UK Energy Policy/Price scandal – outages due

[Isitmebut]

In late 2012 Ofgem in their first annual Electricity Capability Assessment, warned that Britain is running out of energy generating capacity, as the spare capacity would fall from 14% then, to 4% by the winter of 2015-16.
www.bbc.co.uk/news/business-19842401

But in actual fact the crisis was worse than Ofgem feared, as we could have had power outages during the CURRENT winter, as the energy giant SSE warned, but the national grid denied – but whatever, it is getting too close for comfort..
www.telegraph.co.uk/finance/newsbysector/energy/10428950/Power-crisis-risk-worse-than-feared-this-winter-SSE-warns.html

So why in a bad winter within a few years, could the UK be like some third-world emerging economy, where power outages may have to be managed/rotated throughout Britain?

Firstly it will not be because ‘the market isn’t’ working’, it is as Ofgem states, a capacity problem and that we needed to secure £150 billion to replace aging/closing reactors and infrastructure - unlike France whose nuclear power generation had FALLEN to 75% of their energy generation - allowing much CHEAPER electricity to their population, than here.

The problem is with nuclear reactors is there is no quick fix as it takes around 10-years of planning and building, to generate the first megawatt to replace lost supplies and alleviate potential power outages, so by that measure alone, firm decisions should have been made in the early 2000’s and the ground broken.

So what expertise did the UK have in building our own new energy generating capacity? We had a company called Westinghouse, but we decided to sell it in a multi company bidding war to Toshiba of Japan in early 2006, at a price of £3.1 billion, and how pleased the government were – despite Tony Blair saying in 2005 “nuclear power is back on the agenda with a vengeance”.
news.sky.com/story/405200/bnfl-sells-westinghouse-to-toshiba

Next, how come via the bidding process and cunning plan to get the Private Sector to fund our (Ofgem calculated £150 billion) nuclear reactor/infrastructure building programme, were we left relying on the French State, via EDF the French government owned nuclear energy company, to fulfil our national energy needs, clean up our nuclear waste and stop the UK’s lights going out – in a huge Private Finance Initiative type funding, that has saddled our schools and hospitals with annual debt service bills for decades to come – and selling off of to EDF British Energy for £12.5 billion?
www.nnl.co.uk/news-media-centre/news-archive/industry-news-edf-to-buy-british-energy.aspx

Interestingly, did Blair and Brown think that they had an important ally within EDF, as Gordon Brown’s brother Andrew Brown had become a Director of Media (later Corporate Communications) within EDF in 2004, despite admitting he didn’t know too much about energy before he got there?
www.telegraph.co.uk/news/newstopics/mps-expenses/5293459/Who-is-Andrew-Brown-Profile-of-Gordon-Browns-brother-MPs-expenses.html

Well in a government White Paper in 2008, Mr Brown said that “it will be for energy companies to fund, develop and build new nuclear power stations in the UK, including meeting the full costs of decommissioning and their full share of waste management costs”. And Mr Riaz of EDF confirmed that all costs WOULD be borne by EDF.


Did anyone within the government ask back then WHY & HOW the private sector would be able to take all the costs of building nuclear reactors – when the financial crash had restricted most companies from accessing cheap finance?????


Well we are now in late 2009, with Labour and Mr Miliband, responsible for energy, realising the light were likely to off in several years, was starting to panic, AS EDF WERE SAYING THAT NO NUCLEAR POWER PLANTS WOULD BE BUILT IN THE UK WITHOUT GOVERNMENT FINANCIAL SUPPORT.

