POWER FROM THE PEOPLE

There are times when Westminster, the Euro sceptics and perhaps the City are happy for the 22 miles of water separating the British Isles from the European mainland to seem psychologically much wider than they are geographically. Economically at times, particularly when it comes to the model for energy production, distribution and ownership those few miles of water at times might as well be a thousand miles wide. 

I mention this because last week Ofgen referred the energy market (this is Ofgen speak for the big 6 energy cartel members) to the Competition and Markets Authority for a full investigation. Ofgem says that the investigation should ensure, once and for all, that competition works effectively for consumers, by bearing down on prices while driving improvements in customer service and innovation.

Let’s just say that I for one won’t be holding my breath... as our energy production and distribution model has been restructured (over the years) to primarily benefit the big 6 energy cartel members, their interests and their (City) profits. From the perspective of energy consumers and smaller scale energy producers, the problem is that all the Westminster based political parties had quietly bought into this cartel dominated model of energy production and ownership.

The reality is that the UK’s cartel dominated model for energy production and distribution is not necessarily the norm everywhere in Europe. Alternatives exist and prosper, a particularly good example of a balanced and healthy energy mix can be found in Germany. Here small may very well be beautiful, particularly in relation to energy, back in 2012 some 22% of the countries energy came from small scale green entrepreneurs. 

Community co-operatives (both urban and rural), farmers and homeowners are part of the 1.3 million renewable energy producers and part of the energy mix. Incidentally in Germany, citizens’, cooperatives, and communities own more than half of German renewable capacity. Small scale electricity generation is having a knock on effect encouraging change throughout the energy system.

In Berlin, a cooperative (Burger Energie Berlin – literally Berlin Citizens Energy) is campaigning to take control of the capital's electricity grid with some 35,000 km of underground cables. The cooperative is a free, cross-party coalition of citizens who are committed to a sustainable, sustainable and democratic energy policy in Berlin. Members have one vote regardless of the amount their deposit and anyone who wants the power network to be in civil hand, is welcome.

Ordinary Berliners have invested their cash in the venture with the intention of producing a reliable 100 percent renewable energy supply. The aim is to promote the integration of renewable energy into the grid and to invest a portion of the profits from this directly into the transition to renewable energy. At present the Berlin electricity grid is run by Vattenfall (whose concession runs out this year) regularly generates millions in profits, members of the co-operative believe that the profits from the grid operation should flow to Berlin’s citizens.  

This is grass roots energy generation that has potentially the power to change the nature of the energy supply system (in Germany and elsewhere). They aim to build an energy grid that is better handle the rise of green power and allows local use of locally produced energy. This may well be a case of small being both beautiful and perhaps more disturbing from the perspective of Westminster being both community beneficial and community owned. 

These developments are a million miles away from the alleged ‘Free market’ for energy that exists in the UK, which is dominated by the ‘Big 6’ energy cartel members. The way the current set up works, it is difficult to imagine ‘Government’ at most levels in the UK grasping  the concept, let alone the practicalities and possibilities of genuine community owned and community beneficial energy generation projects even crossing the collective mind of Westminster and some of the devolved institutions. 

ED SPEAKS OUT...

According to Ed Miliband a newly elected Labour Government would freeze gas and electricity bills for every home and business in the UK for 20 months if Labour wins the 2015 election. The big energy firms would also be broken up and would be governed by a new tougher regulator to give people "a fairer deal". Eds says that this plan would will save average households £120 pounds and businesses £1,800 pounds per year and cost the energy giants some £4.5 billion pounds. Apparently the Labour leader said that energy firms had been overcharging "for too long" and that it was time to "reset" the market.

It sounds good, save for the fact the energy market that now exists under the control of the big 6 energy cartel members  came into existence when Labour were last in power (with a significant majority). Gordon Brown, initially as Chancellor and then later as Prime Minister did nothing to curb the excessive profits of the large monopolistic energy companies, so why would we seriously expect Ed do anything different.

 Potentially this is the first real break in the consensus on the profitable privatised nominally ‘free’ energy market by the Westminster focused political parties – since the late 1980’s. The big 6 have kicked off with warnings (threats) of power blackouts and a lack of investment in the energy sector and the usual former fleet street suspects have kicked off big time with ‘Red Ed’ like headlines. The ‘policy’ may have sounded good on the conference platform yesterday (naturally it did not go down well with the big 6 cartel members) but it (and Ed) did not quite have sounded so good or so convincing on BBC Radio 4’s Today Programme this morning.

