Basically there are three types of enterprise. State owned, state aided and private enterprise. We should all remember the black hole of a money pit that British Leyland and British Steel became. Few bodies are now state funded and those that receive state aid tend to be such as bus companies, community companies and ferry links who receive grants to support areas of social need which would otherwise be un-economical to service in the commercial world. The rest of British Industry, with a few notable exceptions, is now operating in the real world where profits equal survival and losses are unsustainable. Then came the Green Thing, where carbon targets became the Gods of the Political classes. Into this heady mix came the need to support a Renewables Industry which was cashing in on the blind following of Anthropogenic Global Warming. Wind was economically and environmentally expensive but that did not stop the carpetbaggers cashing in. Despite the USA’s refusal to sign the Kyoto agreement the US had been in the lead on wind energy driven by it’s carbon trading business model of which Enron had more than a little influence. It was this model of funding support that the EU drew on.
Now politically it would be impossible in the UK to start giving state aid to companies that had just bought out a state utility, the Central Electricity Generating Board(CEGB), so with a brilliant legerdemain some bright spark came up with the Renewable Obligation wherein Renewable generators could earn Renewable Obligation Certificates that the energy supply companies could buy to offset their obligations. Feed in tariffs had been used in many other european countries but they had been paid out of tax revenue. At a stroke the cost of subsidising wind had been moved from the Exchequer to the consumer. Consumer supported Feed In Tariffs followed shortly after to support small scale renewables including domestic solar(PV). A variety of different charges starting with the Carbon Tax were levied now on the energy industry. Emission Trading Schemes, Energy Company Obligations, Carbon Partnership Facility were soon joined by Warm Home Discount and Smart Meter costs, partly to offset the impact of higher costs on the consumer. By adding more costs? Ed Milliband, then Energy Minister, and Tony Blair both revelled in supporting EU aspirations on carbon and CO² reduction knowing that it would be paid by the consumer. They wrapped this in a hair shirt of a necessity to save the planet whilst visiting the far corners of the world on the Climate junket trail. What was that carbon footprint?
Problem of carbon taxes was twofold. One it contained the cumulative impact of one “tax” on another adding to an unsustainable level. It is suggested that by 2020 Green “Taxes” will add 33% or more to our energy bills. The second is the Pandora’s Box that every energy provider, Gas, Coal and Nuclear has seen the billions of pounds and euros subsidising the wind industry and they want their share. The Economist wrote not that long ago that new Nuclear was viable and could easily stand the cost not only of building new nuclear facilities but also fund the end of life program leaving a good profit for investors. New Gas power stations have been built in the last few years purely on a commercial basis. Energy is a private industry where profits go to shareholders and consumers are charged a competitive rate for their electricity and gas. Shale gas in the US has drastically reduced the world prices for coal and as exports ramp up will probably have a similar impact on gas.UK Gas fracking, if not still born by EU legislation, has a similar opportunity to reduce energy costs. It is the interference of the Government in subsidising wind, albeit by a back door, that has eschewed the market. While subsidies remain, the main energy companies will be standing outside the DECC with their begging bowls at the ready. Electricité De France (EDF) are rumoured to have persuaded Davey to sign up to a strike price of some £92.5 per MW/hr, nearly double the normal cost of electricity. The latest spat on the ECOs, EU/ETSs, CBFs and Warm Home Discounts is simply a move in the chess game that is now Energy. The Energy Secretary of State is a known Carbonista and his department are of The Religion. The Chancellor is fighting an uphill battle with The Prime Minister and Mr. Clegg. The only way to close Pandora’s Box is a united front and at the moment there is little sign of that. However a failure to grasp the nettle will have a disastrous impact on every man, woman and child in the UK. The latest machinations of Strike Price to support not only wind but nuclear and gas ignores the main issue that the UK cannot afford these high energy costs, neither socially or commercially. To sustain growth out of a recession UK Plc needs affordable energy, both for production and for it’s labour force. Otherwise the need for pay rises will add another anti-competitive level to industry. Economical and sustainable energy supply can add to the UK competitiveness in World markets.
This is less Drake’s Game of Bowls, more a case of Nero playing his fiddle while Rome Burnt!