Trying to Fix the UK energy Trilemma

Apologies for using the awful word trilemma but it seems to be a common word in this debate. It basically is used to describe the three way trade-off between delivering cheap energy, addressing global warming/energy-security1 and investing in energy infrastructure to ensure future capacity.

Let's get this out of the way straight away, freezing consumer prices will not work. Sorry die hard Labour supporters but even thou this is a good battle cry it simply is not a solution. It may be part of a solution but by itself it is a pointless act. If it even looked like a risk this strategy might come about in future suppliers would immediately up their rates to void its effect. Even if somehow you got around this the energy companies would merely siphon "profit" from funds that would previously have gone to building crucial infrastructure. Remember a large energy company's main driving force is to make its shareholders richer, everything else is secondary2 and there are no exceptions to this rule.

Of course you could control prices and also demand infrastructure changes but that is effectively the same as renationalization. To force it quickly, basically amounts to seizure of private assets. We can debate whether this is morally justified3 or not but with absolute certainly doing this seizure would hammer our capitalist based economy globally and locally. In the long run it might pay off but whatever your opinion it is a process the famously short-sighted UK electorate would not tolerate. You would be removed from power and the decision reversed long before the initial waves had settled. 

If you try a soft touch approach, like attempting to persuade private companies to act as you would like, you will run into a fundamental difficulty as they can always claim your proposals to be unfeasible in the current marketplace. The Hinkley nuclear power plant is a good example. Damn near everyone who does not have a vested interest admits this is a bad deal for the tax payer. However it was a bad deal the government seemed forced to make as somehow suddenly they had no alternatives. 

"The obviously bad deal is actually quite reasonable as whilst the plant owners will make a fortune over the plant lifetime without them we would not have the plant." 


That last sentence which you will see and hear in various forms over the next few weeks greatly annoys me. It is alas true but only due to our governments'4 cowardice. There is another very obvious way to solve this problem. Invest tax payer money directly into capacity in the form of new build government owned nuclear power plants. This way you can actually dictate who constructs the plant, who works there and how it operates commercially.

If you are wondering why I only consider nuclear it is simply because it is the only method which is both low carbon and capable of such high capacity5. I am all for renewables but they simply aren't ready yet6. Keep in mind we absolutely need the capacity and relatively soon. No new capacity means lights going out. A phrase which is not anywhere near alarming enough. Naturally it is nice to imagine we could survive black outs by cheerfully cuddling around a candle like the good ol' days but the reality of black outs is much more awful. It means the economy being hammered and vulnerable people freezing to death. 


The expense of a new nuclear power plant is not more than governments are used to working with. For example the last two governments backed the HS2 trainline7 which will cost about £40 billion pounds. You would get about 2 big nuclear power plants out of that with some serious change left over. Once you have this capacity you can use it to tweak the market as you see fit. So rather than fixing the rates high, to generate lots of profit to appease your shareholders, you can choose to reduce rates to ease pressure on consumers. It is basic economics, if you up supply you reduce demand which translates as more capacity meaning lower cost. Add enough capacity to your grid and you will have enough control on the market to let market forces enforce the policies you want. So, for example, if you want to address EDF fleecing their consumers you can simply offer their consumers a cheaper option as opposed to pointlessly ranting at EDF.

And what happens if the energy company's concerns turn out to be right and you simply cannot afford to run your new power stations at a cheaper rate than they would? (Given the profit they make this seems incredibly unlikely but anyway) Well that is fine just sell off these substantial physical assets to another company. At least you tried and even in failing crucially you will have added capacity to your grid, knowledge to your economy and a new competitor to the energy market. This failure would still be a lot less depressing than our governments (past and current) apparent strategy of not even bothering to try and thus failing by default

Or we can ignore all this and continue publically shouting at private energy companies. After all this shouting has had great results so far ...

A snapshot of the big six energy rises over the last year or so


 

Footnotes

  1. Both are pretty much equivalent so even the warming deniers don't get to avoid use of "trilemma".
  2. Many good people work for energy companies but this is neither here nor there when it comes to how the company as an entity will act. As in most issues if you expect big international companies to be decent and fair you are either in for some disappointment or some serious blind-eying. 
  3. Personally I would say it is. 
  4. The apostrophe is not in the wrong place. This is not a party political point. When in power Labour were just as cowardly when it came to facing down the big energy companies. 
  5. And high capacity factor. (If you want to claim renewables are a valid option please google this term and consider its implications before arguing with me) 
  6. I am a proponent of a stratedgy I call the nuclear gap filler where nuclear power is used to quickly faze out coal and then is, in time, itself replaced by renewables once they have the capacity to take over.  
  7. A misguided attempt to add a high speed trainline between Birmingham and London to allow easier commuting to London. It knocks a few minutes off the current travel time.