduction targets affordably. There is no way to capture the carbon dioxide from gas central heating boilers and it would be impossibly expensive to treble or more our electricity generating capacity to provide for space-heating in winter.
Switching support from on-shore wind and photo-voltaics to off-shore wind is also a mistake, provoked in part by party political considerations (this time with regard to UKIP’s and many Tories’ opposition to on-shore wind). Offshore wind is a very expensive way to generate electricity and, as ALDES has explained elsewhere, because these off-shore wind farms are financed by private foreign capital they do more damage than good to the UK economy. On-shore wind, whatever one may think of the aesthetics, is at least cheaper and photo-voltaics now have an electricity production cost (at least in some parts of the UK) approaching the retail cost of buying from the grid.
Energy bills are a function of three things – the cost per unit of energy, the amount of energy people use and how much income people have got to meet these bills with. As we have shown, the cost per unit of energy is no higher in this country than other EU countries. The amount of energy people use should be the priority target with the Green Deal and other measures to improve insulation and cut energy usage. Finally, raising the income tax threshold takes low-income families out of income tax and gives them more money with which to meet those bills.
The government is allowing itself to be buffeted by political pressure from left and right rather than implementing the policies that will benefit the British people in the long term
* Steve Coltman is parliamentary spokesperson for Loughborough and an Executive member of the Association of Liberal Democrat Engineers and Scientists although he writing here in a personal capacity.
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11 Comments
It now looks like Labour’s ‘initiative’ will have the effect of precipitating the Coalition government into policy changes that are driven by party political considerations rather than the national good long-term.
Yep, just like Osbourne trying to bounce Labour into a fiscal rules trap with the full support of Clegg. People in glass houses etc…..
The bit that gets missed out is what Miliband has said he will do in a price freeze…. work out if he can fix the completely disfunctional energy market. Im not sure he can but at least thats something the public understands and why this party and the Conservatives are struggling on this issue.
The electricity companies may turn off the lights if they can’t make any money selling electricity to us. Also, investment will stop and a power company boss has said there will be only a 3-5% margin of capacity in winter 2014 – 15.
“Energy is never likely to be cheap again in the foreseeable future.”
That is the only take away fact from this article, you need to know.
I’m thinking you’ve already wavered on energy policy, haven’t you? The energy companies have kicked their obligations down the road, while continuing to sell energy to the most energy inefficient homes. They’re laughing at us. You’ve also let Michael Fallon and others make all the running on fracking, which nobody believes will lower bills.
“Also, investment will stop”
Why should it? As Private Eye say today, there are rather a lot of things we thought we’d privatised that seem to be calling on us for investment at the moment.
Let’s make the investment ourselves, and get a small, sleeping stake in the energy companies. We’re the investors, just as we are when we pay via our bills.
Steve Coltman makes the point that – ” because these off-shore wind farms are financed by private foreign capital they do more damage than good to the UK economy. ” The same could be said of the insane deal for a new generation of nuclear which will cost consumers (in the same way as a poll tax) for 35 years to benefit the French and Chinese state corporations whilst providing the UK with yet more nuclear waste, which nobody knows how to dispose of.
Anyone wanting an idea of just how bad a del nuclear power is should read the finance pages of the Guardian “Sellafield bosses forced to say sorry over £70bn – plus cleanup”. –
http://www.theguardian.com/environment/2013/dec/04/sellafield-boss-sorry-over-cleanup-costs
Ed Davey got elected at 4 general elections (including 2010) explaining why nuclear power generation is too expensive and too dangerous. Now as a cabinet minister he is doing exactly the opposite of what he repeatedly told voters and supporters. So whatever else we know about energy, we know we cannot trust Ed Davey.
The business community have unexpectedly come out against Osborne.
I wasn’t expecting to suddenly a large group including Sainsburies and Nestlé come out fighting for green policies. Hopefully this will embolden our MPs to fight their corner a bit more in government.
http://www.independent.co.uk/environment/climate-change/george-osbornes-uturn-could-add-200bn-to-energy-bills-8996390.html
“As we have shown, the cost per unit of energy is no higher in this country than other EU countries. The amount of energy people use should be the priority”
While this is true, it’s hard to tell someone struggling to keep themselves warm this winter, when energy prices have gone up so much in recent years, that they should just use less energy. But what saddens me about Labour’s plan and most responses to it is that rather than trying to understand why prices are where they are and what we can do about them in the long and short term, politicians of all parties have been playing the blame game.
