When I launched UKIP’s Energy Policy in 2012 with the claim that we faced blackouts by 2020, I had a nagging concern that perhaps I was being too alarmist. But I’m sorry to say that with hindsight, I clearly wasn’t being alarmist enough.
We now have Captains of Industry coming forward to warn of blackouts not in 2020, but in the next couple of years. First there was Paul Massara, CEO of N-Power, saying “he did not know if the UK would get through next winter”. He was followed by Keith Anderson, Chief Corporate Officer of Scottish Power, saying similar things, and especially concerned that the government’s carbon tax will force coal-fired power stations to close before replacement capacity is on-stream. He also notes, rightly, that coal is just about the cheapest source of electricity. Forcing coal-fired power plants to close is a recipe for higher prices.
It’s a commonplace to describe the UK energy market as “dysfunctional”. But we should pause to consider why it’s dysfunctional. It’s because of constant government interference, ever-more-complicated directives and subsidies and interventions from both Westminster and Brussels. Above all it’s because of regulatory uncertainty. That’s created by government. And in the usual British way, we’ve managed to take damaging EU legislation, and make it worse. The EU’s Energy and Climate Package is bad enough, but we’ve made it worse with our preposterous Climate Change Act, and Osborne’s Carbon Price Floor.
I’m not sure that it was the likes of George Osborne that Lord Lawson had in mind when he famously referred to “teenage scribblers”, but George is certainly showing strikingly similar symptoms. Perverse policies pursued by modish methods seeking simplistic solutions, by people who have no understanding of the markets they’re disrupting, and who have failed to consider the likely outcomes and unintended consequences of their actions.
In a piece in the Telegraph, Scottish Power’s Anderson Proposes “Four ideas that could make energy bills more affordable”. Let’s take a look.
1 “Reduce gas consumption”. A nice idea, but it’s a bit like addressing a food shortage by eating less. It may make sense, but it’s hardly an attractive option, and there’s only so far you can go. He makes a passing reference to “developing our own gas resources”. That should be up in lights, not relegated to a sub-paragraph halfway down. As people sometimes point out to me, shale gas may not reduce gas prices in the UK. But there’s a very high probability it will, and it would be criminal not to find out. The government must act, especially to stop the disruption and intimidation of exploratory gas drilling by small groups of determined agitators. Anderson also calls for insulation and energy conservation. Surely no one will disagree with that. It’s just good housekeeping, of a kind the grocer’s daughter would have approved. But there’s only so much you can do to insulate older houses (for example). And it’s a law of diminishing returns. After a certain point, further saving become prohibitively expensive.
2 “We need to get better at managing our journey to a lower carbon economy”. But this is mere cant – a genuflection to modish priorities. The substance of his second point is an attack on Osborne’s Carbon Price Floor, which he rightly says will force the closure of coal plants which we can ill afford to lose (and that’s in addition to those coal plants closing because of the EU’s Large Combustion Plant Directive).
3 Smart meters. There seems to be a touching faith in the idea that seeing your rate of electricity consumption on your smart meter will both motivate and enable you to use less electricity. It’s a huge up-front cost, estimated by some at £12 billion (I’d rather use that to build a nuclear power station). So far as I’m concerned, the jury is still out on smart meters.
4 “Focus limited resources on the poorest”. This seems to be simply an adjunct to Point 1. If the government is going to subsidise insulation, help those most in need. Fairly obvious, and few will disagree.
So, marks out of ten. Anderson is pro energy conservation, pro-shale gas (sort of), pro coal, and against the Carbon Floor Price. So is UKIP. So far, so good. But we should also be opposed to wind and solar, because they are hugely wasteful and contribute to no rational objective. We should be building new coal capacity, rather than just asking to keep what we have. We need a sense of urgency behind shale gas – it must be a national priority. And Anderson doesn’t mention nuclear, but it must be part of the long-term mix, and the industry needs assurances on that.