Polly Curtis is the Guardian’s ‘reality checker’. Today’s she’s been live-blogging the debate about the margins of the ‘Big Six’ energy retailers, discussed here yesterday.
Reality check: Are energy price hikes inevitable?
Temperatures are about to plummet and energy bills soar with gas and electricity bosses claiming further rises are unavoidable. Are the price rises really inevitable? Polly Curtis, with your help, finds out.
I’ve always wondered how firm the grip that The Guardian and its staff — much as with the environmental movement more broadly — have on reality. Indeed, Curtis’ attempts to get to the bottom of the debate does little more than reproduce official arguments put out by the government, quangos and NGOs. As such, then, she only reproduces official reality. The problem here is, as has been discussed previously, the UK’s energy policies have been essentially drafted by NGOs, and quangos are defacto government bodies, who aren’t really able to criticise policy in any meaningful way.
There’s plenty to take issue with in Curtis’ account of the fiasco. This is perhaps the most bizarre.
This is the most striking set of figures I’ve seen. This graph documents the price changes at the big six suppliers for an average dual customer paying by direct debit over the last seven years. It’s quite breath-taking how tightly they mirror each other, and how in the last two to three years the variability has reduced. I think it demonstrates a total lack of competition in the market.
The reason the curves ‘mirror each other’ so ‘tightly’ is that the margins are so low. In other words, there is a great deal of competition in the retail market. If there was no competition, you would see higher margins.
This, however, makes slightly more sense…
The other area where the government is putting pressure is by making wholesalers sell more energy on the open market, instead of to their own retailers, in order to allow new providers to enter the market and improve competition.
… But only just. The figures produced by OFGEM, which have sparked this row do not discuss the difference between the retail and wholesale parts of the ‘big six’ energy companies’ groups. And the ‘competition’ this will seemingly create is still only competition in the retail market, not in the wholesale market, which, thanks to the UK’s renewable energy targets, is heavily regulated… Suppliers must take a rising percentage of their energy from renewable producers, and so on.
This, however, is completely nuts:
• Over the long-term it is very likely that the unit costs of energy will rise as resources become scarcer, the UK becomes more dependent on imports and there is a bigger shift towards green energy policies.
Curtis has just forgotten about 200 trillion cubic feet of gas, sitting under the North of England. She needs a reality check herself.
“This, however, is completely nuts”
Difficult to disagree that the statement is nuts. True, resources are unlikely to become scarcer or the UK more dependent on imports. However, the UK government certainly claims to believe in these things and to be keen on a bigger shift to green energy policies (assuming these mean wind ‘n’ waste). Does this not simply mean that the government is completely nuts?
Philip – Does this not simply mean that the government is completely nuts?
I think it’s a symptom of existing in what many recognise as a ‘bubble’; i.e. within a cosy political consensus. As I said above, ‘the UK’s energy policies have been essentially drafted by NGOs, and quangos are defacto government bodies, who aren’t really able to criticise policy in any meaningful way.’
Criticism is fundamental here… Criticism isn’t just about sides bargaining in their own interests. At any level of the policy-making process, there’s just no possibility of debate. Climate science, and its consequences are protected from scrutiny by ‘the consensus’ represented by the IPCC. Climate policies are similarly made immune from criticism by political consensus between NGOs, governments, political parties, and so on; and this is epitomised by the fact that environmentalism simply hasn’t been tested democratically.
I call it ‘nuts’ out of frustration. More accurately, but no less offensive, perhaps, would be to suggest that the establishment has its collective head up its arse: it can only see its insides, but thinks it’s looking at the world.
Phil Bentley, managing director of British Gas, being interviewed on BBC Radio 4’s Today programme this morning:
He very nearly found himself mentioning the elephant in the room! But luckily, Chris Huhne was at hand, so we got to hear again about world fossil fuel volatility… the need for competition… cheaper tariffs… easier to switch… insulating homes…. renewable energy… etc… etc. But that was close.
Alex, did you just catch R4’s World Tonight? The chap from Ecotricity claimed that the average UK household subsidises the fossil fuel sector £1000. That would make a total of around a £25bn subsidy, or nearly $40 billion. That would be a remarkable sum, according to the International Energy Agency’s analysis at http://www.iea.org/files/energy_subsidies_slides.pdf — putting the UK on a par (in absolute terms) with Iran, Saudi, China and India and Russia, for a fraction of their outputs.
Ben, I missed it but will catch up on iPlayer this evening and hear what Mr Vince has to say…
Ecotricity has responded, and said that the claim comes from page 390 of this http://conservativehome.blogs.com/torydiary/files/blueprint_for_a_green_economy110907b.pdf report, compiled by environmental activist multi-millionaire, Zac Goldsmith, for the Conservative Party. It quotes a short Telegraph article by Crispin Tickell in the Telegraph.
Close – The report was by John Gummer & Zac – the paper was the FT, not the Telegraph & both authors are academics – you offering to debunk? :)
Ecotricity, it is a Conservative Party report. It says:
I take your point about the Telegraph vs FT — blame it on my headcold. But it makes no difference. The claim that the average UK household is not substantiated by the report, or, as far as I can see, any of the documents it links to. Compare the claim to the IEA analysis above, which sheds some light on how absurd a claim it is.
