It’s half past three on a cold Friday afternoon in mid-January. The temperature is just five degrees centigrade. The sun is already low on the winter horizon. There is barely a breath of wind. Once again, Britain sits beneath cold high-pressure air. And once again we have had to turn to increasingly expensive gas to keep the lights and the heaters on. Having closed all but two of the UK’s coal power stations and having failed to invest in nuclear replacements, our choice is between gas and shivering in the dark on days like this.
It wasn’t supposed to be this way. Just like the false promise of nuclear power half a century ago, renewable energy was supposed to have become “too cheap to meter.” After all, in the course of a year, there is more than enough wind and sunshine to power an industrial global economy. There again, at this time of year this far north, there is barely enough sunshine to register in the UK energy mix. And nobody has figured out a means of transferring the excess sunlight in May June and July so that it can be used in December and January.
At least we have plenty of wind, right? Not quite. While it is true that the British Isles – sat beneath both the Gulf Stream and the Jet Stream – are among the best locations on Earth for harnessing the wind, and while the UK has build the world’s biggest offshore wind farms to capture it, this is of little use on days like this when the wind is somewhere else out on the Atlantic. For all of the theoretical wind available to us, it is precisely on cold, dark days like these when we need power the most, that the wind refuses to blow. As of 15.20 this afternoon, wind was providing exactly one percent of the UK’s electricity:
In the absence of wind, expensive gas is the only option. But as Chris O’Shea, chief executive of Centrica has somewhat optimistically pointed out, expensive gas is not going away. In part this is because of depletion and a lack of forwards investment in opening up new deposits. In part, it is a consequence of the shift away from coal in the developed economies, leading to much greater competition for gas as the only viable back-up for intermittent non-renewable renewable energy-harvesting technologies (NRREHTs). The UK’s problems were made worse by the government’s failure to intervene to maintain gas storage capacity so that where other states can stock up when prices are relatively cheap, the UK is at the mercy of the volatile next day wholesale market.
While it has been fashionable in establishment media circles to blame our energy woes on Brexit, the failure of neoliberal governments over decades is the bigger villain, since it has left us with a dog’s breakfast of regulations which leave us with neither a nationalised nor a private energy system – the worst of all worlds. As Dieter Helm explained in his 2017 Cost of Energy review:
“In the current decade, the government has moved from mainly market-determined investments to a new context in which almost all new electricity investments are determined by the state through direct and often technology-specific contracts. Government has got into the business of ‘picking winners’. Unfortunately, losers are good at picking governments, and inevitably – as in most such picking winners strategies – the results end up being vulnerable to lobbying, to the general detriment of household and industrial customers.
“As a consequence of Electricity Market Reform (EMR), the government now determines the level and mix of generation to a degree not witnessed since these were determined by the nationalised industries – notably the Central Electricity Generating Board (CEGB). Investment decision-making has been effectively quasi-renationalised. This is a direct consequence of EMR. The government, not the customer, has become the client.”
Governments – at least prior to 2022 – have cared little about the impact of policies on energy bills. This is why, for example, a host of “green” levies and subsidies were added to people’s electricity bills by the Blair government, and now account for a quarter of the bill. The reason for doing this was to avoid EU government spending and state aid rules… something which, ironically, no longer matters because of Brexit. The bigger problem though, is that successive governments have rigged the market in favour of NRREHTs generators. That is, suppliers must buy up wind, solar and biofuel power first, while gas and coal come last. This means that NRREHTs generators effectively pass the cost of intermittency onto gas and coal generators whose overheads are far greater and whose electricity is more expensive because they are at the back of the queue. This, in turn, means higher prices for businesses and households as the price of gas goes up.
Helm, a NRREHTs enthusiast by the way, recommended that this system be replaced with a duty for all generators to supply “firm” – 24/7/365 – electricity to the Grid:
“The second way in which renewables policies lead to higher costs of energy is the different treatment of different technologies and the exemption from the system costs caused by intermittency.
“The first-best solution to this problem is to integrate the FiTs and low-carbon CfDs into the capacity markets, and make all technologies bid on an EFP basis. This directly confronts those that cause intermittency costs with the costs they cause, just as a carbon price confronts those that emit carbon with the costs they cause.
“This would be a radical change, but it would have many advantages. These include:
- establishing via the market the full costs of subsidies;
- incentivising the secondary markets in flexibility, back-up supplies, storage, and other ways to manage the intermittency as part of the broader energy-only wholesale market;
- cutting away the ‘picking winners’ elements and associated lobbying and capture;
- radically reducing and simplifying the multiple policy interventions and regulations.”
