Labour Leader Ed Miliband called for a cap on energy prices at the recent Labour Party conference. The energy companies’ profiteering, he declared, was too much. The move was immediately rubbished by Tory ministers as an obvious own goal. Here was Red Ed, the Stalinist, trying to fix prices! Surely everyone knows that you cannot buck the market. In a few hours the Conservative front bench had changed its tune. Tory education secretary Michael Gove joined in the criticism of the energy companies, saying that they were blackmailing the country with threats of imminent black-outs.
The reason for the Conservative about-turn on energy is not hard to work out. Miliband’s attack on the energy companies was very popular. Why would it not be? Energy prices have been ramping up year on year. The average household energy bill is now £1,300 a year, twice what it was 10 years ago. And energy companies have let it be known that more price rises are in the pipeline.
According to the energy companies, price rises are unavoidable. The problem is that Britain does not generate enough energy. From 2004 to 2010 energy consumption fell from 2,718 to 2,355 terawatt hours, but over the same time energy generation fell from 2,610 terawatt hours to just 1,730. The shortfall was met by importing more energy, 705 terawatt hours, or five times as much as in 2004. Buying in the shortfall pushes up energy prices.
The shortfall, or ‘energy gap’, is a real concern. Last year, Britain came within six hours of energy blackouts, and will come close again this winter. Alistair Buchanan of energy regulator Ofgem explained earlier this year: ‘A number of older, UK coal-fired power stations will be decommissioned this year, but new power sources have not yet come on stream. The shortfall, which amounts to a 10 per cent decrease in capacity for this April alone, will mean an increased reliance on imports. Competition for imported fuel is set to drive up prices.’
‘New power sources have not come on stream’ is putting it mildly. So far, just one tenth of all energy in the UK comes from renewable energy sources; just one twentieth comes from wind. All the same, by law, energy companies must subsidise renewable energy by buying renewable obligation certificates. These cost around £2 billion in 2013.