Tuesday, 28 October 2014

Energy in the UK

Energy prices have risen every year since privatisation in 1990, when the beginning of the privatization of the Central Electricity Generating Board began. The assets of the CEGB were broken up into three new companies: Powergen, National Power and National Grid Company. Later, the nuclear component within National Power was removed and vested in another state-owned company called Nuclear Electric.

Energy prices have generally risen about 30% since 2010 and are likely to be at least 10% per year from now on, and yet today we are told to expect blackouts this winter.

If energy policy was as good at building power stations as it has been at closing them, we would not be facing the risk of targeted blackouts this winter. The plant retirement rate has simply outrun the replacement rate. That we are even talking about the possibility of blackouts is in itself a massive policy failure. Even if the lights don’t go out, wholesale prices will jump to uncompetitive levels and consumers and businesses will pick up the bill.

To prevent blackouts, you have to allow for the unexpected. Since the summer, two nuclear reactors have gone offline and three other plants at Ferrybridge, Ironbridge and Didcot B have had fires. Not only has 4.4 gigawatts now gone offline, more stress is put on the remaining fleet to perform at a higher level.

Paying businesses to cut their power use at peak times to keep the lights on is no way to run a modern economy. The test for this winter will not just be whether the lights stay on, but how much UK wholesale electricity prices diverge from our neighbours in France.

The UK energy market has been distorted by government intervention for too long and we may now pay the price in blackouts or brownouts – when major consumers of electricity are asked to shut down for short periods. Just as coal has become the cheapest fuel, the UK has been closing down coal stations, expanding renewable subsidies and effectively making low-carbon Combined Cycle Gas Turbines uneconomic by pushing them down the merit order and forcing them to operate intermittently.

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