The adoption of this new Labour position on energy, may seriously stir things up a bit as Cameron whatever his private (or some of the Conservative Party) feelings are on the matter cannot afford to look like the best mate of the ‘Big 6’ energy cartel members in the run up to the next Westminster General election. The problem is that in office Labour (under Blair and Brown) adopted not so much ‘a hands off approach’ as ‘a look the other way approach’ to the increasingly excessive profits raked in (at our, the energy customers expense) by the cartel members as long as the Treasury continued to receive its share of the profits in the form of extra tax.

The applecart may well be truly been upset if  the power companies cozy relationship with the political parties ends. Over the years some of the Political parties have got used to some of the perks of having a close relationship with the Power Companies – who sponsor free food at funded functions, glossy paid adverts in conference brochures, etc. One very old rule that Ed may have forgotten is that once you sell your virtue it stays sold, and once you sell your principles they stay bought and the end result is that the fabric of our democracy is damaged or tainted.

EXIT STAGE LEFT PURSUED BY SUBSIDY!

A member of the Big 6

If you are searching for material to build the character of a pantomime villain then perhaps you need look no further than the members of the big six energy cartel, who are busy squeezing every ounce of profit out of their customers (most of us) when not flogging off free low energy light bulbs, etc. With that in mind the news that Centrica, who own British Gas owner reported a rise in half-yearly profits, following the unusually cold winter boosted gas consumption should come as no surprise. Centrica's adjusted operating profit increased by 9% to £ 1.58 billion pounds in the six months up to the 30th June, rising from £ 1.45 billion pounds for the same period in 2012.

Amidst the statistical wizardry and smoke and mirrors that passes for energy profit related statistics, the  residential arm (of British Gas) saw its profits rise 3% to £ 356 million pounds, up from £ 345 million pounds one year ago. Like all the other cartel members last November (2012) British Gas upped its energy prices by 6% - basically because - in their largely unregulated farce that passes itself off as the ‘free energy market’ – they could. The news of Centrica's results came a day after EDF (the French energy company) announced that its UK pre-tax profits were some of £ 903 million pounds.

Interestingly enough, just before the profits were announced, House of Commons, Energy and Climate Change Committee (ECCC) realised a report which said that Ofgem (the Energy regulator) is not doing enough to make sure that energy company profits are transparent. MPs stated that the watchdog was "failing consumers by not taking all possible steps to improve openness". The committee also noted that "working out exactly how their profits are made requires forensic accountants".

Energy Profits before People?

The ECCC believes that Ofgem should force energy companies to standardise their bills to make it easier for consumers to compare the value for money of different energy providers. They also believe that it should be possible to break down the total cost of the bill into its components, i.e. wholesale energy prices, supply costs, the cost of implementing government energy policies, operating costs, and profit. And that consumers should be given details of price changes in pounds and pence, and not just in percentages

At the same time EDF stated that it was pulling out of the US nuclear power market because of the widespread availability of shale gas. This later announcement should come as no surprise, as at the end of the day it comes down to chasing easy money (and making excessive profits) when faced with a complicated and pretty much free energy market (one literally awash with resources) the cartel members will tend to back off seeking permanent subsidies (easy money) which make farcical any suggestion that the UK energy market is neither free or open for completion.   

THE WAVEOF THE FUTURE

In Scotland, the SNP Government is overseeing the development of a new generation of prototype wave power machines. This as Alex Salmond has pointed out is "another significant step" in Scotland's journey to become the green energy powerhouse of Europe.

The wave power machine, which was built in Leith, is some 180m long, weighs 1,500 tonnes and can produce 750kW of electricity. The Vagr Atferd generator is being transported to Orkney, where it will be tested in situ for three years to prepare it for commercial use. 

I mention this for a variety of reasons, one being that if you have proper powers in relation to energy development and the political will it is amazing what you can achieve. Also, energy (and energy cost) is a key issue in Scotland, there was a debate in the Scottish Parliament (on the 21st April 2010) which looked at the charges that Scotland pays to connect to the National Grid.

Basically it works like this; electricity produced not far from me here can cost me far more per kilowatt than it can someone who lives in the south-east of England. In Scotland, electricity industry leaders have been demanding an end to the 'unfair' practice, saying that these costs may have an impact on the development of some renewable electricity generation projects causing some to be delayed or abandoned.

Now transmission charges, which electricity generators pay for the cost of the national electricity grid, are a touchy subject not just for energy producers but also for energy users. The charges vary according to how far a power source is located from the main centre of demand, which is London.

