March 26, 2013 by Nash Riggins
Last month, OFGEM executive Alistair Buchanan warned energy customers that government-mandated falls in the UK’s power production capacity would lead to an influx of energy imports – and subsequently, substantially higher bills for customers. OFGEM was already expecting a 10% energy shortfall in capacity by this April; however, an unpredictable and devastating cold front has actually knocked Britain’s reserve supply of natural gas back to a flimsy 10% capacity. Prices are rising accordingly.
What’s the cause? Energy Secretary Ed Davey’s vision of the UK’s low-carbon future. These admittedly vital upgrades to the UK’s power grid mean that several key power stations are being taken offline even as we speak, and effectively replaced with ‘bigger and better’ ones. But because most of these £7.6bn projects have yet to be approved and started, the next 10 years are expected to be riddled with rising costs of energy due to a temporary shortfall. Apparently this snowy cold front is the first piece of evidence that this transition to a renewable Britain may have been just a tad too hasty. After all, the entire point of Davey’s infrastructure improvements was to wean Britain off of its reliance on foreign gas imports; however, it seems this attempt to quit cold turkey has caused customers to suffer from withdrawal.
The country is currently working at 40% above gas capacity, and it’s left us anxiously scanning the horizon for those Qatari tankers that, only months ago, we were pugnaciously and pompously declaring independence from. What can we take from this? Only that hindsight is cruel at the best of times, and that the British government has no foresight whatsoever. Energy analysts saw this display of desperation coming, but the government’s over-enthusiasm to show the world that we can be a green nation quicker than anyone else drowned out these warnings. If the government thought that we’d be facing ‘relative’ energy shortages until 2020, how much worse will things be for customers next year? According to industry analysts, at least £200 per family per year.
Because the UK’s energy suppliers buy the vast majority of the gas that powers our homes at least a year in advance, this month’s dire increase in prices will undeniably come back to rear its ugly head next winter. The average dual fuel bill in the UK currently stands at about £1,300 per year; however, with Britain’s irregular demand, wholesale prices may have spiked anywhere between 10-15%. In 8-10 months’ time, Britain’s Big Six energy suppliers will most likely be forced to pass these extra costs onto their customers, rendering price hikes of anywhere between £130-200 per year. An extra increase of 2.5% will also be imposed upon customers next year as a part of Westminster’s desire to ‘go green’.
This crisis should by no means be allowed to marginalise or discredit the British government’s desire to establish a cleaner and more self-sufficient power infrastructure for its people. Green energy is great, and it will ultimately provide the UK with a means to declare independence from overpriced fossil fuels and simultaneously minimise its impact upon the environment. Yet it’s worth noting that the DECC’s ambitions to see this dream realised are costing hard-pressed UK families a hell of a lot more than they were originally promised.
Energy analysts have been saying since November that ‘phase 1’ of Ed Davey’s new energy plan was proving a case of ‘too much, too soon’. Even if the government had waited to start shutting down its coal plants until construction on their new power stations had at least started, there’s a good chance this impending price hike could have been partially avoided. With household bills expected to rise by at least 15% within the first year of the plan’s decade-plus implementation, perhaps Mr Davey would do well to heed the advice of those energy professionals in the future.