Private profits, public risk again

 

 

This headline is not quite as it seems as the 30% increase is the projected increase over the next 20 years.

But it does apply to yet another subsidy for the ‘private’ energy companies that we are going to be asked to pay in addition to the subsidies – renewables obligations and feed-in tariffs – that we’re already paying. And despite investing so heavily in renewables, they are not actually producing significant quantities of energy (surprise, surprise); accordingly, we are still largely dependent on imported energy and so we’ll continue to see massive price rises – such as the near 20% increases recently announced by Scottish Power and British Gas – because our suppliers only buy wholesale when energy prices are at their highest…  or so they tell us.

The Telegraph reports,

Mr Huhne is expected to announce on Tuesday that energy companies, such as Centrica and EDF, will get a fixed price for electricity generated from nuclear power and wind farms, which will be higher than the market price.

Mr Huhne admitted in an interview with The Sunday Telegraph last year that there was no money available for direct state subsidies for a new generation of nuclear plants, so this week’s announcement sets out how consumers will shoulder the cost of incentives directly.

The changes to be outlined by Mr Huhne this week will hand billions of pounds in subsidies to the energy companies and kick-start a construction programme creating thousands of jobs.

It is understood the Government will not set the exact level of the subsidies on Tuesday. But it will confirm the mechanism is likely to be a “contract for difference” model which effectively imposes a surcharge on bills to make market prices attractive for new investment in wind and nuclear power.

Given that energy companies appear to be largely untroubled by OFGEM when it comes to their pricing structures, I’d be surprised if this measure could encourage investment in new generating capacity: why get involved in the compexities and responsibilities of building nuclear power stations for a percentage point or two when lax regulation of import pricing enables similar or larger increases with the stroke of an algorithm?

Even assuming that Huhne’s ‘plan’ will work, we will end up paying foreign workers (probably) to build some extremely costly assets that will end up in the hands of predominantly foreign owners. Wasn’t the security of energy supplies meant to be one of the key objectives in our brave new green world?

Rather than sending all our money abroad, let the taxpayer fund construction (by indigenous workers) and thereby retain control of the resultant assets. That way, we’ll maintain some control over our energy policy (such as it is) and there’ll be no need for more subsidies.

More subsidies; didn’t you know?

It is also understood that Mr Huhne’s long-awaited announcement on energy policy will delay a separate subsidy for power station owners, known as capacity payments, while there is further consultation.

Remind me; what was the purpose of privatising the UK’s energy industries?

 

Update – It’s not about this issue specifically but if you read nothing more today, go and read this over at Max Farquar’s blog. It’s an eloquent summary of all that is wrong with Britain today.

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