UK Energy Crisis Was Bound To Happen Due To An Illiterate Government Policy

Energy Crisis Car Crash
Lord Rupert Redesdale

By Rupert Redesdale

The car crash that has followed a massive hike in gas wholesale policy has left most small energy companies at risk of collapse. The Government is now thrashing around for a solution, but realistically the only option is to subsidise the companies or more likely try and provide a safety net for consumers using public money.

Why was this almost certain to happen at some point?

Government policy has been based on competition in the market and has ignored the risk of rapid wholesale price rises. There has been the assumption that Government can control wholesale prices which was possible when the UK produced gas to meet all its needs. The depletion of gas fields means 60% is now imported. So why was a cap on prices that ignores wholesale costs introduced?

Ed Miliband (remember him?) without any real discussion or research came up with a rather stupid policy of capping energy prices. Quite rightly at the time it was laughed at, because it is economically illiterate, but unsurprisingly was really popular with voters, so with equally little thought, was adopted as Conservative and therefore Government policy.

So, what makes it such a bad idea?

The simple answer is that the energy markets can be incredibly volatile, and therefore setting a rate twice a year, based on a guess at what future prices will be is inherently risky. The problem is compounded as rates will be set as low as possible to protect consumers, but this moves risk firmly onto the retailers. Retailers, to win customers have offered rates that make razor-thin margins and are now looked into rates that are loss making.

What will happen next?

The likely scenario, is that following a bloodbath of retailer failures, a number of large companies will survive but the cap will need to be raised to allow retailers to recoup losses. It should be noted that some of the large retailers will also leave the market.

The cap needs to be abandoned but the Government needs to face the real issue which is use not cost.

Finding the silver lining…

Higher gas prices will drive energy reduction strategies which will also boost actions towards Net Zero.

Luckily you can find out some great energy saving learnings at EMEX London , hope to see you there!

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A Taste of This Year’s EMEX Speaker Lineup

Gemma Brierley Global Director of Sustainable Sourcing and Human Rights at Danone
Global Director of Sustainable Sourcing and Human Rights
Danone
Baishakhi Sengupta Environmental Sustainability & Governance Strategic Consultant Avara Foods
Environmental Sustainability & Governance Strategic Consultant
Avara Food
Beatriz Valdes, Networks Energy Manager at Vodafone UK
Networks Energy Manager
Vodafone UK
Robert Williams,Director Procurement Sustainability at AstraZeneca
Director Procurement Sustainability
AstraZeneca
Doug Parr, Chief Scientist and Policy Director at Greenpeace UK
Chief Scientist and Policy Director
Greenpeace UK
Fernanda Aller Senior Sustainability Manager at Wealmoor Ltd
Senior Sustainability Manager
Wealmoor Ltd
Ian Beynon Head of Energy at Royal Mail
Head of Energy
Royal Mail Property & Facilities Solutions
Sean Owen, Head of Low Carbon at Greater Manchester Combined Authority
Head of Low Carbon
Greater Manchester Combined Authority
Trevor Payne, Director of Estates at the University of Birmingham
Director of Estates
University of Birmingham
Richard Nugee
Lieutenant General (Retd)
MOD
Andrew Baker, Woodland Carbon Markets Advisor at Scottish Forestry
UK Woodland Carbon Markets Advisor
Scottish Forestry
Gerald-Mason Senior Vice President Tate & Lyle Sugars
Senior Vice President
Tate & Lyle Sugars

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