The rise and rise of the energy production racket

Columnist

Thursday 21 February 2013

There are many things I don't understand.

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Iain MacWhirter

Like why a day return rail ticket between Edinburgh and Glasgow costs £22 when we are trying to get people to stop using their cars. Or why a cup of coffee costs £2.50 when its ingredients cost 0.5p. But nothing puzzles me more than energy prices. They have doubled in five years even though Scotland is sitting on a mountain of power. Yesterday, we were warned by Alistair Buchanan, the chief executive of Ofgem, the energy regulator, that energy prices are going to soar again because of something called a "gas crunch". We haven't seen anything yet. The lights will go out.

Every six months or so there is a scare about lights going out (LGO). The most recent – inevitably – was a warning that independence for Scotland would lead to LGO because England wouldn't continue to subsidise Scottish power generation. This seems utterly baffling since Scotland has a vast surplus in electricity generation at the moment and is sending the surplus south.Ah, but that's only because of those nasty fossil fuel stations like Cockenzie that are being closed down. And nuclear power stations like Torness that are coming to the end of their unnatural lives and will not be replaced because, according to Labour, the SNP is irrationally biased against nuclear power. Labour has for years been predicting LGO without more nuclear power stations, which the Scottish Government has ruled out on the grounds they would be hugely expensive, dangerous and surplus to requirements. At present, Scotland has a total energy generating capacity from all fuel sources of just over 12 gigawatts – or so I am told. By 2020, we will have the capacity to produce 100% of electricity demand from renewable sources like wind. Scotland supposedly has wind, wave and tidal energy potential of 60GW – six times the current capacity. We have 25% of Europe's wind and tidal and 10% of wave energy potential – a colossal comparative advantage in green energy.And these aren't fantasy figures from some environmental pressure group: 20GW are already in the pipeline, according to the Scottish Government, which is nearly twice what we have now. We already provide nearly 40% of the UK's renewable energy output – which is why the UK Government has been helping subsidise the development of the Scottish renewable energy, so that Scottish wind can help England meet its climate change targets.So, lights going out? I don't think so. Unless this is all garbage. But assuming ministers are not lying, we seem to have rather a lot of energy. Indeed, we still have a trillion pounds worth of oil in the North Sea, prodigious amounts of Scottish coal and a lot of the latest fad, shale gas, which is supposed to be worth £5 billion a year in Scotland alone if fracking (that's a method of extraction not a term of abuse) turns out to be safe. Germany would love to have our renewable energy sources – they are turning green and phasing out nuclear powers stations at the same time. But they are of course German, and their lights do not go out. But a daft laddie like me still wants to ask: why are Scottish energy prices rising by 10% a year? It's to do with the energy market, according to the Scottish Government. We are locked into a UK generation and distribution system. What happens is this: we produce the electricity and send it to England, then they send us subsidies to build more wind farms. Then the power companies charge us a price based on world market conditions, which have nothing to do with the cost of energy in Scotland or England. At this point people start talking about renewable obligations, contract for difference, feed-in tariffs and other interplanetary nonsense. Well, that may make sense to people in the energy business, but all I know is that energy bills have been rising at an intolerable rate, leaving an ever-increasing number of Scots in fuel poverty: 900,000 according to Energy Action Scotland. There is hyper-inflation in fuel prices in the UK, and no-one seems able to do anything about it, least of all the Scottish Government, even though we are supposed to be on the cusp of another energy revolution. In the 1950s we were told that nuclear energy would be so cheap it wouldn't even be metered. In the 1970s we were told Scots would be driving around in Rolls-Royces because of oil from the North Sea. In the 2000s we were told Scotland would lead the world in green energy that is cheap and safe. But energy prices just kept going up and up. And they will continue to do so after independence, because we will still be part of that UK energy system, which keeps energy prices down by making them higher. We will still be at the mercy of the energy companies, most of them foreign owned, who will continue to charge whatever they feel they can get away with. This, of course, was why we privatised all those inefficient nationalised energy companies 20 years ago so that we could have a healthy competitive market that would keep prices down. Except that our privatised energy companies were bought by companies like the nationalised French EDF and prices quadrupled. The UK Government was hoping EDF would build a new generation of nuclear power stations which would stop the LGO and give us all cheap energy. But it is now saying it needs guaranteed profits. And those profits will be guaranteed by higher prices for 40 years set at twice current energy costs. Oh, and we, of course, will be left with the cost of cleaning it all up again, and insuring against nuclear accidents, and looking after the waste for the next 1000 years – that's if anyone is willing to take it now Cumbria has said it won't. No, the only thing I do understand is that energy production is a racket, like the railways. And there is nothing any of us can do about it.

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The rise and rise of the energy production racket

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