So when Labour left ‘power’ in mid 2010, this was their legacy; “the money had all gone”, our own nuclear expertise sold off already (but Westinghouse now of Japan will be subcontracted by EDF to build nuclear rectors here) - so the French State (EDF), energetically now had us by the goolies – as their was no PFI type contracted price for electricity generated at the beginning, for a NEW GENERATION NUCLEAR REACTOR that is YET to be built and tested, for maybe a year or so.
www.theguardian.com/business/2011/jul/20/edf-french-nuclear-reactor-delays

[Isitmebut]

Claig .. the main problem is, as per my opening post, is unlike other countries who HAD enough nuclear power etc stations, ensuring energy SECURITY & ENERGY at all times when the majority of 'green' alternatives do not - the UK likely to have power outages, does not have the luxury of winding down the likes of nuclear, to go green.

Re UKIP and non green issues; UKIP have been around for 20-years, please provide links on their nuclear, gas, coal energy solutions, as per their past general Election manifestos.

Re UKIP and the EU, clearly voting for UKIP and giving them 24 MEPs achieves sweet fanny all other than giving UKIP MEPs a nice fat salary not to turn up - so please explain how voting UKIP, that will stop a Conservative EU REferendum in 2017, thus insuring the UK will remain in the EU with Labour until 2020 or 2025, helps our energy situation at all?

[claig]

The calls are already starting, the pressure will mount, but are they allowed to change it? Will the EU let them?

"Scrap the Climate Change Act to keep the lights on, says Owen Paterson"

www.telegraph.co.uk/earth/energy/11156113/Scrap-the-Climate-Change-Act-to-keep-the-lights-on-says-Owen-Paterson.html

[claig]

I think we will see difficulties in the future due to their policies. And I think some will say "we told you so" and use that as a means to ration our energy use and increase the lurch to green taxes and green policies. But there will be a party of opposition - UKIP - and everything will change.

There is no climate catastrophe, there will be no Götterdämmerung, only for the spinners, climate evangelists and Cameron.

[OhYouBadBadKitten]

I'm marking my place to read this later when I can dedicate some time to it. I'm quite concerned about our energy security - if we had had a severe winter last winter there would have been some difficulties.

[claig]

And the thing is that the establishment parties are not allowed to change. They have to follow the EU consensus of climate policies. Only one party speaks for the people and that is why they will eventually win and restore sound energy policies.

[claig]

'As I warned at the beginning of this year, our energy situation is getting very tight - mainly to under investment years ago in reliable high capacity sources when decisions in infrastructure were both timely and affordable - and on the first severe winter, we will pay the price of chronic indecision. '

It is due to the climate change obsession of the elite. When the proverbial hits the fan, the common sense party of the people will gain so much support it will be like nothing we have ever seen. Everything will change and common sense energy policies will be restored. The proclamations of doom and disaster for our planet will be laughed out of court and the spinners will lose their safe-seats. We are not there yet, but it will come.

[Isitmebut]

As I warned at the beginning of this year, our energy situation is getting very tight - mainly to under investment years ago in reliable high capacity sources when decisions in infrastructure were both timely and affordable - and on the first severe winter, we will pay the price of chronic indecision.


October 2014; ”National Grid warns of lower winter power capacity”
www.bbc.co.uk/news/business-29794632

“National Grid has warned that its capacity to supply electricity this winter will be at a seven-year low due to generator closures and breakdowns.”

“Spare electricity capacity, which ran at about 5% over the winter months last year, would be nearer 4% this year, National Grid said”.

“Three years ago the margin was 17%”.

“But National Grid said it has contingency plans in place to manage supply, including paying big firms to switch off on cold winter evenings.”

“Dismissing fears of possible electricity blackouts, energy minister Matthew Hancock told the BBC: "We are absolutely clear we are taking the measures necessary in order to have secure energy supplies this winter."

“Professor Jim Watson of the UK Energy Research Centre, said: "I think it's… very unlikely we will see blackouts in the UK, but what it does mean, this tight situation, is that lots and lots of extra measures are having to be layered on top of an already complicated policy framework."

[Isitmebut]

News today, but you read it here first. Lol

Another profligate Labour legacy not high on any 13-year infrastructure priority list, for the Coalition to crisis manage.

