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!
HELP US to Make EMEX a COVID-secure & Eco-Friendly Event!
A Taste of This Year’s EMEX Speaker Lineup
Mace and AFC Energy to use hydrogen power in construction
Mace and AFC Energy have formed a UK-first strategic partnership to use hydrogen power in decarbonising the construction industry....
To combat climate change “Your Country Needs You”.
Climate change is a reality, the science is clear and the solution is obvious, we need to reduce emissions,...
Five Energy Management Trends for 2019
2019 promises to be an interesting year for energy management, with continuing technological progress and some important policy changes....
Major Companies Call for Ambitious 2030 Renewable Electricity Targets in Japan
20 major companies have today (June 17, 2019) called on the Japanese government to set an ambitious target of...
Public and private sectors unite to boost UK energy efficiency at EMEX
For the past 7 years, EMEX (www.emexlondon.com), has helped thousands of businesses from all sectors to increase their energy...
Explore 5 Energy Efficiency Megatrends at EMEX
EMEX, the UK’s must-attend energy management show, reveals 5 energy efficiency megatrends that can save energy, cut down costs...
Energy Management at the British Antarctic Survey
Q&A with Parthena (Nopi) Exizidou, the Energy and Carbon Reduction Manager at British Antarctic Survey, also speaker at EMEX...
The Hidden Value of Compressed Air Heat Recovery
Social responsibility is forcing manufacturers to find new ways of reducing their carbon emissions and energy consumption. Obvious steps...
