THE Tory leadership contest has acquired the early hallmarks of a freak show. Will it be a very rich one, a very dodgy one, a very stupid one or a very cruel one? Or perhaps a star will emerge who embodies all of the above.

Meanwhile, there are more pressing issues to trouble the citizenry. High on that list is the risk to millions of being unable to heat their homes or feed their children. This week, a report suggested that Ofgem will raise the price cap by January from £1,971 to more than £3,363.

This is exceptionally serious stuff, demanding a commensurate political response. It requires an understanding of how we got here and acceptance of government’s responsibility. For the Tory contenders, the grinding realities of fuel poverty belong in a parallel universe which barely impinges upon their outlook.

I doubt if any of them really cares about the “how we got here” bit because the lessons lead in inconvenient directions. So they will stick to the script. “Forces beyond the control of government … war in Ukraine … rising gas prices a global issue … doing everything we can to protect the consumer … more to follow (or not, as the case may be)”.

There is, of course, truth in asserting that the energy crisis is global, exacerbated by Russia’s cynical use of energy diplomacy. However, it is also far from the full story and unless the long-term fundamentals are addressed, there will be no safeguards for the future.

Within months rather than decades, the imperative is for government to do far more. It alone can provide the safety net which protects people on low incomes from the brutal prospect of domestic energy bills doubling, trebling, maybe more.

That is a crisis as big as Covid and demands the same scale of response, to buy time needed to address policy failings.

In 2017, I gave a talk at Strathclyde University headed “How not to run an energy policy: the lessons from three decades”. I looked at it again this week to confirm my recollections of the landmark events it touched upon and for which no government or party is free from responsibility.

At that time, I said: “The current security of supply position in electricity is worryingly tight – with the margin at between two and six per cent, down from almost double that a decade ago with the mildness of recent winters the saviour of the system… We muddle through because there is no other option where public interest objectives conflict with the commercial interests on which they depend for delivery”.

Until 20 years ago the UK had the luxury of energy independence – Scotland even more so. Indeed, we had an over-supplied market which the state-owned industries had reluctantly bequeathed to the privatised companies.

All we had to do was maintain that happy position and we would now be in a relatively good place.

However, commercial interests do not like over-supplied markets. They hate them, and will do everything in their considerable power to squeeze out capacity which, in public interest terms, makes complete sense. The alternative approach was to close down generation, slash investment in replacement capacity and rely on imports. That became the de facto policy.

This mentality reached its most egregious point with the decision by Centrica to close the Rough gas-storage facility in 2017, with government approval. Imports would, of course, provide. Now Centrica have applied for a licence to re-open Rough in a desperate effort to head off the real prospect of shortages and price volatility this winter. It takes short-termism to a whole new level.

Or maybe not. I bear the scars from 20 years ago of the decision to force British Energy to the wall because – in an over-supplied market – the price of electricity briefly fell below the fixed point of viability for nuclear power. The company was subsequently sold to EDF. Investment in new nuclear ground to a halt.

This made absolutely no sense for security of supply, carbon reduction or the public finances. Coupled with the decline of coal, which at least had an environmental argument in its favour, it ensured a dramatic decrease in the UK’s (and particularly Scotland’s) baseload capacity. Gas would provide, or so they said.

Sure enough, the chickens have come home to roost. Now the policy is to build new nuclear stations to provide a quarter of the UK’s electricity by 2050. Meanwhile, Hunterston is gone and Torness is going without replacement. Our loss, I would say.

The lesson from these three decades is that privatisation of the energy sector based on the illusion of competition was an historic mistake in terms of anything other than right-wing ideology.

Critically, it relegated security of supply, the bedrock of previous policy, in the interests of private profit. By the time Labour came to power in 1997, the best available (and affordable) answer seemed to lie in regulation to protect the consumer interest.

In practice, Ofgem has acted more as the protector of corporate interests and the false god of competition. Where is the competition now for people who are being asked to pay these massive bills?

The ongoing winners in the saga have been the privatised utilities whose profits have soared undisturbed and who will make further fortunes off consumers’ current and forthcoming misfortunes. They should be windfall-taxed to the hilt, as happened in 1997 when a £5.1bn hit scarcely troubled them.

Renewable energy should be accelerated but must always be balanced against affordability and security of supply. If I may be forgiven for quoting again from 2017: “There is no point having the most virtuous energy mix humanity can devise if few can afford to pay for it. And nobody will thank a government for environmental virtue if nothing happens when the switch is flicked.

“These three imperatives require a constant balancing act and it is the politicians who will, quite rightly, be held responsible when that balance fails”. A home truth which should not be forgotten when the bills arrive.

 

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