We need to change energy market rules to slash crisis levels
WE’RE in the middle of our worst energy crisis ever. I include the power cuts of the 70s during the miners strike – because they were just an inconvenience, in fact as a kid I found the evenings with candles rather fun. By contrast this energy crisis is delivering widespread misery, runaway inflation, unaffordable energy bills for millions – and it will certainly cause deaths.
It could even bring the government down if they fail to properly get a grip of it – which until now they have failed. They like to claim this energy crisis is caused by Russia’s invasion of the Ukraine. That’s not true.
It certainly added a new level of craziness to things, but the crisis itself started months before the invasion, back then the government blamed the pandemic.
It’s proper roots though are much further back – with the handing over of our national energy supply to unfettered free markets.
So for example, we have 10 percent of Europe’s population but just 1 percent of its gas storage – because we let the markets decide how much we needed when it’s not needed it’s not economic so it gets shut down – now we need it and don’t have it – that’s a real problem.
It’s part of the reason why the energy crisis has hit Britain harder than Europe generally. But only part.
onsider this, in France energy bills have gone up by 3 percent, in Germany 30% while over here it’s 300 percent.
Why is that? It’s because our government have not moved yet to intervene properly in this crisis. Not remotely.
They’ve been paralysed like rabbits in the headlights. And more recently by the inordinately long leadership contest.
A new PM will finally be here in a few more days though – so here’s some advice that I hope they might take.
The first thing to do is to break the link between the price of gas and the price of electricity – only 40 percent of Britain’s electricity is made from gas, but we allow the price of gas to set the price of all our electricity – including the 60 percent we get from nuclear and renewable energy.
It makes no sense. If we stop that we could avoid the price cap going up in October altogether.
That would be a massive and immediate relief to millions – and of course, reduce inflation.
The second thing is to price cap North Sea gas – half of Britain’s gas is produced there but it’s not saved us a single penny during this crisis because we allow the global energy market to set the price that we pay for our North Sea gas.
That also makes no sense. And it’s the root cause of the obscene profits of the oil and gas producers.
If we control that wholesale price in the same way we have the retail price, allowing a simple 2 percent profit margin – we could reduce the price of half of our gas back to pre-crisis levels.
And that takes away half of the price rise since last October….call it £1k per home. It would also stop windfall profits from occurring – at source. In combo we could return our energy bills to last October’s level.
We only need to change market rules to make this happen – nothing else.
But it can’t be done overnight – so for this winter the government needs to step in and fund the gap – it will take just 10 percent of pandemic funding to get the country through this exceptional event. Not doing so will be a false economy.
A proper windfall tax in the meantime could help reduce that cost substantially.
These two changes to how our energy market works can insulate us from global drama in the energy market in the short term while we work on the only feasible long-term answer – end our use of fossil fuels altogether. This is a fossil fuel crisis after all.
We can make this energy crisis the last one we ever have if we take control of the situation.