Chronic Energy Problems
Updated: Jan 6
There has been a mild panic in the Nisse household after the energy company we had just agreed to switch to had the bad manners to go bust. Maybe I should have checked it out more closely, though it did come with a top rating from the energy alerts that Moneysavingexpert sends me when every times prices at my existing energy supplier go up.
I’m not alone. Over a million people are finding that their energy supplier has fallen victim to soaring gas prices, which have also led to the British fertiliser industry to largely close down with the knock on effect that there may be shortages of meat in our supermarkets. So what does Kwasi Kwarteng, the Secretary of State whose bailiwick includes energy policy, do? He urgently calls all the energy companies that aren’t bust, as well as the regulator, and demands they do something.
Of course when you are called by a senior Minister you try to find a solution, when every sinew in your body is wanting to say: “You, and all your predecessors going back decades, have been failing to pay attention to the problems in the energy market. Without a coherent energy policy – what did you think will happen?”
Energy – like transport – is an area where politicians are ill equipped to make good decisions because the impact of the policies they promote do not come to fruition until well after they’ve moved on to another job, or left office. The problem was brilliantly summed up (referring to transport) in a Yes, Minister episode that ran nearly 40 years ago.
The mismatch between short term political horizons and the long term planning required for energy policy are compounded by – among other things:
Actions needed to tackle climate change include reducing our dependence on relatively cheap fossil fuels and so would push up energy prices, which is not something governments want to be seen to be doing;
Ministers like to unveil big shiny things – be they initiatives or infrastructure projects, such as nuclear power stations. Yet much of what is needed to sort out energy involve lots of small interventions –such as insulation and heat pumps in homes or recycling heat produced by factories and supermarkets;
The “market” for energy is prone to short term shocks – for example when the Fukushima nuclear plant in Japan failed prices of Liquified Natural Gas (LNG) shot up because the Japanese needed it to fill the gap;
Also the real cost of energy is hidden for many reasons – such as the prevalence of subsidies and there being not clarity on the costs of cleaning up the mess that the energy industry creates. For example the UK has yet to decide – after decades of pondering the problem – how to dispose of its nuclear waste. If you don’t know what you are going to do with it, you can’t price it;
The UK energy infrastructure is geared towards the cheap gas which we are getting less of from the North Sea. Four out of five of us use gas for heating or cooking or both – yet we are now a net gas importer.
Possibly the biggest challenge is energy is the ugly stepson portfolio in government. It is hidden in plain sight in the Business, Energy & Industrial Strategy brief of Mr Kwarteng – yet it is critical to a brief of Alok Sharma, the President for the COP26 Climate Summit taking place in a few weeks’ time in Glasgow. Can Kwasi solve the current energy crisis without undermining Alok’s climate strategy?
Someone somewhere in Government will have to make some unpopular decisions. And that is something politicians hate doing.