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Premier's James Smith: Miliband's energy policy is doomed to failure
by James Smith on Sep 26, 2013 at 11:03
Firstly, the UK has moved over the past 10 years from being a country self-sufficient in gas to one which imports half of its requirements. Over this time, gas prices have trebled. Gas fired power stations, many of which are loss making and in the process of closing down, have had little choice but to increase their wholesale prices in the power market.
Secondly, government policy has had a huge impact. Here we come back to our “energy trilemma”. Policy has been to prioritise the reduction in carbon emissions. This has come in two forms: the promotion of renewable energy, and energy efficiency schemes. Both these policies reduce emissions, but at the expense of affordability. Renewable energy receives unit revenues roughly double that of a conventional power station. This is paid for by consumers through their bills. Likewise, energy efficiency policies have increased tariffs as utilities have been forced to carry out insulation schemes for older houses, again paid for through bills.
It is my opinion that the measures announced simply will not work. If anything, the uncertainty created will increase the cost of capital in the sector, discourage new investment and will in all likelihood increase prices over the medium-term, rather than decrease them. The only real option the Government has is to pull back substantially from new renewable energy build, which Labour is unlikely to be able to do even if it wanted, given the EU mandated targets to which we are already signed up to.
The UK is now a price taker in the world’s energy markets and Miliband can no more legislate what these prices are, than he can legislate for a white Christmas.
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