“Grid To Pay Firms To Prevent Winter Blackouts”
news.sky.com/story/1279213/grid-to-pay-firms-to-prevent-winter-blackouts
“National Grid offers to pay companies to manage their electricity use amid fears of demand outstripping supply from THIS WINTER."*

“National Grid has begun offering to pay firms to manage their electricity use from this winter to help prevent the "lights going out".

“The company, which runs the power network in England and Wales, is asking the largest energy users to agree to cut their usage at peak times over the next four winters.”

“But the move was seized upon by a body representing big industry as proof that its earlier warnings to successive governments on a lack of spare capacity risked harming consumers and businesses.”

“National Grid said any requests to reduce power consumption would apply between 4pm and 8pm on winter weekdays and would add no more than £1 annually to the average household energy bill.”

“The Demand Side Balancing Reserve service (DSBR), as the scheme is being called, would only be enacted on a voluntary basis, the company insisted.”

Hardly any homes, rail, airport, road, or hospitals/schools (that weren’t provided via the Private Finance Initiative debt/loans to come out of annual budgets for decades to come) or even one nuclear power station built during those 13-years.
www.telegraph.co.uk/health/healthnews/8779598/Private-Finance-Initiative-where-did-all-go-wrong.html

www.telegraph.co.uk/health/healthnews/9356942/Blair-defends-PFI-as-NHS-trusts-face-bankruptcy.html

But Labour did ‘build’ a honking great Quangocracy for the apparatchiks ‘few’.
www.dailymail.co.uk/news/article-1214001/The-cost-quango-Britain-hits-170bn--seven-fold-rise-Labour-came-power.html

[Isitmebut]

ttosca…..You don’t need to be a Tory anything to understand how markets/companies work, however you do need to be a idealistically thick socialist/Commie not to understand the consequences of anti business populist rhetoric/policies.

There are such thing as free markets, is they are relatively large and liquid e.g. government bonds, as if (as they do) Investment Banks tight bid/offer prices in ‘size’, like 99 8/32nds bid –to-99 9/32nds offered in $200 million size, there is no room for manipulation e.g. any rogue price move higher, will see the bid hit.

Clearly in anything else, where companies etc can act in concert with another is different, and finally we agree on something, ‘deregulation does not necessarily improve prices, if often does the opposite’ – and that will always be so if services (or markets) shrink and/or become LESS liquid, for whatever reason.

The problem with gas/electricity suppliers, is that over 20 became 6, I don’t know when or care, MY POINT is that few suppliers can allow companies to act if concert to manipulate prices.

NOW CORRECT ME PLEASE IF I’M WRONG, but the UK’s problem is that BY POLICY, the Labour government oozing Public Finance Initiative contracts, decided that it would be the energy companies that PAID for our energy sources e.g. nuclear power stations, to be repaid via the bill to commercial and private consumers – and the Labour politician that should know all this, is our last Labour Energy Minister, Mr E Miliband.

Now is Mr Miliband (or you) understood companies, stock markets, or shareholders, they would know that there are always negative repercussions to anti business rhetoric, especially when they can lead to firm policies (as promised) in just over a year – especially when Miliband first mention ‘fixing prices’, the energy company stock prices fell several £billion.

Furthermore, unlike fat, inefficient government, companies are always looking for internal efficiencies, especially if they believe that either now or in the future, profit margins will fall, and they want to retain those margins.

So companies have several choices; the most extreme is leave that country, but initially they tend to hive-off assets, especially businesses that have either become less profitable, or may do in the future i.e. SSE selling their onshore and offshore wind farms and Centrica’s warning below.

