One of the characteristics of this Government has been an extraordinary inability to plan in advance for obvious problems ahead and to take basic steps to avert them.
Last week the National Grid issued a statement about the possibility of power cuts this winter if a cold snap is combined with gas shortages, with households experiencing 3 hour black outs.
This scenario has been entirely predictable since Russia invaded Ukraine but as usual the Government has acted with a mixture of sloth and ignorance. The UK doesn’t directly import much Russian gas but we will still be affected by reductions elsewhere – and while there are many advantages to our increasing renewable energy supplies they are, give the problems of storing electricity , prone to problems if the wind doesn’t blow ( or blows too hard ) and the sun doesn’t shine.
So we have an urgent need to ensure we have a good store of gas and are reducing demand as far as possible. The UK has very low gas storage capacity – there is the ‘Rough’ facility, a former gas field which as used by Centrica but which closed down in 2017 – the Government acting at its usual (low) speed finally negotiated and reached agreement with Centrica in August about reopening – but its not clear how much gas it will hold this winter.
That leaves us with reducing demand – and here we enter the completely extraordinary world of Liz Truss who turned down proposals to encourage business and the public to reduce demand because she ‘doesn’t want to tell people what to do’. Graham Stuart (still) the Energy Minister said that informing people about ways to cut energy would be the actions of a ‘nanny state’ presumably believing that power cuts are better than the Government advising people what to do.
We actually need a crash program not just to advise people how to save energy but to stop energy being wasted. The Government should be banning shops and offices from keeping lights on after they are closed for example. Public pressure can help – one of my bugbears is shops who tout their Green credentials and yet keep their doors permanently open in the winter – we need to be publicly shaming them.
Saving energy this winter will not just help avoid power cuts – it will save consumers and the government money and reduce our CO2 emissions. We may also at time be able to export electricity to Europe – cutting their use of gas.
The people of Ukraine are facing a cold, dark winter as Russia systematically tries to destroy their power supplies. The least we can do is save energy to reduce the effect of Russian cuts in gas supplies this winter.
* Simon McGrath is a councillor in Wimbledon and a member of the board of Liberal Reform.
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>This scenario has been entirely predictable since Russia invaded Ukraine
The scenario of potential winter powercuts has existed for several years before Russia invaded Ukraine, due to the UK’s inability to invest in power generation infrastructure, specifically nuclear (not that I’m a big fan of Uranium-based nuclear) to replace and update our power generators. The event sin Ukraine have simply brought matters to a head and so cause National Grid to publicly acknowledge the problem.
So in some respects Putin has done us a favour…
With the high profit in the energy utilities, should not that have been used to make improvements? My energy supplier has a CEO who earns 4 million a year plus bonuses. Yet my meters were not read in a year, I’m a vulnerable customer.
So many with health conditions who are struggling.
This is SSE part of the OVO group.
Is taking the energy companies back into public ownership the answer, privatisation hasn’t worked.
Simon McGrath……….the ‘Rough’ facility, a former gas field which as used by Centrica but which closed down in 2017 – the Government acting at its usual (low) speed finally negotiated and reached agreement with Centrica in August about reopening – but its not clear how much gas it will hold this winter……
I seem to recall a big fanfare about it being at 20% capacity; a figure which, in any other circumstances, would be deemed a failure…
Everyone can do their bit but I’m not 100% convinced targeting shops and offices is best way to go when companies like Shell largely see “green” as purchasing offsetting certificates rather than investing into renewable energy sources. They’re getting better but were shockingly bad as recently as 2020 and still far behind what we need from them now.
Just Stop Oil, Insulate Britain, Extinction Rebellion etc. are annoying little blighters but we can’t deny they have some good big ideas: insulation of homes, targeting needless domestic flights, properly committing to green energy rather than offsetting certificates.
It means backing policies we might not be comfortable with (HS2 for some, nuclear power, onshore wind/solar panel farms for others) so long as we aren’t replacing one silver bullet (offsetting certificates) with another.
A good next few weeks will see Sunak u-turn on COP decision and Brazilian elections go way Amazon Rainforest needs them to, a bad few weeks will see reverse of that.
