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Privatisation of energy risks lights going out this winter

light bulbThe effects of the UK privatised energy system are now becoming clear, not only in cartel pricing and poor service , but also, critically, in loss of energy security. As a result of the latter there are real risks of blackouts this winter.

The Big Six privatised companies’ failed to invest on a scale that matched the performance of the industry when in public ownership. As a result, the UK’s spare electricity generating capacity has tumbled from 17% three years ago to just 4% now as winter approaches.

The government has been forced to take emergency measures over the next 3 years to try to keep the lights on during the winter months. They plan to keep three power stations on standby and are actually proposing to pay businesses to use less electricity. In other words taxpayers not only have to put up with rocketing energy prices to fund unprecedented dividends to shareholders and bonuses for top executives, but now have to subsidise the companies’ reluctance to invest in order to keep the lights on.

The risks arising from the shrinkage of reserve generating capacity have been highlighted by 4 nuclear reactors at Hartlepool and Heysham being shut down 3 months ago after a defect was found. In addition there have been fires at Ironbridge and Ferrybridge power stations, but most seriously a very big fire last month at the Didcot B gas-fired plant in Oxfordshire, one of the biggest UK power stations, which led to a loss of 600 megawatts of generating capacity.

The government’s answer to these setbacks is to launch a new system of what it calls “capacity payment auctions” which are effectively bribes to get the energy companies to invest. It exposes how helpless the government is in a privatised system where the companies hold back, knowing they’re in the driving seat, till the government makes an offer they can’t refuse.

There’s also the problem that most of the generating system isn’t now even owned by British companies at all. Four companies (Eon, EDF, Npower and SSE) now control 96% of the residential electricity market and 71% of total generating capacity. Foreign state-owned corporations control 25% of the sector. This leads to some bizarre outcomes. The Chinese, French, Norwegian and Russian governments, through their state-owned corporations, now have collectively far more control over UK strategic energy interests than any British political actor. I hope the government believes it can trust Mr. Putin and Mr. Xi Jinping if the going gets tough this winter.

3 Comments

  1. Robert says:

    To late now when we needed a labour party all we had was New labour and today we have a leader of the labour party who still has nappy rash, if the lights do go out it will be as much labour’s fault as the Tories.

  2. Matt London says:

    Richard says: “if the lights do go out it will be as much labour’s fault as the Tories.”

    Agreed – indeed, Labour is actually more to blame – capacity now reflects energy policy going back 15/20 years. At least Mrs Thatcher supported building Sizewell B.

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