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The energy crisis shows exactly why the industry should be in the public hands.Christine Berry

LThis week, the energy company Valve has become the latest and greatest victim of the bloodbath ever seen. 25 companies Go to the wall. The emergency procedure for “special control” was used for the first time and the light bulb was used effectively Bailout Taxpayers avoid incapacitating 1.7 million customers. As a result of the UK energy crisis, very few large companies dominate the market, and millions of households are expected to face challenges this winter as fuel costs soar. Are you familiar?

Not long ago, the oversized power of a major energy company It was a major political issue. British people Paid more for their energy And I was less satisfied with the supplier than most other parts of Europe. Thousands of people died each winter because they couldn’t afford to warm their homes. We were told that more competition is the answer: the fresh air of the free market will ventilate Britain’s broken energy system and solve these problems in one fell swoop.When Ed Miliband first proposed Energy price cap In 2013 he was accused of being a crazy Marxist – just to see the Conservatives Adopt his policy 4 years later.

But recent events have made us go around completely. The competition experiment worked and really failed.After being praised as a solution to overcharging and fuel poverty, the small challenger company is now accused of being irresponsible and reckless. “Run badly”.. Big Six, on the other hand, is showing off its new position as a hero and piously declares to its customers that they “need something sustainable and responsible.” Supplier market– In other words, they. Companies are also aiming at caps on energy prices and complaining that they have suffered unsustainable losses due to soaring wholesale gas prices.

So how can you understand all of this? We need to start with the facts that are important but underestimated.Energy supply companies-the companies we buy electricity and gas-do not own our energy system.. They are essentially intermediaries: buy energy at the wholesale market, sell it to you, and pocket the difference. They are not responsible for producing power that keeps your lights on, or running the network that supplies them to your home. In fact, some Big Six companies do some of these things, but the law allows them to perform these activities through a different entity than the one that pays the invoice. It is obligatory.

The next obvious question is why design energy systems this way on Earth. The answer is ideology. In the 1980s, the Thatcher administration had problems. It is working on the privatization of power plants and grids that produce and supply our energy. However, the principle of efficient markets did not work in a system that was a natural monopoly like the railroad. The solution was to create a whole new and separate function of “energy supply”. Its sole purpose was to turn this natural monopoly into an artificial market.

The theory was that this would force businesses to compete for customers, lower prices, and increase investment. The reality was quite different. Customers rarely care about switching, and as long as wholesale energy prices remain low, the new system was licensed to print money. Even when competition began to emerge, odds were still accumulating against new entrants. This is a business with high fixed costs and a large economies of scale. Companies need a “hedging strategy” to manage the risk of wholesale price yo-yos. This favors large companies that can afford to hire the entire trading floor of people to bet on future prices of energy in the financial markets. When big six companies brand their failed rivals as “not very well run,” what they really mean is “not that huge.” What left the old giants of our energy system as the last man is their huge size and access to capital, not their talent.

This has also destroyed different visions of how competition can modify the market. This is the most clearly expressed view by Lisa Nandy. When she declared At the 2020 Labor Party Leadership Contest: “Honestly, I think nationalizing energy companies is a waste of money. To confuse them by establishing local energy companies and energy cooperatives nationwide. Is a much better route. “She wasn’t the only one to find hope in this outlook. Many believed that the UK could emulate this through local governments such as Nottingham, inspired by the progress towards local democratic renewables in Germany and Denmark. Robin Hood Energy..

But these lucky young Davids, after all, were not comparable to our Energy Goliath. Everything collapsed after the last market turmoil in 2018. Even if they succeeded, they would not have been able to bear the burden. The term “city energy” describes a city producing its own energy and distributing it to the locals. But without the control of the grid owned by the private monopoly patchwork, doing this would not have been within the authority of the local government. They were simply playing the wholesale market in a game that was fraudulent against them.

It wasn’t wrong for Progressive to aim for a green energy system. Decentralized and democratic.. Although the grid itself is a natural monopoly, the energy that powers the grid can be generated by a variety of democratically owned renewable energy sources, from community solar power plants to large public offshore wind farms. increase. But trying to beat the Big Six, leaving the rest of the system alone, wasn’t a plausible path to this future. In addition, the liberalized energy market – a model currently exported from the UK to all over Europe – Actually undermined such efforts: Community energy co-operatives struggled to compete with corporate giants when bidding to supply the grid.

Attempts to create a competitive energy market have caused more problems than they have solved. Opponents of public ownership need to explain how they plan to solve the problems that competition was supposed to solve. And big companies that declare that they are the only ones who can manage the risk of price fluctuations need to explain why this is preferable to having a single utility. After all, as last week’s bailout shows, these risks are socialized anyway when pushes come in. The reason why the government can’t allow a company like a light bulb to go bankrupt is simple. Access to energy is an essential public good. So why not treat it like one?

The energy crisis shows exactly why the industry should be in the public hands.Christine Berry

Source link The energy crisis shows exactly why the industry should be in the public hands.Christine Berry

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