Regaining Real Power: An Energy Price Cap and Green Investment

The Way Forward – An Energy Cap as well as Green Investment 

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Ed Miliband’s welcome announcement at the Labour Party Conference to cap energy prices was a popular one with the electorate. Realisation of that caused alarm with Tories and energy companies -scare tactics threatening power shortages. Indeed, it is not just energy power they hold, and fear of losing control unnerves them. Ed has emphasised his belief in the green economy, and introducing the feed back tariff for solar power and micro-generation demonstrated that. 

This was rapidly cut back by the Coalition government, and their investment in fracking, and gas makes their self-interest very clear.

An energy cap and green investment policies could go a very long way to shifting that power back to the people. If this is followed by control of other utilities, transports, money and banking, we would be looking at a real recovery – that of Society. 

Our dependence on energy for our very survival is clear. What can be avoided is a perpetual dependence on privatized energy companies. We are imprisoned by fear of the collapse of society and the consequence has been wars in the Middle East. Ominously, British oil companies have unprecedented influence  of British military policies.

British oil companies are promoting a ‘fight against piracy’ to get a vast hidden military subsidy. In the process they have got an unprecedented amount of influence over UK military policies. Oil companies have talked up the risk from piracy to justify the use of Navy frigates, drones and helicopters to protect corporate oil assets in the seas. They have demanded increased spending on military hardware at a time of major public cutbacks. 

The media’s insistence that renewable energy would not satisfy our needs literally fuels the thirst for fossil fuels, and nuclear, while denying the dangers of climate change and nuclear contamination. The financial argument in favour of fossil and nuclear fuels is heavily biased, distorting political and public confidence in renewable energy. Why is George Osborne insisting on commitment to dirty, carbon producing gas-fuel for years to come? Ed Davey has been pressured by George Osborne to adopt gas or face deep cuts to any renewable subsidy. (Friends of the Earth, ) While cutting feed-in-tarriffs, the government prepared to invest in fracking and shale gas, with known dangers, and Lynton Crosby clearly has self-interest, yet Cameron refuses to address questions on this issue.

Evidence shows how energy companies manipulate markets, Libor style by fixing prices. (Guardian)

Michael Burke‘s recent article, was published by Socialist Economic Bulletin, and emphasises the need for green investment if there is to be a real change for British politics.

Capping Energy Prices and Green Investment are BOTH Required

“The announcement by Ed Miliband that Labour would temporarily cap energy prices is a welcome one. But the reaction to it reveals to deep-seated problems of the British economy and British politics.

  • According to Labour’s own (uncontested) research household energy bills have risen by 29% in 3 years. Therefore the pledge to cap prices rises for 20 months is really a very modest reform.
  • According to a campaign tool ‘Freezethatbill’ the average household has seen bills rise by £300 under the Tories and will save £112 a year from this policy. That would be an estimated saving of £160 in total.
  • The reaction to this moderate plan has been vociferous and extreme. Lurid headlines about the lights going out in Britain have been accompanied by open threats from the large energy companies to discontinue investment. SEB has long argued that the cause of the slump is an investment strike by private firms.
  • The energy companies threatened to make that an all-out strike in their sector.
  • The Tory energy secretary and a host of MPs immediately relayed the threats of the energy companies. This is hardly surprising given the very large donations those companies make to the Tory Party. The Tory Press did likewise.
  • However it cannot be argued that this was simply scaremongering, based on empty threats. It is already the case that the energy companies do not invest sufficiently, either in storage capacity or in renewables. The energy companies, especially those controlling energy reserves, have previously withheld supplies in order to push up prices. It was previously reported that in March this year the British economy was just half a day away from running out of gas. But the reality was that energy companies withheld available supplies, which drove up liquefied natural gas prices to 150p a therm, from 57p earlier in the year.

In pursuit of profits, the energy companies have been willing to collude in driving up prices, and endangering supply. They are able to do this, in part, because existing capacity is extremely limited and they are an oligopoly.

This is the real threat to Ed Miliband’s policy.

Clearly the price pledge is only relevant if wholesale energy prices are rising. Capping retail prices for business and household consumers while wholesale prices are rising can only lead to a profits squeeze. As a result the energy companies threaten that they will reduce their already inadequate level of investment, even while some of them have caved in on the temporary price freeze. This could lead to energy shortages and would end Ed Miliband’s much more ambitious goal of de-carbonising energy production by 2030.

The financial position is clear. Taking the shareholder payout from just British Gas, Centrica, Scottish & Southern Electricity and National Grid alone the current annual dividend is £3.4bn. Yet despite the imperative for investment in renewables, the level  of  investment has halved from already low levels over 3 years.

This private investment slump has been exacerbated by the withdrawal of state investment in the energy sector under this government. Private companies have proved incapable of providing the necessary investment for long-term projects over a prolonged period. They are simply unwilling to take the risk. Yet the current government has reduced its own investment in subsidies for renewables which reflects its commitment to the oil companies and in pursuit of the illusory benefits of fracking.

Ed Miliband’s policy of capping energy prices is very welcome. It makes a small contribution to softening the fall in living standards. But the extreme response to it highlights the complete unwillingness of the energy companies to provide the necessary investment in renewables and storage capacity. De-carbonisation and energy security require large-scale state-led investment. Instead dividend payouts to shareholders are at record levels. Faced with sabotage and threats from the energy companies, nationalisation is a necessary step that can lead to the investment that is imperatively required.”

1 thought on “Regaining Real Power: An Energy Price Cap and Green Investment

  1. The aim of the Tory governments has been to privatise as much of industry as possible. this is the capitalist ideal, privatisation of everything. If you want to see the end result of this you only have to look at America, where the wealth of the Elite is incalculable, and contrasts starkly with the poverty of the majority. ‘Obamacare’ is being blocked by the right wing Elite ( God only knows why!). President Obama is trying to undo some of the harm which is the result of all out Capitalism.
    Privatisation is the bedrock of Capialism, and while it works very well for some, unfortunately it does no good for the majority.


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