My Czech contacts tell me that their country has large scale gas storage.
The Czech authorities also gave grants some time ago to add exterior insulation to houses and blocks of flats.
@Helen Dudden, state ownership didn’t work either, and directors’ bonuses cost less than £1 annually on your bill. The biggest element in what you are paying now is the fuel cost, which has been inflated by the war with Russia. The desire to re-nationalise utilities is based on a rather misplaced assumption that civil servants plus politicians equals a better outcome than market forces plus regulators. If the regulator is up to scratch, as is the case with Ofgem (not the case with OFWAT, the water regulator) that combination works.
The following is a link to Centrica’s announcement made some 12 hours prior to the posting of this article.
https://www.londonstockexchange.com/news-article/CNA/centrica-re-opens-rough-storage-facility/15691689
It contains some interesting comparatives with our mainland European neighbours gas storage capacities. i.e. 10% of Germany’s 7% of the Netherlands.
The main text of Centrica’s announcement was:
“Centrica has announced the reopening of the Rough gas storage facility, having completed significant engineering upgrades over the summer and commissioning over early autumn.
The initial investment programme means the company has made its first injection of gas into the site in over 5 years and is in a position to store up to 30 billion cubic feet (bcf) of gas for UK homes and businesses over winter 2022/23, boosting the UK’s energy resilience.
The work done so far means that Rough is operating at around 20% of its previous capacity this winter, immediately making it the UK’s largest gas storage site once again and adding 50% to the UK’s gas storage volume. Rough will help to balance the UK’s gas market, injecting gas into the facility when prices are low and putting that gas back into the UK’s gas network when demand is higher.
Centrica’s long-term aim is to turn the Rough gas field into the largest long duration energy storage facility in Europe, capable of storing both natural gas and hydrogen.
The UK has diverse gas supplies with connections with Norway and other European countries and a number of LNG import terminals. However, it still has some of the lowest levels of gas storage in Europe at 9 days, compared to Germany at 89 days, France at 103 days and the Netherlands at 123 days. The flexibility in Rough allows cheaper gas to be stored ready for winter, helping to reduce or stabilise costs for UK energy consumers.
Concuded:
Centrica Group Chief Executive, Chris O’Shea, said “I’m delighted that we have managed to return Rough to storage operations for this winter following a substantial investment in engineering modifications. Our long-term aim remains to turn the Rough field into the world’s biggest methane and hydrogen storage facility, bolstering the UK’s energy security, delivering a net zero electricity system by 2035, decarbonising the UK’s industrial clusters, such as the Humber region by 2040, and helping the UK economy by returning to being a net exporter of energy.
In the short term we think Rough can help our energy system by storing natural gas when there is a surplus and producing this gas when the country needs it during cold snaps and peak demand. Rough is not a silver bullet for energy security, but it is a key part of a range of steps which can be taken to help the UK this winter.”
Andy, the privatised industries are all disastrous and are seen as such by the public, even Tories.
How could an energy market be lower cost with 100’s of companies offering rival billing, call centres, managements, ads, plus dividends? It’s phony competition as natural monopolies should be in public hands.
Look 22 miles away – France. They put gas into public ownership & kept increases down to 4% or elec. at 8%. This kept inflation to be half of ours & no cost of living crisis. France is investing, growing & exporting well.
We were told the Treasury would not invest in Water (they could have), but private firms would. They have done almost nothing. In 30 years not one new reservoir, others sold off & we are still using mainly the same old victorian plant. Every time the local housing stock expands & it rains, they allow more sewage into rivers & inland seas. On leaks they are worse than ever & a limited resource is wasted. Again this is incredibly unpopular with Tory voters, as Davey recognises.
The UK’s joke of a train networks costs massively in subsidy and is still rubbish, poor or no catering, unreliable & the most expensive in Europe.
The State should not be making cars but still does these relatively simple tasks a lot better, as the vast majority of UK voters recognises. If LibDems don’t reflect this they will be likely to remain to be treated as a fringe party.
LibDems should continue to agree on Labour and the other opposition parties on the headline issues and keep the divide with the Tories. This happening in the media already and it supports anti Tory tactical voting.
