Letters / Households paying dear
I can understand why Alistair Carmichael prefers to blame the “cost of living crisis” on the recent Tory shambles. Having supported net zero policies and been responsible for energy during the 2010-15 Con-Lib coalition, his party had a hand in it, too.
The seed notion that renewable energy could replace declining North Sea production and help emissions reduction had been quietly germinating for years. However, the 2007-10 Labour government applied copious fertiliser via the Climate Change Act, 2008, and the Electricity Act, 2010, which modified Ofgem’s duties, slyly redefining “customer interests” to include greenhouse gas emissions reduction.
Every government since has made matters worse, raising targets and hiding the costs. Until finally, the dam has burst, and consumers are being hit with unaffordable bills (SIC forecasts Shetland average £10,300/year!).
Ofgem embraced its new duty with gusto, designing market structures to suit.
The wholesale electricity price is now effectively set by the dearest generation available, currently gas, resulting in soaring customer prices and a spate of retail supplier bankruptcies.
Hence, the new 45 per cent ‘windfall tax’ being applied to ‘low carbon’ generators.
Certainly, the Ukraine war triggered high gas prices, exposing the failures of electricity markets and our dependence on Russia (47 per cent of EU imports!).
As billionaire investor Warren Buffett pithily observed, “You only get to see the nude bathers when the tide goes out.”
In fact, the worst of the crisis was avoidable had we shielded our nakedness by developing our own UK/EU gas resources.
The objection “That would make no difference because markets are global” does not stack up. The UK and EU have no LNG export terminals. We would be producing for ourselves.
Maximising UK/EU onshore and offshore production would have significantly reduced imports, lowering prices and importantly, improving security of supply.
Setting ‘Net Zero’ targets and banning production of our own gas resources without knowing how to replace fossil fuel systems, what that would cost, or, even, how to secure the supplies we desperately need, meanwhile, has proved disastrous
Little wonder, then, that the House of Commons Public Accounts Committee (PAC) panned Ofgem and the government. Chair Meg Hillier was scathing:
“Problems….were apparent in 2018……and Ofgem was too slow to act. Households will pay dear… The PAC wants to see a plan, within six months, for how Government and Ofgem will put customers’ interests at the heart of a reformed energy market, driving the transition to Net Zero.” (JT emphasis).
Readers of my past letters may find that sentiment familiar.
It’s long past time that this scandal ended, and the PAC’s hard-hitting report is better late than never.
John Tulloch
Aberdeen
