Missing the point

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A week or so ago, I posted on the question of subsidies for different types of energy generation.  The issue arose again earlier this week.

The protesters against wind power are right to say that the wind industry is receiving significant subsidies through energy bills, and that, without those subsidies, the industry would not be viable.  It does, though, ignore the point that other types of generating capacity are able to externalise the costs of dealing with the pollution they cause – effectively passing it on to the taxpayer.  So the comparison is not an accurate one; subsidies are still subsidies even if they look like taxes.

There were two other elements in this week’s report which interested me more.

The first was that every Megawatt of installed capacity generates around £700,000, but that only £100,000 of that stays in the local economy.  And the second was that more than half of the construction spend goes abroad.  Since this is a UK study, ‘abroad’ means ‘out of the UK’; my guess is that figures looking solely at Wales would reveal an even more alarming gap.  These are damning statistics, and underline the way in which we are not receiving our fair share of the rewards for the energy being produced here.

I remain as convinced as ever that we have to exploit renewable resources in Wales.  But the real battle is to make sure that we gain the benefit of that exploitation.  All the attention is going on the first question – to exploit or not; but we should really be paying more attention to the second – who benefits.

Not asking the right question

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The meeting between the Prime Minister, the Energy Secretary, and the ‘big six’ energy companies seems to have been a classic case of creating the appearance of action without actually doing anything very much.

That high and rising fuel prices are a problem is indisputable and that they impact disproportionately on the least well-off is equally so.  But exhorting energy companies to make their bills clearer, and to make it easier for consumers to switch supplier, is little more than tinkering on the fringes.  And there’s nothing new in any of it, as one of the more independent suppliers who was present stated after the meeting.

The response of opposition politicians has been little better.  Ed Miliband’s statement that the companies should use their profits to reduce prices is merely the most glaring example of a lack of will to implement real change.

There does seem to be some doubt as to whether the claim that the energy companies are making an average profit of £125 per household per year is true or not.  The companies themselves claim that it’s closer to £15, but I’m not sure how relevant any figure is. 

‘If £125 is too high, what’s the right figure?’ is not a question to which I’m hearing any answers.  And in any event, the percentage figure is more relevant that the absolute figure, and energy companies’ profits do not seem that far out of line with other profit-making businesses.

That goes to the heart of the inadequacy of the political response.  The underlying question – whether we want these services provided by companies whose main aim is profit – is not even being asked.  Suggesting that companies should sacrifice the interests of their shareholders for the benefit of their customers is like criticising the outcomes of the free market without challenging the underlying basis.

Government (or opposition) politicians could propose an alternative ownership model for energy companies, or they could propose legislation to limit profits or enforce lower tariffs, but they do none of those things – because they accept the basic economic model under which the companies operate.

That leaves them nothing to fall back on except pious words and spin, which will do little to alleviate the problems which many will face this winter.