"Boss of Britain's largest energy firm Centrica warns of mass blackouts after investigation in to Big Six providers is announced"
www.dailymail.co.uk/news/article-2590628/Boss-Britains-largest-energy-firm-Centrica-warns-mass-blackouts-investigation-Big-Six-providers-announced.html

• Ofgem announced today that it intended to launch a competition probe into Britain's biggest energy companies
• Centrica boss Sam Laidlaw claims investigation will deter investment
• Insists there is an 'increasing risk' of the lights going out thanks to uncertainty surrounding the future of energy markets
• Consumer group accuses Laidlaw of 'unnecessary scaremongering'
• Government says he is 'totally wrong' as Ofgem defends investigation


Understanding how companies work is not rocket-science, companies exist for their shareholders e.g. pension funds, not for the whims of half wit politicians. Especially those who as Energy Minister intimates they can recover the £100 billion of private sector investment in energy generation via the bill in the 2000’s, but then in a pathetic attempt to get re-elected in 2015, say as a Prime Minister he will will control their profits, BEFORE they’ve even BUILT that energy generation. D’uh.

And Labour wonder WHY they are seen as both anti business and incompetent to run the country.

[ttosca]

When governments try to ‘fix’ markets, IMO there are always negative repercussions.

Yes, but you're a right-wing and Tory propagandist.

There are no free markets, governments always 'interfere' with the market, to a greater or lesser extent.

You can't even operate a 'market' outside of a context of rules and regulations. Otherwise you'd have collusion, price-fixing, IP theft, monopolies, a complete lack of transparency, tax evasion, the selling of stolen or faulty goods, and too many other things to mention.

Every. Single. Market. Is. 'Fixed'. And history has shown that deregulation does not necessarily improve prices or quality of service for consumer. Often it does exactly the opposite.

[Isitmebut]

So what can we make of the announcement that the energy company SSE is freezing gas and electricity prices until January 2016 – that dictates from South American type dictators like El-Milibando to ‘control’ prices actually work – and that SSE are preparing for a May 2015 Labour victory?

Well we know price controls in the distant past always have seem to have adverse repercussions, but I suspect there are a number of commercial considerations going on here, helped over the short run, as SSE mention in their press release, by the government lowering green and other levies, not the threats of El-Milibando.

So as energy prices are volatile, HOW are they really able to absorb the (potential) cost of a general price freeze, rather than the usual smaller ‘special’ plans for those that want to lock prices in for over a year, usually at a price premium to current tariffs?

Sure, they could have raised their prices more than most over the winter, have a company view that energy prices will fall over the next 2-years, or have/will use energy futures contracts to ‘hedge’ their price exposure for the period – maybe a combination of all three,

The commercially and environmentally sad reason might be ahead of a 18-month regulatory enquiry into the industries prices, the proceeds from their decision to downsize and raise £1 billion from cutting 500 staff and either selling, or curbing, the development of offshore and onshore wind farms, could financially hedge their 2-year cost exposure.

When governments try to ‘fix’ markets, IMO there are always negative repercussions.

[BackOnlyBriefly]

UKIP would just build new coal and gas powered stations, open up the mines where there are still hundreds of years worth of coal etc.

Phew, that's ok then. I thought we had a problem for a moment.

[Isitmebut]

As I thought, more hot air to contribute to the global warming issue.

[Spinflight]

Common knowledge old chap, I'm not here to google things for you.

Try your local library.

[Isitmebut]

Was that in Ukip’s 2010 general election manifesto Farage has taken off the Ukip website and called “drivel”, a preview of your new ‘working class’ 2015 general election manifesto - or Ukip still making up policies they don’t stand behind, on the hoof?

Lets explore the “hundreds of years of coal”; please explain Ukip's research re the viability, cost in a competitive market and environment costs, as rumour has it, the environment is starting to kick back?

[Spinflight]

"It has been reported on but no-one in government appears to be doing anything - is that a fair summary?"

Yep.

UKIP would just build new coal and gas powered stations, open up the mines where there are still hundreds of years worth of coal etc.

Just common sense...