So what this means is that in the north of Scotland for example, generators are charged £20.08p per kilowatt but in Central London a power source receives a subsidy of £6.41p per kilowatt. Subsidies are payable across most of southern England.

The National Grid naturally argues that the differentials encourage companies to locate power plants close to demand centres, cutting the costs of the national transmission network and reducing consumers' bills. National Grid are also on record arguing that stronger winds in northern Scotland meant that wind farms situated there generated more power than their southern counterparts and logically could afford to pay the higher transmission changes.

National Grid, a private company regulated by Ofgem, has been looking at how the costs of providing this infrastructure can be recovered from electricity producers and consumers. It has been using its existing pricing, which is already controversial in Scotland because it imposes higher charges on Scottish electricity producers to compensate for the cost of sending power to the main areas of demand in southern England.

The bottom line is that because Scotland generates more power than it consumes and decide to send it south to England they get penalised. While this may be a fact of life, it is decidedly unfair. This is all relevant because, according Jane Davidson AM, the Environment Minister to Wales (July 31, 2009) in Wales we use around 24 TWhr of electricity per year. WAG back in July 2009 then believed that with sufficient innovation and investment, the right Government framework and public support, Wales could produce over 33TWhr per year of electricity from renewable sources. 

For the record, in Scotland, which has a far stronger devolution settlement, has full powers for energy projects over 50mw. These powers for Wales now lie with New Labour’s lasting legacy - the unelected Infrastructure Planning Commission. The IPC is based outside of Wales and contains no representative or commissioner from Wales, yet is involved (as of 31st March 2010) in 9 projects either or the Welsh coast or in Wales. 

Interestingly enough successive Scottish administrations regardless of their political hue have pursued energy agendas which have ruled out nuclear power. One thing is certain we need a real debate about developing an energy strategy for Wales, one that encourages and empowers small energy producers.

To do this properly we need to make sure that the issue of the devolution of power consents for power stations over 50 Megawatts takes place sooner rather than later. In the meantime, National Grid must be rubbing their hands with glee at the prospects of more revenue. Potential alternative and sustainable energy generators in Wales beware…

THE GREAT ENERGY RIP-OFF

Energy firms are one again under pressure to cut domestic prices after an Ofgen (the energy regulator) report suggested their profit margins were up. While the Ofgem report noted that the average net margin for supplying the average gas and electricity customer was £105 a year in February 2009, up from £75 a year in November 2008, and while this has provoked calls for firms to cut their gas prices, little will happen because Ofgen is toothless and the UK Government has little appetite regulate the allegedly ‘free’ energy market.

It is worth noting that while, wholesale energy costs have fallen for over a year; there has been no fall in the energy costs for hard pressed energy consumers.The reality is that we can no longer afford the luxury of an effectively unregulated energy market or its consequences. Ofgen has failed, it has failed to protect consumers, failed to regulate the energy companies or the so called ‘free’ energy market.



It is pretty clear to most disinterested observers that the UK Westminster Parliament and most of the parties within it are not serious about developing secure sustainable energy supplies, they are more than happy to benefit from windfall taxes when energy company profits go up and happy to be wined and dined by the large energy companies (who are well known for throwing their money around during the Party Conference season) – at the consumers expense - but not happy to regulate their reckless profiteering.

The Energy companies, reaping a 500% increase in profits over the last half a decade, were pretty quick to blame rising oil and gas prices, and even quicker to rake in the profits – the average annual dual fuel bill rose from £662 a year in 2005 to 1,048 in 2007. The UK Government was very happy to rake in the extra tax revenues – the only real loser in this pretty picture was us, the energy customers.

The so called energy free market has failed, we have a monopoly on energy supply in the UK; the number of energy supply companies fell to six in the last ten years, with less that £30 differential between all of the energy supply companies, which works out to be no more than a few pence a week difference in bills, what we have is an energy cartel which brings minimal benefit to hard pressed energy customers, maximize profits at our expense and does not plan for the medium to long future.

We are in the midst of a particularly hard winter,which as yet shoes no sign of abating, many ordinary people are beginning to dread the energy bills that will drop through the letter box when spring comes around. No one, in a civilised 21st century country should ever be forced to make a literal choice between putting food on the table for their family and heating their home, our older people should not have to worry about whether or not they put the heating on, but that’s where many people now find themselves.

Not that long ago families could live on one salary, but, not anymore, today people are working all hours of the day to cope. A situation has now arisen where we have a culture that actively rewards greed and recklessness in the City of London (and beyond), which has promoted a vast increase in credit, and fed what became an absurd house price boom – that is how we have arrived at the credit crunch which has brought real economic hardship for many and yet continues to enrich the few at our expense.

