Energy Monopolies

Figure 1: Community owned wind farms are a big part of any energy solution [Credit: eaem.co.uk, 2012]

Figure 1: Community owned wind farms are a big part of any energy solution [Credit: eaem.co.uk, 2012]

One of the things I’ve long liked about renewables is the fact that they are infinitely scalable. They can go from a GW scale array of wind turbines or a dam, right the way down to a solar panel or a water heater on the roof of a house. This smaller end of the scale is handy as it offers a way to get around the big six energy firms and effectively turn your house into its own power station.

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A key part of Germany’s renewable energy strategy has involved both individual ownership of renewables but also by community owned co-operatives. Where for example the residents of a village or a group of farmers come together to buy and build their own wind farm, using the electricity themselves or selling it back to the grid. It is this bottom up approach to energy that is the reason why the Germans have been able to install much renewables infrastructure without significant need to taxpayer support and without many objections from locals to wind farms (given that after all, its their wind farm!).

Figure 2: Break down of the ownership of renewables in Germany [Source: ]

Figure 2: Breakdown of ownership of renewables in Germany [Source: German Renewables agency, 2013]

However the big six, anxious to protect their monopoly and the Tories, anxious to encourage a dash for gas have been trying to stop such free market notions from spreading to the UK. The government has been blocking efforts to found such co-operatives, while the utilities have begun to charge excessive amounts of money for the all-important grid connection.

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And this is not just a UK phenomenon. In the US, noting that one or two of the UK’s big six operate over the pond, similar efforts to promote locally owned renewables have faced opposition from the energy firms and their political allies. This has led to the formation of the so-called “green tea party” who are committed to the normal tea party values of small government, but recognise that renewables can help them to live independent of government, and thus they are strong supporters of community ownership schemes and other pro-renewable incentives.

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For the last couple of months, and with those winter bills fast approaching, the energy companies have been pulling every excuse they can think of out of the book to explain high energy prices. Firstly they claimed it was high wholesale gas prices. Then it was pointed out that while they seem very fast to put prices up when the gas price goes up, they were very slow to put them down with the gas price fell.

 

And the obvious solution to this would be to build more wind farms, as this tends to insulate against sudden peaks in gas price.
Next, they claimed it was green energy tariffs, convincing the government to get rid of such charges, against the advice of many within the energy industry. Of course they make up about 6% of the average energy bill and cannot possibly explain a 40-175% rise in energy bills over 5 years.

Figure 1: Breakdown of an average Bill [Source: BBC (2012) http://www.bbc.co.uk/news/business-15352599 based on Ofgem data]

Figure 3: Breakdown of an average Bill [Source: BBC & Ofgem (2012)]

Recently the energy industry suggested that the reason for high bills is not that they are a price gouging monopoly, but in fact due “over regulation” of the industry…which is a bit like the mafia claiming that the reason why there is so much crime is because there’s too many cops. I suspect next month they’ll be claiming bills are high because the dog ate their homework.

 

The real reason for bills being high however is that our present energy market is run by rules written by 80’s era yuppies for yuppies. The Thatcher government turned the UK energy market into a casino where traders could buy and sell energy. It also led to the consolidation of the UK’s energy supply into a handful of large firms. And as I’ve pointed out before for capitalism to work, there has to be competition, else it can end up less efficient and more costly than the public sector.

 

With no effective competition, the big six have no major incentive to build new power stations, even if this risks the lights going out…in fact given that this would push up energy prices and lead to higher profits the energy companies have if anything a perverse incentive NOT to invest in new infrastructure. Hence why recently the taxpayer was forced to step in to pay for the next generation of nuclear power stations…or more precisely we’ll be paying via our energy bills for the next 60 years!

 

Clearly one of two things needs to happen, re-nationalisation of large parts of the grid, or changes made to how these companies operate to ensure serious and effective competition between them. Or allowing new players into the market, such as these community led schemes.

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About daryan12

Engineer, expertise: Energy, Sustainablity, Computer Aided Engineering, Renewables technology
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