Privatisation of energy risks lights going out this winter

The effects of the UK privatised energy system are now becoming clear, not only in cartelised pricing and poor service , but also, critically, in loss of energy security.   As a result of the latter there are real risks of blackouts this winter.   Because of the Big Six privatised companies’ failure to invest on a scale that matched the performance of the industry when in public ownership, the UK’s spare electricity generating capacity has tumbled from 17% three years ago to just 4% now as winter approaches.   As a result the government has been forced to take emergency measures over the next 3 years to try to keep the lights on during the winter months.   They plan to keep three power stations on standby and are actually proposing to pay businesses to use less electricity.   In other words taxpayers not only have to put up with rocketing energy prices to fund unprecedented dividends to shareholders and bonuses for top executives, but now have to subsidise the companies’reluctance to invest in ordedr to keep the lights on.

The risks arising from the shrinkage of reserve generating capacity have been highlighted by 4 nuclear reactors at Hartlepool and Heysham being shut down 3 months ago after a defect was found.   In addition there have been fires at Ironbridge and Ferrybridge power stations, but most seriously a very big fire last month at the Didcot B gas-fired plant in Oxfordshire, one of the biggest UK power stations, which led to a loss of 600 megawatts of generating capacity.   The government’s answer to these setbacks is to launch a new system of what it calls ‘capacity payment auctions’ which are effectively bribes to get the energy companies to invest.   It exposes how helpless the government is in a privatised system where the companies hold back, knowing they’re in the driving seat, till the government makes an offer they can’t refuse.

There’s also the problem that most of the generating system isn’t now even owned by British companies at all.   Four companies (Eon, EDF, Npower and SSE) now control 96% of the residential electricity market and 71% of total generating capacity.   Foreign state-owned corporations control 25% of the sector.   This leade to some bizarre outcomes.   The Chinese, French, Norwegian and Russian governments, through their state-owned corporations, now have collectively far more control over UK strategic energy interests than any British political actor.   I hope the government believes it can trust Mr. Putin and Mr. Xi Jinping if the going gets tough this winter.

6 thoughts on “Privatisation of energy risks lights going out this winter

  1. I never really understood privatisation; I think the theory is for competition to make industries more efficient. However it seems to me that the bulk of the profits go investors, and dividing industries over a number of different companies increases the costs as there must be a tremendous amount of duplication between their various administrations. I expect the fact that our main companies are owned by the French and Germans, means that the profits don’t even remain in this country (and I also wonder what their tax arrangements might be). Even Scottish Power is owned by the Spanish.

    A while back I read that some companies using renewable systems were being paid NOT to generate energy! Weird; very strange. Here’s an example:

    Wind farm paid £1.2 million to produce no electricity
    http://www.telegraph.co.uk/earth/energy/windpower/8770937/Wind-farm-paid-1.2-million-to-produce-no-electricity.html

    Quote: “The amount is ten times greater than the wind farm’s owners would have received had they actually generated any electricity. The disclosure exposes the bizarre workings of Britain’s electricity supply, prompting calls last night for an official investigation into the payments system. The £1.2 million will go to a Norwegian company which owns 60 turbines in the Scottish Borders.” This was in 2011; I wonder what became of the “official investigation”

    Ecotricity, who describe themselves as “the World’s first green electricity company” and supply wind turbines, are based in my town and bragged that on Sunday 19th October: “nothing happened.” Quote: “Everything was just as it should be. No one noticed that around nine million homes worth of electricity had simply ‘disappeared’ after four nuclear power stations had shut down and Didcot went up in flames. No one noticed because Britain’s windmills carried on turning, powering almost 25% of our country. It was a historic event that went almost unnoticed; one revolution after another quietly secured our energy needs. The lights didn’t go out. We have wind energy to thank for that.” http://bit.ly/1Gw8tjJ

    I’m sure no one likes the idea that we’ll have to rely on Russia and China for our power, so let’s hope we’ll have plenty of wind this winter!!

  2. Well we know now selling our silver off wasnt the way of it but untill you has a party understand the electorate wants then you could be outside for a while longer shouldn’t all thats been sold off once more taken back for the sake of the nation selling off our assets didnt do us any favours infact it makes the rich richer the tory way isnt it but one wonders is the party over for you has labour unless you show that you aint tories with red ties but sadly you all went ahead closing down coal powered electric producing stations hum I wonder when Germany openned a massive opencast mine to supply ten new power stations yes they see that coal is the way but then tories never liked the miner in us hay jeff3

  3. “A while back I read that some companies using renewable systems were being paid NOT to generate energy! Weird; very strange.”

    It’s really not weird at all, although I do question the financial methodology, (yet another own goal for green energy subsidies,) behind it?

    All it really means is that the UK doesn’t yet need the energy being generated from these schemes, (a relatively trivial amount anyway,) as it can already meet all it’s current needs from the existing mix, (with about a 10% redundancy, currently reduced to about 5% but still comfortable,) without there being much real danger of lights going out just yet.

    Wind remains a small if now somewhat more significant than formerly, but always unreliable element in that mix.

    Once again as so often with climate change, too many people are seeing what they want or expect to see, not what’s really going on.

    As for privatization?

    Private companies will never; and this goes back I think even to Adam Smith, make the scale capital investment that is now required to construct these huge engineering and operational projects without the guarantees and subsidies, (to offset the massive financial risk involved,) that only government can provide them with.

    So once again the tax payer effectively pays for capital investment whilst the companies take profits.

    To my knowledge the only person who has ever tried to seriously argue otherwise, (that private enterprise would raise those levels of capital independently,) was Marget Thatcher who was essentially a blinkered and doctrinaire lunatic and yet again she’s been proved completely wrong about this as about so much else besides.

  4. JP:
    The reason I find paying Cos using renewables NOT to generate energy “weird” is that surely it’s best to use almost free energy rather than use up precious resources (oil, gas & coal) which are running out, polluting the atmosphere and adding to global warming. Definitely weird, in my book anyway!

  5. WL:

    You’re clearly a bit a romantic, (which isn’t an altogether bad thing,) but much of my own skepticism about wind power comes from looking out from the top of Tandle Hills to the hills above Rochdale and seeing wind turbines sited there standing stock still.

    More often than not they aren’t generating even a single Watt of electricity.

    (But I’m sure I won’t change your mind and that wasn’t point of my comment anyway.)

    Personally I think that nuclear power generation needs to remain an important part of any future energy mix for the UK and I’m pleased that EDF are finally making that kind of investment.

    As for green energy, it probably has a useful if limited and supplemental role in UK energy generation, but notion that it can ever fully replace our existing electricity generating capacity is probably deeply unrealistic.

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