There is, of course, an even broader question about government policy which is seldom asked – why are we going all in on electricity anyway? (clue: what began has an environmental movement long ago morphed into a lobbying sock-puppet in the service of a global corporate “green” industry). As Helm argued:
“The overwhelming focus on electricity rather than agriculture, buildings and transport has added to the cost. Agriculture in particular contributes 10% greenhouse gas (GHG) emissions, and the costs of reducing these emissions are much lower than many of the chosen options because the economic consequences of a loss of output in agriculture are small. Agriculture comprises just 0.7% GDP and at least half its output is uneconomic in the absence of subsidies. With the development of electric vehicles (EVs) it is apparent that transport can contribute more. The CCC could have paid more attention to the lower marginal cost of abatement in these sectors.”
Helm is undoubtedly wrong about electric cars. And growing food closer to home is likely to become a major issue in years to come as our ability to ship and fly foods around the planet is curtailed by a rising energy cost of energy. Nevertheless, the point stands. Much more could have been achieved by such things as insulating buildings, creating integrated public transport systems, and encouraging rather than resisting more home working.
For the moment at least, none of these changes are on the table. And this, too, is testament to the power of a corporate “green” lobby which has persuaded governments of all stripes that there is no alternative. Indeed, the one (non)solution proffered by spokespeople from all of the main political parties this week was the deployment of more wind turbines – thereby making the intermittency problem far worse while doing nothing to resolve the dearth of wind power on days like today. For a couple of hundred billion pounds, we might double the number of turbines around the UK, with the result that wind would be accounting for two percent instead of one percent of our electricity this afternoon.
The gut response of the self-identified party of the working class was to call for a cut to the VAT on energy – something which would benefit the middle class, by knocking £60 off an average bill which is set to rise to £2,000, but would do little for poorer households whose consumption is far lower than average. After some consideration, the people’s party then argued in favour of a windfall tax on the energy companies. But since the immediate need is for more investment in recovering new gas, this would be a dangerously blunt approach – a tax on dividends and CEO bonuses would be preferable as this would encourage companies to invest in new production. And so, yet again, it falls to right-wing Tories like Jake Berry from the red wall Northern Research Group to highlight the serious economic shock that is coming, and to lobby his own government for reforms that the official opposition cannot contemplate.
Not, of course that the Tory Party – which generally supports state handouts (unless they are for the poor, obviously) – could shake off centuries of peasant bashing to do the two things which would make a difference; restore the £20 it docked from benefits, and reverse the suspension of the triple lock on pensions, thereby providing support directly to those hit hardest by rising energy prices while not letting the wider electorate off the hook – moral hazard and all that.
The Tory gamble which is shaping up is based on the shaky assumption that the increase in energy prices is temporary and will return to “normal” once the pandemic is over. This being the case, the plan is for government to fund the energy companies to spread the cost of this winter’s price increase over the next 5-10 years – something which still hits the poor hardest. This is bravery bordering on recklessness, since it assumes that the problem is solely on the demand side, whereas supply-side problems – depleting gas fields, lack of investment in new production, greater global competition for gas supplies, and greater domestic gas consumption within gas-producing states – are the main drivers of higher prices… and they’re not going away any time soon.
The only Tory sop to those hardest hit by rising prices is the proposal to increase and widen the scope of the £140 Warm Home Discount – whose cost is also added to energy bills. This would at least target those most in need, and head off backbench Tory pressure to remove the “green” levies and subsidies that make up some 25 percent of electricity bills.
Green groups have been notable by their silence on the growing crisis… and for good reason. With some notable exceptions who have been brave enough to make the case for some form of de-growth, bright green organisations and parties sold us the lie that if only we made the Green New Great Reset switch from fossil fuels to renewable energy, we would enjoy abundant and cheap energy while simultaneously doing our bit to save the planet. Indeed, anyone who raised the possibility that we would end up with state-imposed eco-austerity was vilified as some kind of climate change denier. Fast forward to the start of 2022, and the growing energy crisis is beginning to look a lot like eco-austerity for any household in the bottom half of the income distribution. And as we discovered at last year’s shambolic COP26, the UK’s paltry one percent contribution to greenhouse gas emissions means that no amount of self-inflicted bright green economic hardship is going to make a blind bit of difference to global warming.
In the last few years, it has become apparent that the reason green parties and organisations have put so much effort into “raising awareness,” even though the overwhelming majority of us already accept the science on climate change, is that this allows them to conveniently avoid having to offer a viable solution. This is because there are but two theoretical solutions available. The first is that clever people somewhere else come up with a new energy source which is at least as versatile as oil and, crucially, is more energy-dense. To date, no such energy source exists. And so, the second option is that we de-grow our way of life, and most likely our population, to fit the limits of planet Earth. We might do this in a planned manner, but most likely we will have to go through a prolonged period of energetic, economic, and environmental collapse before those who survive are able to rebuild some kind of civilisation once more.
One thing is for sure, this latter horror show – because roughly six out of every seven humans on the planet will be dead within a matter of weeks once the oil and gas stop flowing – is far more likely if we persist in the lie that we can continue with business as usual solely by swapping fossil fuels for sunlight and wind.
As you made it to the end…
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