In Labour’s case the blame game is par for the course. They’re always trying to find someone else to blame for problems of their own making – look at the way the financial crisis was “all the fault” of the bankers, or Labour councils cutting jobs are “all the fault” of the coalition. In the case of energy, Labour’s meddling with the market when they were in government stopped investment in new energy generation capacity and sadly we’re now playing catch-up. High energy prices are sadly here to stay but if we’re to stop prices spiralling we need to invest in energy generating capacity. Us liberals have got to be honest about this. Renewables alone won’t be enough. That doesn’t mean going to the other extreme and ignoring the environment but it does mean being open to new sources of energy (e.g. nuclear). The worst aspect of Labour’s planned price freeze is that it’s putting off investors and threatening investment in new energy generating capacity. In turn this will push prices up further than they would otherwise be.
“Energy is never likely to be cheap again in the foreseeable future.”
Ask yourself why energy is never likely to be cheap again and then look at the facts (rather than Ed Davey’s nuclear lobbyist inspired spin).
Taxpayers and electricity bill payers are propping up the financial madness of nuclear. Just look at a tiny fraction of the cost so-called nuclear “clean-up” at Sellafield as disclosed at the Commons Select Committee – it is appalling.
This from the Guardian –
The chairman of the American-led consortium that runs Britain’s largest nuclear complex at Sellafield was forced into a humiliating apology on Wednesday after admitting a raft of cost overruns, performance failures and an expenses scandal.
Tom Zarges, the head of Nuclear Management Partners (NMP), said he was a “long way from satisfied” by the track record of the business after it was pilloried by members of the Commons public accounts committee.
The Guardian reported this week that the bill for cleaning up the Cumbria site will rise even higher than its current estimated figure of £70bn as operators struggle to assess the full scale of the task.
Zarges was forced onto the defensive after MPs quoted extensively from a review prepared by auditing firm KPMG for the Nuclear Decommissioning Authority (NDA), the public body charged with overseeing NMP and Sellafield.
A redacted copy of the accountant’s report – obtained through a freedom of information request last month by an environmental consultant, David Lowry, and given to the PAC – caused the committee’s chair, Margaret Hodge, to express astonishment that the contract had been extended by the NDA.
“Energy is never likely to be cheap again in the foreseeable future.”
John, you have missed my point – I meant that WORLDWIDE, “Energy is never likely to be cheap again ……. etc” so the UK’s nuclear issues are not really relevant to this point.
Further to your earlier point, I agree that a similar argument applies to the building of nuclear power stations with foreign, private capital as applies to building wind farms with the same. It would be better and cheaper in the long run for these to be financed by government capital. Whether it is worse for nuclear or wind is another matter, I have not looked at the numbers.
“Energy is never likely to be cheap again in the foreseeable future.”
Well – Responsible energy that does not wreck the planet will not be cheap. However, dirty fossil fuels will probably stay far cheaper. We used to think that fossil fuels would conveniently price themselves out of the market as they became scarcer, thereby enabling the market to solve climate change for us. It isn’t happening. Fracking in the US is producing very cheap gas, and hence the US is able to sell us very cheap coal.
What we haven’t achieved is the development of a financial mechanism that will favour expensive clean energy over cheap dirty energy.
Steve Coltman 14th Dec ’13 – 1:25pm
“Whether it is worse for nuclear or wind is another matter, I have not looked at the numbers.”
Well the numbers were clear when the party agreed its manifesto for the last four general elections.
Nuclear power will continue to be the most expensive form of electricity generation because of the unquantifiable costs involved in storing the deadly nuclear waste for eternity.
This is the problem WORLDWIDE with all nuclear power stations. Nobody knows how to cope with radio-active waste with a dangerous life of thousands of years.
This is why the report to the recent select committee is so relevant.