Public ownership of natural monopoly utilities should be non controversial, as should be the broad concept of an active Industrial and Green strategy. Distinctiveness in policy to differentiate against Labour and other opposition parties should be in other areas.
The LibDems should not be pursuing policies based on the ideas of Ayn Rand, Hayek, Friedman or the Freedom Association. That Sovereign self era is gone and disproven. It never worked for ordinary people or mainstream business, as the tories are finding to their cost.
@John, the privatised industries are not all disastrous. Those of us who worked in a utility before, during and after privatisation would tell you a different story than the uninformed public opinion you refer to. Privatisation creates a competitive environment where change and innovation are prized.
@John, regarding France, where 85% of electricity generation is either nuclear or green, it should surprise no-one that the hike in fossil fuel prices has hardly affected the cost of electricity. It is simply not true that the low cost of electricity in France is because the notoriously inefficient EDF is largely government owned. I accept that there are some duplicated costs in admin and billing in the UK model of several energy company suppliers. That is the price we pay for a competitive market, which drives innovation and brings down prices. If we use your logic on supermarkets, why should we pay for duplicated admin costs in Tesco, Sainsbury’s, Morrisons, the Co-op, Asda and Lidl, when a state-owned ‘Brit-foodmart’ could supply all our needs? Most Lib Dems know the answer to that one.
Thank you for pointing those things out Andy. The number of commentators on this (Liberal?) site who think that nationalisation solves all the problems never ceases to astonish me.
@Andy Daer
“Privatisation creates a competitive environment where change and innovation are prized.”
In respect of the water authorities that comment would be funny if it wasn’t so tragic to all those of us suffering as a result of mains water leaks and/or sewage spills. The performance of the water utility companies is lamentably poor.
In respect of water supplies and/or sewage disposal there is no competitive environment – because we the individual customers cannot choose our supplier. We have to put up with whichever one serves our area. It isn’t like choosing from whom you buy your groceries! We the customers have no effective control over these organisations. Likewise with most of the rail services (those where there is only 1 service supplier on the route in question).
And if OFWAT really was doing its job properly we’d already have had proper investment in improved water supply and sewage disposal systems – if only to keep pace with increased demand from increased population.
Every word right on this piece from Simon.
I would say as well as his suggestions, the absurd waste of heating in many public venues. Why do people go into heated malls? They wear coats and scarf, yet they are heated to mean you might as well wear t shirts. Similarly shops, staff, in t shirts, instead of turning the heating down, wearing strong clothes. And offices the same. My mother was a librarian for three decades, often passing out in the heated library.
As for Andy and James re comments from Helen and John, yes its true nationalisation is to as good as private industry and compettitive markets for much delivery of goods and services. But in a few , no monololy run by the private sector is as accountable as one run by the public. So water and rail make sense. Energy is an emergency situation, not a monopoly one, so, again, nothing wrong with the subsidy and acccountability factors leading to public ownership.
Apologies with keyboard issues, typos a plenty lately, here, attempting to improve them!
Every word right on this piece from Simon.
I would say as well as his suggestions, the absurd waste of heating in many public venues. Why do people go into heated malls? They wear coats and scarf, yet they are heated to mean you might as well wear t shirts. Similarly shops, staff, in t shirts, instead of turning the heating down, wearing strong clothes. And offices the same. My mother was a librarian for three decades, often passing out in the heated library.
As for Andy and James re comments from Helen and John, yes its true nationalisation is never usually as good as private industry and competitive markets for much delivery of goods and services. But in a few , no monopoly run by the private sector is as accountable as one run by the public. So water and rail make sense. Energy is an emergency situation, not a monopoly one, so, again, nothing wrong with the subsidy and acccountability factors leading to public ownership.
@Andy Daer…
Utility companies are operating as a cartel @ the expense of the poorest in the UK ..
CEO salaries are an absolute obscenity when workers are struggling to make ends meet …
Nothing much changes for those at the bottom…
The idea of re-nationalisation is a non-starter; money from the privatisations in the 1990s isn’t sitting in a government back pocket, and buying them back would increase government debt by tens of billions. That’s not going to happen. Even if that weren’t the case, proponents should consider the implications of doing it.