Back in January 2010, Natural Gas prices rose to their highest level in 10 months (reaching 45p per therm) and this triggered the import of extra gas from Belgium and Norway via the natural gas (liquefied) importation terminal in Kent.So what you may ask? Well aside from the prospect of higher energy bills (and higher profits for the energy cartel (sorry companies) and even more tax for Gordon Brown’s government.

Now while other countries insured themselves against external shocks to their energy needs; successive UK Government’s entirely left it to the market (stop me if this sounds a bit like what happened with the banks) to sort out – so what did the energy companies do, they chased quick short term profits at our expense. The UK’s market driven approach has been entirely and utterly inadequate. Thirteen months ago as of January 2009, France could store 122 days of gas and Germany 99, the UK had storage capacity which would only 15 days and frantic efforts have been made to increase storage capacity.

In the 1980’s and 1990’s developing a long term energy strategy or making sensible long term decisions in relation to energy supply was never an option for the Tories during their last tenure on government. Likewise, the New Labour Government (and the nominal Conservative opposition) took the best part of a decade to recognise the need to increase storage capacity.The abject inheritance of the Conservatives privatisation of the energy companies is one of enshrined self-interest, short term profiteering and an utter absolute failure to plan for the UK's future energy needs.

As I have said before and will say again (and again) it should be a matter of urgency that the Westminster Government, the Scottish Parliament, the National Assembly and the Northern Ireland Assembly should work with the Irish Government to make these islands entirely self sufficient via renewable non market driven energy resources. If we develop a flexible self-sufficient energy development strategy within these isles that encourages decentralised microgeneration schemes and by actually implementing it could create jobs, useful skills and help to bootstrap the economy out of the developing recession as well as helping consumers.

There are many things that can be done to rectify this situation. On a UK level we need firm regulation of the energy sector, excessive profiteering must be curbed and we need a windfall tax on excessive profits. We need to break up the effective energy cartel, which neither supplies the needs of the energy customers or the UK's medium to long term energy needs, they only service the needs of shareholders. We need a series of public private partnerships to develop sustainable alternative energy resources and we need a firmly public owned planned national grid that is flexible enough to deal with small scale energy suppliers.

Here in Wales, the Plaid driven One Wales Government should be working flat out towards improving the energy efficiency of business operations and production processes to reduce CO2 equivalent emissions and to cut down on waste. We also need to encourage the development of new cleaner technologies and processes for businesses and promote the use of sustainable infrastructures with regard to energy and waste.

We need to welcome with open arms local plans to develop local energy plans, local energy supplies and welcome the development of community owned and community beneficial sustainable energy plants. We need new local authority planning guidelines and proper feed-in tariffs to rapidly promote the incorporation of small-scale renewable energy installations and much better insulation in individual homes, commercial and public buildings and groups of buildings - this is essential.

To make any of this happen, we needs a realistic and flexible energy strategy that will allow and encourage the creation of sustainable green energy job opportunities for our people and take full advantage of the extraordinary natural resources we in Wales are blessed with. If this happens, then there is absolutely no reason why Wales should not be amongst the most progressive countries in the field of sustainable alternative energy and sustainable green jobs and the UK can end it's dependence on fuel supplies from unstable regions and unsavoury regimes.

THE OIL CRUNCH

The publication a report called ''The Oil Crunch - a wake up call for the UK economy'' (on 10th February 2010) has warned that we will all face a serious rise in the cost of heating, transport, food and other goods, the hard-hitting report can be said to have largely slipped by under the radar. The report was researched by the Industry Taskforce for Peak Oil and Energy Security, which rather than consisting of the usual Green suspects, is actually a group of British companies members including Sir Richard, Brian Souter, chief executive of Stagecoach, Scottish and Southern Energy boss Ian Marchant and Philip Dilley, chairman of consultancy firm Arup.

The report which pulls no punches has said that Government must recognise the risks to the economy and produce contingency plans for transport, retail, agriculture and alternative power. It suggests that the challenges facing the UK will far exceed those currently presented by the financial crisis and that the poorest in society will be the most vulnerable to potentially significant increases in fuel costs.

There are further dire warnings that unless the Government gets its act together on alternative energy then there is the distinct possibility that during the term of the next government that fuel price unrest could lead to real shortages in consumer products and compromise the UK's energy security.