[Isitmebut]

When was the £40 price negotiated (and not signed), when power price were cheaper and promises were plentiful - but also turned out to be ‘cheap’ from 2008 on?


France historically was falling over nuclear energy, up to 90% of their usage at one point, if memory serves, and now closer to 75% - and both businesses and consumers get cheaper electricity than us - as I believe our nuclear energy is down to around 10% of our usage.

In fact France’s socialist government at the last election promised to close down capacity, but not now.
www.bloomberg.com/news/2013-11-12/france-won-t-shut-down-any-more-nuclear-reactors-minister-says.html

[funnyossity]

Jim Ratcliffe compared that price to the negotiated price of under £40/MWh from French nuclear, showing the uncompetitiveness of Hinkley C. Sobering.

[HollyHB]

There is one very good piece of news on this topic this morning -
Swansea Bay £850m tidal lagoon plan submitted
www.bbc.co.uk/news/uk-wales-south-west-wales-26072805
Good because lead time is less than nuclear (even though it's only a relatively small project and less than quarter of the power of a nuclear site) and also if it were successful a similar project could be the long term solution to the Somerset flooding (so it must be politically popular right now).

[Isitmebut]

Spinflight…sorry, just saw your post; re your “Tories would have done the same”, that is very doubtful as they were actively trying to reduce UK debt after the early 1990’s European/U.S. recession, so PFI type finance was used relatively sparingly, and therefore £130 bil of borrowing for nuclear reactors was not planned, unless you find different.

Remember Brown was only trusted in 1997 as he promised New Labour was different to the Old version, so New Labour adopted Conservative debt reduction budgets until 2002/3, which funny old world is when the annual budget deficit virtually balanced – and the Brown spending splurge started around then.

So would the Tories had spent £70 billion a year on new Quangos and other fat government, certainly not, they had reduced the size of the State/public sector throughout the 1990’s, Brown increased it by over 1 million employees from 1997 to 2010 – with the extra future pension liabilities for generations to come.

Therefore from the budget/spending ‘known, knowns’, the Conservative priorities were very different to Browns.

[Isitmebut]

Funnyositty…no that is not a fair comment, as although our last Energy Minister (Miliband) left office without managing to sign an agreement with their EDF, Cameron did, hence as per my second post on this thread, a future fixed price of £92.50 was set – but they still take several years to build.

Oh and as EDF were still trying to squirm out of their head man Riaz confirmation to Brown in 2008 that they would fund themselves, Cameron secured the additional finance from the Chinese on one of his visits.

Cameron has to play the stacked nuclear card deck he was handed – including the EU now wanting to investigate if such deals Brown and Miliband set us up for e.g. State subsidizing industry, that Cameron just signed, is ‘fair’ or not.

[funnyossity]

It has been reported on but no-one in government appears to be doing anything - is that a fair summary?

[HollyHB]

Yes Spinflight, the Tories would indeed have done the same. There is more than plenty blame to go round.

But the issue is - how do we fix it? And that has to begin with admitting that there is a problem to fix. Do we really have to suffer massive blackouts for days on end without light or internet before we get the message? I fear we do.

I used to be a technical writer for the electricity industry quite a few years ago. No-one in that industry has been in ignorance but management focusses exclusively on this year's profit.

[Spinflight]

Tories would have done the same..

[Isitmebut]

Questions should be asked in parliament why Brown sold the UK’s own Westinghouse, the nuclear power plant builder/supplier, to Toshiba of Japan in 2006, when we were losing so much manufacturing/industrial jobs in the mid 2000’s AND had such a huge need for nuclear energy ourselves..

EDF is owned by the French State, why couldn’t we have invested in Westinghouse to supply our own needs and export that expertise, heaven knows we need to boost stuff we make and makes a mockery of Labour’s old complaints of selling off public/utility assets – especially as EDF is likely to sub-contracts a few plants to Westinghouse to build in the UK.
supply.westinghousenuclear.com/Main/Welcome.aspx