Power to the People!
No, this is not an article about Marxist-Leninist communism, nor is it a tribute to a 1970's sitcom featuring a wanna be revolutionary in south London who proclaimed the above title to
no one but himself outside Tooting Broadway tube station every Wednesday night.
This piece is a comment on the recent announcement by various energy companies that prices are going up.
An article I have found from 2011 tries to explain away the previous rises. You can read it here. I have no idea of the provenance of such a website but it is interesting none the less. Energy bills have, according to the article, risen on average by 11% a year in he UK since 2004. Which is WAY above the corresponding underlying rate of inflation (3 % ish).
There has been a certain level of shilly shallying between the gas and electric providers and government over the need for these rises. As a consumer I have to have confidence that Ofgen is in some sort of control and that we are not being hung out to dry by the providers of gas and electricity. However I am not certain there isn't a certain amount of squeezing the market for maximum profit. It is I suppose the nature of a market that the price will rise until it cannot be sustained.
The article I mentioned attempts to set out what makes up our bill. Sure enough whole sale prices make up the largest slice. Also within the article is the concept that the energy providers are not necessarily paying the whole sale price. This is because they can "hedge" and effectively pre purchase the energy they will supply. This is a ploy to try and even out the peaks and troughs of energy prices. The fact that we are facing energy price hikes of up to 10% suggests that they are not doing it very well.
Why are we not able to forward buy energy? Why can't a supplier agree a rate for production of energy? I guess at some point, some one has to take a risk. Electricity is generated often by burning fossil fuels and we all know how that price rises and falls. The UK government has just agreed a deal for the price of energy produced by a new generation of Nuclear power stations as a for instance. This is a different issue, the price was agreed to ensure that there was "suitable" return on their very considerable investment.
I have written about markets before and said before that the UK energy market is not a true and pure market because the UK is trying to wrestle it's energy production away from fossil fuels like coal. The actions that this requires prevents energy being produced in the most cost efficient ways (big centralised power stations).
So what is the solution? I'll give you my solution if you like. Nationalisation! Ha ha. Talk about being a hypocrite! In my last post I subscribed to the notion that in general I was against nationalisation largely because politicians are the least suitable people to run industry. It is not all their fault bless them. Part of the problem is down to elections. Politicians seek reelection at some stage and a new broom sweeps clean. So when a new politician or political party arrives they naturally want to change things and it all adds up to a confusing morass for industry. I did say nationalisation was valid if the national interest was strong enough however.
It appears to me that you can have a free market or a subsidised market. A free market cannot exist where random controls are placed on it. A free market cannot exist whilst trying to coerce it into working in a different way. The UK and indeed Europe are trying to reduce the amount of CO2 they produce and have agreed levels they must achieve. Rather than raise the capital through taxation we are having to pay it through our bills.
So why nationalise energy production again? Government could directly invest in, say, wind turbines. Build the number we require then effectively they could be sold off to private investors, as in the past, but with the cost of installation rather written off the lucky providers will be able to just let the cash roll in and we might be awash with so much energy our bills might start to slow down
Nuclear power stations are perfect for governments to run. Highly expensive and will never make a profit but can produce high amounts of almost carbon free electricity.
So what is the solution? I'll give you my solution if you like. Nationalisation! Ha ha. Talk about being a hypocrite! In my last post I subscribed to the notion that in general I was against nationalisation largely because politicians are the least suitable people to run industry. It is not all their fault bless them. Part of the problem is down to elections. Politicians seek reelection at some stage and a new broom sweeps clean. So when a new politician or political party arrives they naturally want to change things and it all adds up to a confusing morass for industry. I did say nationalisation was valid if the national interest was strong enough however.
It appears to me that you can have a free market or a subsidised market. A free market cannot exist where random controls are placed on it. A free market cannot exist whilst trying to coerce it into working in a different way. The UK and indeed Europe are trying to reduce the amount of CO2 they produce and have agreed levels they must achieve. Rather than raise the capital through taxation we are having to pay it through our bills.
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| Wyfla Nuclear Power Station |
So why nationalise energy production again? Government could directly invest in, say, wind turbines. Build the number we require then effectively they could be sold off to private investors, as in the past, but with the cost of installation rather written off the lucky providers will be able to just let the cash roll in and we might be awash with so much energy our bills might start to slow down
Nuclear power stations are perfect for governments to run. Highly expensive and will never make a profit but can produce high amounts of almost carbon free electricity.
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