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Let’s join the dots for them

There are three stories on the BBC website today which are treated separately, but are, in fact, intimately linked.  And when understood in this way, explain a great deal about the mess we are in.  The first is one of those “human interest” – bordering on “poverty porn” – stories about a young couple having to go without electricity for weeks on end because prices are too high for people living on social security.  Clearly, the unfortunate couple are just one of hundreds of thousands of households across the UK who are struggling to make ends meet in the face of the steep rises in the cost of essentials in the past two years… the story concludes with a reference to next week’s government Autumn Statement, when the next uprating of social security payments should be announced:

“The UK government normally increases benefits according to the inflation rate of the previous September, which this year was 6.7%.  But, so far, [UK Chancellor] Mr Hunt has refused to commit to such an increase.”

Social security though, is not the cause of the crisis, but only an increasingly inadequate (after four decades of neoliberalism) means of papering over the cracks.  To get to the heart of the crisis, we need to draw the link to the second and third stories.  The second story concerns a 66% increase in the contract price for building new wind farms following the spectacular failure of the auction in September, when no bidders turned up:

“Companies have said that the cost of building wind farms has soared because of rising inflation and interest rates, while the maximum price they can charge for the electricity they generate has been relatively low…”

This gives a glimpse into the big lie about renewable electricity and net zero more broadly.  The conceit was that, because the energy itself – sunlight and wind – was – for all practical purposes – infinite and free, that the deployment of – non-renewable, as it turns out – renewable energy-harvesting technologies would ultimately result in the fabled “energy too cheap to meter.”  And when these cheaper prices failed to materialise, we were treated to ever louder chants of the holy mantra of Big Tech:

  • It’s only a prototype
  • It will improve
  • It is inevitable.

The reality – as is true of any and all technologies which depend upon fossil fuels in their manufacture, transportation, deployment, and maintenance – is that the cost of renewable electricity was always linked to the cost of fossil fuels.  The flooding of a depressed economy with cheap oil and gas from the US shale plays gave the illusion of cheaper renewable electricity in the 2010s.  But the recent, eye-watering spikes in prices following lockdown and self-sanctioning of Russian imports have destroyed the illusion that wind power will ever be cheap.

This price problem feeds into growing opposition to net zero policies in general, as these are widely regarded as “socialism for the rich and eco-austerity for everyone else.”  Although initially seen as a right wing cause – often linked to those who regard climate change as a hoax – concern about the inherent inequalities built into net zero policies is becoming more mainstream.  For example, Adam Bell at Politics Home sets out the unfairness of the current approach:

“Just about every party, barbecue and village fete across Middle England will have at least one knot of middle-aged folk trading stats. It may sound a little like this: ‘Four point five kilowatt array! A cop of two point nine! Guaranteed charge of at least 80 per cent!’ 

“These competing well-heeled revolutionaries will brandish their phones to illustrate the finer details of the performance of their air-to-water heat pump or some other piece of low-carbon technology. But all of the players of this game are already winners, and the reason why lays bare one of the key challenges confronting the politics of decarbonisation in the wake of the cost of living crisis. 

“Those who have invested in low carbon technology are able to ignore at least part of the painful increases in energy prices that have blighted the nation since Russia’s invasion of Ukraine. They perhaps have an array of solar panels covering their roof, producing considerably more electricity than their average demand. They may have a heat pump, which takes that electricity and uses it to capture environmental heat, removing the need for an oil or gas boiler. They may have a battery to store the electricity from their solar panels for use at night. Or they might capture the output of their heat pump in a large thermal store – traditionally a hot water tank, but also a range of more advanced materials that achieve the same thing for a much smaller footprint. And the chances are an electric vehicle will sit in the drive – one that can be charged from their solar panels or cheaper nighttime electricity from the grid.

“With all of these assets in place they will have reduced their bills to a few hundred pounds while the rest of us pay several thousand…”

And let us not forget that beyond hard-pressed bill-payers are thousands more – like the couple in the first of today’s stories – who can no longer afford electricity at all.  But it is not just the rising cost of energy around the world which is driving this affordability crisis.  In fact, affordability would improve in the event that the UK’s energy regulator was to take the third of today’s stories to its logical conclusion.

In his 2017 energy review for the UK government, Professor Helm concluded that:

“It is not particularly difficult to set out what an efficient energy system might look like which meets the twin objectives of the climate change targets and security of supply. There would, however, remain a binding constraint: the willingness and ability to pay for it. There have to be sufficient resources available, and there has in a democracy to be a majority who are both willing to pay and willing to force the population as a whole to pay. This constraint featured prominently in the last three general elections, and it has not gone away.” (my emphasis)

Arguably, prior to the SARS-CoV-2 world tour, there had been a majority who were prepared to “force the population as a whole to pay.” But those days will be looked back on as a golden age when only those with serious health and/or social problems could not afford to pay for energy.  In the new environment of global shortages and much higher prices, opposition to net zero is growing ever louder.  And one obvious target for muting at least some of this opposition is the regressive poll tax that every connected household has to pay just to be connected to the grid.  As Kevin Peachey at the BBC explains:

“Currently, energy customers pay a fixed daily charge covering the costs of connecting to a supply.  But there has been anger about increasing fees and customers’ inability to reduce what they pay…

“In most areas, the charge – which is capped by the regulator – has doubled over the last two years. A typical household pays 53p a day for electricity and 30p a day for gas – adding an extra £300 to the total bill each year.”

There is, of course, no such thing as a “typical household” in a society as unequal as the UK.  And for the majority of households, the standing charge – around 12 percent of which funds “green” subsidies – costs more than the electricity and gas they consume… in effect, poor households – including the couple in the first of today’s stories – are forced to help fund the heat pumps, solar panels and electric cars which help the wealthy save thousands of pounds a year on their energy and fuel bills.

The simplest and most obvious reform would be to incorporate the cost of operating the grid into the price we all pay per unit of electricity and gas – in the same way we do with the water and sewage and telephone networks – so that those who consume the most also pay their fair share of the cost (some allowance would be needed for the minority who need more energy for health reasons) with the various subsidies for net zero coming from general taxation.  Whether the regulator will be brave enough to go this far we will have to wait to see.  But a more radical inquiry would question why we have an energy regulator at all.

One of the greatest failings of neoliberalism has been its attempt to convert natural monopolies into marketplaces.  As with the UK’s increasingly despised water companies, the quasi-private energy companies have been permitted to price-gouge their way to riches even as the promised competitive environment for consumers has all but disappeared – all that remains in 2023 is the choice of energy supply company you are going to be fleeced by.  Moreover, while the regulator is charged with protecting the interests of consumers, the reality is that the career structure links the state, regulator, and energy companies, so that any employee of the regulator who wants career progression will have to seek employment with one of the energy companies… thereby ensuring that, in practice, the energy regulator will always give the energy companies an easy ride.

Abolishing the ridiculous quasi-market, treating electricity and gas as strategically essential monopolies, and reining-in the current price gouging activities of the companies involved would all help take the edge off the UK’s gathering energy crisis.  So too, would restructuring the way in which the energy grid is paid for.  But in the end, these are secondary to the root of the crisis – that the days of cheap and abundant energy are behind us.  This is especially difficult for a UK economy which was built on the assumption that North Sea oil and gas would flow forever.  Nevertheless, for the global economy as a whole, more of our energy and resources are having to be used to secure energy, leaving us with far less energy to maintain the wider, non-energy sectors.  And whichever way you cut it, that means that from here on, the economy – global, national, and local – will be getting smaller… and nobody knows how to manage that.

As you made it to the end…

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