Am I alone in getting fed up at the hand-wringing and lack of action by everyone involved in the current crisis? The increase in energy bills in the UK is forecast to be 2-300%..... the average in the EU, where many countries are directly impacted by Russian supply issues, is expected to be 40%. Why?
The answer is simple, the UK energy supply market has been carved up into multiple smoke-and-mirrors fiefdoms, all looking to maximise their profits, paying 6 or 7-digit salaries to their CEOs and "regulated" by a quango that they pay for.... which is itself headed by a CEO earning over £300k. Yes, that's right, the CEO of OFGEM earns more than any minister or civil servant - and he got a bonus last year!! All this to "fill a post" that did not exist under the nationalized system and which has patently failed to provide any sort of value to the consumer. What it has done is to "insulate" Government from the day-to-day control of energy and this has in turn led to successive governments being asleep at the wheel with regard to the energy sector.
Let's break down the smoke and mirrors. Energy is generated by one level of company, or bought in from suppliers outside the UK. Famously there is North Sea Gas..... which is now being sold to us at prices governed by the price of gas on a world market hit by its reliance on Russia. Note, this energy costs no more to produce, but we have absolutely no benefit from the fact that it is UK-based, we just pay through the nose to provide extra profit. Amongst these generators, of course, are the "green" suppliers and the Nuclear companies...... the green suppliers who can't guarantee a constant input to the grid and the nuclear companies who must keep supplying (because shutting down is uneconomic), so have a "by" into the market. Then there are those who generate power from gas, now that coal is a no-no. This means that when gas goes up in price, we have a double whammy because the price of electricity also goes up - especially since it is bought in at a price, not based on the cost of production, but based on the price of gas!
Then there are the transmission companies..... you know, the ones who can't foresee issues with trees growing close to pylons or who decide to shut down the UK's gas storage facility.... and who levy a different charge in different parts of the country (imagine if Tesco did the same). Then there are the "retail" supply companies, who buy in power from the grid and sell it to us.... except, of course, that these were famously the same people who they "bought" the power from, so the companies had a double bite at the profit cherry.... and then were city-boys who saw a way to make a quick buck on the spot market and then bailed out when the cap made this uneconomic. Smoke and mirrors, multiple companies all making a fortune and paying multiple CEOs world-class wages for third-class activities.
But it's not only the costs generated by this fragmentation that impacts us.... it's the lack of coordination. Who decides energy strategy? Not the companies, not OFGEM..... and seemingly not the government either... or at least, not in any meaningful way. Ministers decide we must have more green energy and the orders go out.... but it's all piecemeal and small-scale - Where is wave-power, or tidal power on an island surrounded by sea? The French have had a tidal dam producing over 500GWh of power constantly since the 1960s at a cost of approximately €0.12/kWh, night and day, no need for storage, no shutdowns if the wind is too strong or too weak. No real involvement by government means the Severn project, the Swansea Bay proposal and all the rest are non-starters. Instead we have generation by thousands of small-scale windmills and no way to store the power..... or solar fields that equally only produce power for immediate usage - this leaves us at the mercy of the "infill" suppliers who can guarantee that the lights stay on.
It has been proposed that the government should take control of this profit-generating megalith and offer the North Sea producers a fixed price for gas produced in UK waters, based on costs plus a good margin, not pegged to world prices. Even if we paid 50% more for gas than last year, this would still be a fraction of the increases we are facing by inaction. Then we need to re-examine the pegging of electricity supply to the gas price..... again, a formula based on the actual cost of production - and paid for each KWh actually supplied, not for potential - with a defined strategy for "topping up" the grid at times of crisis, not being priced to offset crisis mode at all times.... In other words, we need an actual strategy.
Or there is a third option - we threaten to dismantle the whole shambles and kill the golden goose unless the energy companies agree to a restriction on price increases.... less profit, or no profit. What we DON'T need is some scam that sees the companies continuing to make megabucks unchecked, whilst the government "bails out" the consumer and offsets the costs for later (like in the pandemic). But, of course, that is what we'll get..... and those who have savings or who are not "in need" will see yet another way for their income to be depleted in order to pay the growing horde of private companies profiting from public need. Maybe we should do something terribly un-British and actually take note of what other countries are doing......
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