“The most expensive policy disaster in modern British History”
For three years now, as UKIP Energy Spokesman, I have been inveighing against the high costs of renewables, and the vast economic damage which they are doing to the UK and the EU. I have argued that we are driving energy intensive businesses off-shore. I have documented job losses and plant closures. And while there have certainly been others, including the TPA and the REF , who have been making the same points, it has sometimes felt like a lonely furrow to plough – especially in Brussels, where “the fight against climate change” is like a Western form of Jihad, obsessive and destructive, and renewables are its weapon of choice.
So it was refreshing and encouraging to see a new report from the Centre for Policy Studies , titled “Central Planning with market features” (perhaps an archetypal reference to “Socialism with Chinese features”). This is a magisterial analysis of our energy market, by CPS staffer Rupert Darwall. CPS is one of the UK’s leading independent think-tanks.
Darwall makes a powerful case that if we want renewables, nationalisation of energy is the best option. If not, regulators should stand back and let the market behave like a market. He has a point: I have felt for some time that the level of regulation, and regulatory uncertainly, in the UK energy market has reached the point where investors will simply not be prepared to put up the large sums needed for energy infrastructure projects. The eye-watering striking price at our new nuclear power station at Hinkley Point C is driven not so much by the underlying cost of nuclear energy as by the risk premium demanded by EDF as a hedge against regulatory uncertainty.
But that vital debate is beyond the scope of a short blog. I just wanted to share with you some of the points from the CPS report that support positions which we in UKIP have taken on energy.
“(UK) Energy policy …is on course to become the most expensive domestic policy disaster in modern British history. By committing to high-cost, unreliable renewable energy, its consequences will be felt for decades”.
“The result of imposing an arbitrary form of decarbonisation … is that the privatised electricity industry is being transformed into a vast, ramshackle Public Private Partnership promising the worst of all worlds – state control of investment funded by high-cost private sector finance, with energy companies set up as fall guys to take the rap for higher electricity bills”.
“The Government presumed that fossil fuel prices would rise continuously, a view now rapidly being overtaken by falling coal prices and the halving of oil prices”.
We have “a policy framework to encourage renewables that systematically conceals their true costs” … “the costs of intermittent renewables are massively understated … higher plant costs… massive amounts of extra generating capacity (as back-up)”. “Massively subsidised wind and solar flood the market with near random amounts of zero marginal cost electricity … impossible to integrate large amounts of intermittent renewables into a private sector system and expect it to function”.
“To keep the lights on, everything ends up requiring subsidies, turning a once-profitable sector into the energy equivalent of the Common Agricultural Policy”.
You get the picture – and it’s exactly the picture I’ve tried to paint over my last three years as UKIP Energy Spokesman.
One other element of the report is worth mentioning. The narrative of the old political parties is to blame high electricity prices on “profiteering” by energy utilities, who buy cheap but fail to pass on savings. The truth is that prices are primarily driven by green subsidies and taxes, and by the fact that we have turned our backs on secure, low-cost generation like coal. Darwall presents a list of the cost structures of the “Big Six” electricity companies. And guess what: the average “EBIT” (“Earnings before Interest & tax” – a common accounting measure) is just 2.8% in 2013. A very modest figure. So much for Ed Miliband’s plan to save the world – and the hard-pressed consumer – by imposing a price cap.