While not specifically dealing with the issue of climate change, the report stresses the significant overlap between the issues of pollution and depleted resources. The vulnerability of transportation to rising oil prices, with small and large businesses ranging from supermarkets to manufacturers being reliant on fossil (oil) fuel based delivery networks, is also highlighted.

The report calls for more research and development of alternative methods of powering vehicles and the electrification of the railway network. Surprisingly, the report has also called for an end to the £9 billion tax break on fuel for domestic airlines and suggests that the money for public transport investment, and that more efforts should be put into encouraging less car travel.

Basically the UK's freight network, its cars and its public transport systems are almost entirely dependent on oil, which when you factor in the threat of the oil price rises (known as the Oil crunch) and factor in climate change, make the way the UK operates unsustainable. The report warns that economic growth could be endangered with rapid price rises raising the costs of raw materials and reducing consumers' spending power as they fork out more on energy and transport costs.

The report notes that there could be a social recession which will hit the poorest households hardest, and calls for the UK Government to make serious provision for the effects of a rise in food prices, which may be triggered by increases in farming costs as agriculture in the UK is far too reliant on oil-related products like fertilisers the costs of which will also rise along with oil prices.

What makes this report timely is that we have already seen warnings from Ofgem – the Energy Watchdog, which has publicly warned that electricity and gas may become unaffordable for an increasing number of households unless drastic action is taken to secure power supplies. In recent years Oil prices have been particularly unstable with peaks of $147 a barrel in July 2008 before falls to $32 a barrel that December 2008 as the worldwide financial crisis and the economic downturn hit home. Oil prices rose again towards the end of last year reaching some $70 to $80 a barrel.

Oil Prices have stayed relatively static in recent months as worldwide economies continue to struggle. It is grimly ironic that the effects of the worldwide economic crisis may have bought us some more time (2 years), as they have pushed back the ''oil crunch'' point – which is when worldwide demand will use up stocks faster than they can be replaced by new production – the question is will the UK Governments and business use this precious time to work out how to solve the problem or not?

The UK is seen as being vulnerable to energy price rises, as it is so dependent upon imported energy supplies, something that is made worse because many of the areas where oil and gas are imported from are politically unstable. Now oil prices are, once the world economy comes out of recession, still predicted to climb to a sustained level above $100 a barrel within the next five years, which is good news for Mr Putin, the Iranians and the Saudi’s but bad news for Mr Brown’s successor whoever they may be and bad news for the rest of us.

Developing sustainable secure renewable energy supplies is the only serious answer to this problem, that and curbing our dangerous addiction to oil fueled air travel and road haulage – which brings us back to a radical idea of investing in our railways and electrifying of our railways and getting freight of our roads and onto our railways. Another question to ask is how serious will any incoming Government be towards investing in and developing our railways?

IN THE COLD AND IN THE DARK?

That Ofgen has said that there is "reasonable doubt" about the ability of the UK's energy market to deliver sustainable energy supplies in the coming decade, should come as no surprise to anyone with half an eye on what has been going on within the energy sector over the last twenty years. Neither should it come as much of a surprise when Ofgen goes onto say that the open competitive energy market, such as it is in the UK, may fail to deliver secure, sustainable supplies in the coming decade.

This is the result of a sustained lack of Government interest in the energy sector, particularly when it comes to developing the sustainable energy sector, especially when it comes to the development of realistic storage for gas and when it comes to developing sustainable green energy resources. UK Government interest in the energy sector and this applies equally to whoever has been and is in government at Westminster, has largely been focused on spending the funds received from the energy companies and profiting from higher tax returns when energy prices and energy company profits have risen.

Ofgen has effectively admitted that as a result of the credit crunch, the ongoing problems of maintaining international supplies, and dealing with the consequences of dealing with global warming that the UK needs to look for new solutions to protect security of energy supply. Ofgen, somewhat belatedly has also suggested that the private energy companies be required to deliver more generation capacity and gas storage. Things must be bad, because the suggestion has been made that the industry should revert to a form of centralised market control, which is potentially the most significant shake up of the complacent energy sector since privatisation.

The suggestion that the energy sector needs some £200bn of investment and stronger incentives to deliver sustainable and secure energy supplies for the UK within the next ten years, may prompt many people, who have been paying higher and higher energy bills since privatisation to wonder where all the vast profits that the privatised energy companies have been tucking away have gone?

And over the longer term who has really benefited from the privatisation of the energy market, save for the Tories and their money men and banker friends in the City of London, as we face in the short term yet another cold spell and in the medium term higher energy bills and in the longer term potential energy blackouts over the next few year, I suspect that the answer may turn out to be the few at the expense of the many.