If the utilities were all under government ownership the chancellor would have competing claims for cash, for the NHS, defence, education etc., and demands for borrowing for capital expenditure would be in a fight to avoid cuts, let alone win new money (this is one of the main reasons privatisation was first contemplated in the 1980s).
But under privatisation the regulator can set targets for improvement, agree funding for what is needed, and the utility companies’ annual letter to customers can say bills are going up, and explain why. The direct link between higher bills and, say, better sewage treatment would be in plain sight, whereas even if a state-owned water company caught the eye of the chancellor, the reason for higher taxes to pay for improvement would be lost in the mix of other government spending.
Second, think of how improvements are actually delivered. A privatised company is set a target by the regulator, and the operations director tells his people ‘get these projects done, or we’ll face a £100m fine, I’ll lose my bonus, and so will you.’ That level of incentive isn’t there in state enterprises.
This all depends on good regulation, which seems to have been absent with water, but less so with electricity.
This thread also mentions ‘natural monopolies’, but in practice having an exclusive geographical area can’t defend companies from competition. The regulator says to company A “I want this done, at that unit price” and if the response is “sorry, you’ll have to allow us more money” the regulator comes back with “really? Company B is doing it for that price.” The other way competition works is that if Company A is underperforming it gets taken over. That means job losses among senior staff, something they try to avoid by making their company more efficient.
Andy, I’ve in worked the utility regulators and my father planned power stations for the CEGB. They did things properly in those days and paid the upper quartile of comparable pay, instead of below the lower quartile in a lot of the public sector now, albeit the promise of nuclear was over exaggerated. I am now in business but not blind to any of this.
On rail, the subsidies are such that the public sector taking over the franchises would be easy and has happened already under the Tories. There were no downsides and travellers are getting a better service.
On Water, the situation is so now bad that it should be treated as an emergency. In this country, it is extremely rare for directors to get prosecuted for anything. You can see after the prosecution of 700 innocent sub post masters for fraud, mainly during the coalition.
The present directors of water now routinely pollute all of England’s rivers and many beaches with vast quantities of untreated sewage and the fines have largely been stopped. It is a total scandal. I would suggest a compulsory purchase order. They are using the Water industry as a monopoly cash machine and making almost no investment to victorian plant. The promises of privatisation are all broken. Between that and under regulated farm run off, our rivers have totally had it.
2)
With energy there are no easy or cheap answers, but Liberal France has managed to take over the gas industry so I don’t see why we can’t. It is investment that would pay for itself in the long run. Labour’s answer is to set up a rival in public hands. I would not be surprised if private companies will be saying that they cannot compete in future.
Past Treasury orthodoxy in refusing to invest in Britain is part of the problem. We have had lower domestic investment than Germany and France for decades. UK GDP per head has fallen from 1st to 34th, total GDP has fallen to 7th. Other countries do not have this private money good, public bad, right wing idea.
Government expenditure is part of GDP and Investment pays back. The UK is falling behind Germany and France who both have a lot more in the public sector and are adding to it. In 2016, the UK had 90% of the Germany GDP level. Now it is 70%. Present policies are failing badly and we are on the cusp of probably an even worse recession.
If the LibDems put out an Orange Book type list of economic policies, the membership will continue to decline and the party will remain treated as a fringe.
Andy (Daer), Thanks for your points about the effectiveness of private sector ownership over public sector ownership in many circumstances. However, in the case of regulated markets, the effectiveness of the state appointed regulator is key and in the case of Ofgem I fear your approval of their record does not accord with reality. You refer to EDF and its 8% price increase for electricity in France being due to 85% of its production being nuclear or renewables. However, in the UK EDF claim 82% of its UK electricity being either Nuclear or renewable, but they have just quoted my business a price increase of 550% next year.
Something fishy going on?.
@David Evans, I haven’t seen where UK edf claim 82% of its electricity is ‘nuclear or renewable’. If that’s true, not much of it can be nuclear, but either way I think it’s asking a bit much of edf to expect them sell at below the market rate, harsh though that might sound to you, with your price going up so massively.
