Robber Lords and the Marketplace of Bad Ideas

by | Jun 18, 2013

I watched the entire debate — if it was a debate — on the Government’s Energy Market Reform Bill (EMR) in the House of Lords today.

For a chamber that is populated by people who are appointed on the basis of merit, replacing the feudal system, it was a very disappointing experience. It’s not simply that I disagreed with many of the comments; the problem is with their total mediocrity. Nigel Lawson and Matt Ridley made good arguments, but the putative ‘rebuttals’, were all of the kind we’re so used to hearing: the deference to the scientific consensus, and the litany of climate catastrophes that await us. The latter invariably consists of cobbled-together factoids. And the former, as ever, allows someone with very little brain power to marshal ignorance against a better-informed argument.

That much is old news. We’re used to that. But one theme came up often in the arguments in favour of the Bill that I hadn’t given too much thought to before: the apparent need to create ‘investor confidence’ in the renewable energy sector.

Hansard isn’t up yet, so I can’t refer to any of these arguments directly. (I imagine they’re still struggling to decipher Lord Prescott’s speech). But here are some comments made outside the house:

Lord Deban:

in order to secure maximum economic benefit for the UK, it is crucial that the Government gives certainty to investors by legislating to chart a clear course well beyond 2020. Only then will we be able to insure against the risk of much higher future energy prices; enhance Britain’s energy sovereignty; and protect ourselves against dangerous climate change.”

Michael Fallon:

EMR will provide certainty to investors with long-term electricity price stability in low carbon generation

Ed Davey:

CfDs are designed to boost investment in low carbon technologies, including renewables, Carbon Capture and Storage (CCS), and potentially nuclear, by providing certainty to revenue streams, encouraging investment and finance

The government’s thinking appears to be that creating ‘certainty’ — i.e. eliminating risk — for investors will make them rush to put their money into the UK’s energy infrastructure.

But hold on a minute. When was ‘investment’ ever conceived of as a risk free opportunity?

I thought the deal with capitalism was that those who are fortunate enough to have surplus capital risk it for the possibility of a return. The idea is that you make decisions about what to invest on, based on your own knowledge, or someone else’s knowledge of a market.

When you take out a pension plan, for instance, you’re sometimes asked to state your attitude to risk. Risk and potential yield correlate. But note that, even with a low-risk pension, you’re not being sold certainty.

So what does this say about the Energy Market Reform Bill?

In what sense is it ‘reforming’ a market, when you promise investors that you will eliminate risk? In fact, in what sense is it a ‘market’ at all, if there is no risk? No risk, no competition, no market.

What the government seem to be proposing with the EMR is something more like a loan.

Moreover, some of the arguments for this ‘reform’ include the suggestion that big energy suppliers should be forced to announce their prices up to two years in advance, so that a more competitive retail market, and smaller scale producers can emerge. That can only push prices up. thereby benefiting the ‘investors’ — a surprising number of whom turned out to be speaking in the House of Lords today.


  1. Pathway

    There idea is best known as crony capitalism.

  2. Jack Savage

    Is there any way I can join Lord Deben (Ben, note spelling!) at this particular trough?

  3. TDK

    While they worry that there isn’t sufficient certainty for investment in Renewables, they do not worry about the uncertainty for other investors who fear arbitrary laws designed to punish “unsustainable industries”.

  4. j ferguson

    Suppose there is no market. These folks are talking about inventing one. The words are a little off, but to me that seems the intent. Maybe they don’t realize it, but I suspect they do.

    If this seems a bit askew, I’ll develop the idea a bit more.

  5. Derek Tipp

    What the Energy Bill does is to completely rig the market. In fact it attempts to centrally plan our energy which is the complete opposite of a free market. The result is likely to be shortages and blackouts, just as occurs in other centrally planned economies like the former USSR.



  1. The Madness of the Energy (and Climate) Minister » Climate Resistance - [...] Liberum’s analysis is pretty solid. In summary, it argues that the EMR bill will transfer risk from investors in…

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