If you can show me where the claim has some foundation in analysis, I will gladly attempt to ‘debunk’ it for you.
I love the WIkipedia entry on Myers…
It then links to these articles:
Which are well worth a read.
Crispin Tickell is not an academic. He’s a long-time environmental activist, though one who has worked within the political establishment. He’s also a neomalthusian and patron of the Optimum Population Trust.
The UK doesn’t appear at all on the IEA document you link to, which shows figures for 37 countries, none of which are in Europe or North America. Perhaps the slide show from which the information comes only covers the Third world?
I’d guess the British “subsidies”mentioned by Ecotricity covers things like miners’ pensions, health payments (inexistent in the third world) etc. (It costs a lot to destroy an industry for ideological reasons). No doubt Ecotricity can tell us.
The OECD report linked to on Twitter, Ecotrcity says this about UK fossil fuel subsidies…
I am wondering if ‘fossil fuel subsidies’ is a bit like the waffle about retailers’ margins. It’s designed to mobilise people’s feelings of fairness and rightness, but ultimately, don’t relate to anything meaningful at all.
Geoff, my thoughts on that were that the subsidies in Western countries weren’t of the order of those oil producing countries. I don’t see much evidence that there’s a great deal of subsidies on offer to fossil fuel companies in the UK at all, certainly not of the order of £1000 per person as Vince suggested last night, which would be extraordinary.
So Ecotricity estimates British fossil fuel subsidies at c $40billion, yet p390 of the document they refer to puts total world fossil fuel subsidies at $150-250 billion. So deregulated Britain provides c12-25% of the total!
The report actually says “a typical British taxpayer [not household] pays at least £1,000 a year to fund ‘perverse’ subsidies”, referring to a 2003 article by Myers and Tickell which can be found here
The FT article actually says
“A typical British taxpayer pays at least £1,000 a year to fund perverse subsidies, then pays another £500 through increased prices for consumer goods and through environmental degradation”.
This includes all kinds of “perverse subsidies”, including agricultural etc, which are estimated at $2 trillion a year globally. Britain’s supposed share of $40 billion (assuming taxpayers = households, which is not true) would therefore represent exactly 2%, which is approximately our share of global GDP.
Looks like Tickell and Myers been abusing the backs of envelopes again.
Tickell and Myers get one thing right though, when they say:
“… perverse subsidies persist virtually untouched. This is because subsidies tend to create powerful interest groups and political lobbies”.
That was back in 2003, long before the wind farm scam had got going.
Geoff – So deregulated Britain provides c12-25% of the total!
Yep, that was the implication I found extremely unlikely. The analysis pointed to by @guynewey on Twitter suggests that there are a total of £3.6 billion ‘subsidies’ to the fossil fuel sector in the UK, £2.8bn of which are reduced rates of VAT for fuel and power, and thus are subsidies available to renewable sector anyway, and are hardly subsidies that ‘cost’ the taxpayer.
That leaves £800 million — which is a fair whack less than is available to the renewable sector, which produces a fraction of the energy. I think it’s fair to say that Ecotricity and Dale Vince get the figure completely arse-about-face.
I make the figure approximately £13.50 for each person in the UK, giving subsidies to the fossil fuel sector.
The 500-page Gummer / Goldsmith document is clearly a rich vein of bovine biomass. Consider this, from the same p390:
“The revenue that government collects from the fossil fuel sector may be greater than revenue from council tax, stamp duty, capital gains tax, and inheritance tax combined. But it is likely to be subject to long term structural decline, and phasing out taxpayer subsidies would be consistent with the Conservative Party’s principle of shifting the basis of taxation to give greater rewards to perceived ‘goods’ and greater penalties for perceived ‘bads’ such as pollution. The polluter should pay, not get paid”.
If this means anything at all, it seems to be suggesting reducing petrol tax, VAT on fuel, etc, on the grounds that revenue “is likely to be subject to long term structural decline” – presumably as we use less petrol and electricity, due to the increased cost.
Tickell and Myers confirm the information from your Twitter source guynewey, that the so-called “subsidies” are in fact taxes which the government could collect, but choose not to. The idea that tax that the government doesn’t collect is some kind of gift would be regarded as treasonable nonsense by most Conservatives. Someone should bring the Gummer/Goldsmith document to the attention of Delingpole.
Serious self-inflicted Graun injury here:
where, under the sub-heading
“One can’t assume energy prices are going ever upwards. The real problem is there may be too much fossil fuel, not too little”
Dieter Helm says:
“Customers were led to believe it would not hurt them, and hence were happy to support green policies. But now they are finding out that it isn’t true, and the backlash has started. The very real risk is that having been misled by politicians, they start to doubt the veracity of climate change”.
The most recommended comments by far are:
“This all sounds quite sensible to me – so what’s it doing on CiF?”
“This is a suspiciously reasonable article by someone who knows what they’re talking about. Very poor”
The Guardian and its readers are one in understanding the grave problem presented by cheap energy. They’re quite happy to admit that they were wrong about peak fossil fuels – an empirical observation overturned by events. But climate change is something else.