The massive hike in fossil-fuel prices has pushed up the market rate for every generator, and many wind farms and solar generators will have been coining it – provided they didn’t sell forward too far (and all generators will have sold forward for many months, at prices probably a lot below the current price). In these very exceptional circumstances it’s up to the government to impose windfall taxes on non-fossil fuel generators, where applicable.
My comments above were about network businesses, which are still regulated. I think you’d agree it’s been pretty good in the case of electricity and gas, and pretty poor in the case of water. OFGEM stopped regulating supply business ages ago, hoping the market was mature enough for competition to keep prices fair. Of course, they were wrong, and customers were overwhelmed by the multiple tariffs available and mostly gave up switching.
@John, I suspect we are drifting away from Simon’s original points, but to pick up one thing from your latest post. punitive measures like compulsory purchase of the poorest performing water companies might vent a bit of justifiable anger, but none of the other problems of state ownership would go away. And are you suggesting compulsory purchase at a price below the market value? That might hurt the directors, but a lot of the pain would be felt by investors like pension funds, and individuals, not all of them rich. If it happened to one company, share prices would drop across the sector, wiping billions off the value of utility assets.
You say there are no easy answers, but I suggest that a good regulator for water would be able to direct water companies to spend more on sewage treatment, and impose fines if they didn’t, and even higher fines if they falsified evidence of outflows (some have in the past). I would call that relatively easy.
Andy, The mix on their Website can be found at https://www.edfenergy.com/fuel-mix and it claims 63.1% Nuclear and 19% renewable. That seems to torpedo your first point. As to your point at selling below the market rate, clearly there are more than one market rate as you tell us EDF’s French market rate has only risen by 8%!
Perhaps it is to do with a difference between Network businesses, but it is supply rates to consumers that counts when it comes to inflation, not those in the inner markets. What is clear is that it isn’t that simple and Ofgem as you put it “stopped regulating supply business ages ago, hoping the market was mature enough for competition to keep prices fair. Of course, they were wrong, and customers were overwhelmed by the multiple tariffs available.” Now they are overwhelmed with price rises, so not what I think should be described by “If the regulator is up to scratch, as is the case with Ofgem” in any way.
My experience in working in audit in two privatised industries is that senior managers find ways to game the market rules and do not pass savings onto the customer. Regulators being bureaucracies (a bit like the Lib Dems, as I have pointed out elsewhere) are not up to the job of reacting quickly enough and are easily outmanoeuvred.
@Andy Daer “Privatisation creates a competitive environment where change and innovation are prized.”
Not seen much innovation from the businesses the Government privatised other than in the ways failing directors have found to enrich themselves…
>“punitive measures like compulsory purchase of the poorest performing water companies”
It is a shame the utilities were wholly privatised, rather than merely contracted. As then the model offered by Directly Operated Railways Limited would be available…
@Roland, in many respects regulation of the utilities infrastructure is equivalent to contracting the work out, due to the way regulation works. As regards innovation, I’m a bit gobsmacked by your perception. In the 20 years leading to privatisation I recall progress from the black handset to the green trimphone; now you can watch the world cup on TV via a BT fibre cable and do everything else remotely by mobile phone. In electricity it’s probably largely behind the scenes; for example, everything previously on paper or on physical schematic boards is computerised and remotely controlled.
@Andy – I was focusing on innovation within a business and not industry innovation.
So whilst there has been rapid change since the 1980’s, much of that has been driven from outside of BT, with both BT and Ofcom dragging their feet over adoption.
From my own involvement with the sector, I remember the disinterest of BT in ADSL in the mid 1990’s. Similarly, in 2010 when Jeremy Hunt and Ed Vaizey launched the Government’s National Broadband Strategy: “Britain’s Superfast Broadband Future”, BT’s ‘innovation’ was only really in preventing contracts being awarded to third-parties. With fibre, it is only in recent years that BT senior management have fully thrown their weight behind it and committed the necessary engineering resources.
However, there is one area of innovation I’m aware of, namely the convergence of fixed and mobile communications, in this instance Ofcom effectively forced BT to sell off their mobile network…