For some years, the leaders of the energy industry have been warning us about the coming ‘trilemma’. These 3 lemmas, push-me-pulling-you in different directions, are:
- Environment – Energy generation and supply must be ‘green’ – ideally it should only use renewable resources, not release carbon into the atmosphere or cause pollution – including noise, additional road traffic, interfering with daylight or spoiling the scenery. Oh, and you shouldn’t make half the country uninhabitable for the next 10,000 years with a nuclear explosion. Preferably. Sadly, that’s expensive.
- Price – everyone wants their energy to be as cheap as possible. Old, vulnerable and poor people need it to be cheap or they may have insufficient heating in the Winter and die. Gas was quite cheap, until everyone started buying it and everyone started to become dependent on Russian pipe-lines.
- Security of supply – Customers want as much electricity as they ask for, whenever they want it, at no notice. This is known colloquially as ‘Keeping the lights on’. They even want energy if the sun doesn’t shine or the wind isn’t blowing or a power-station goes off-grid or a fuel is temporarily in short supply due to war, natural disaster, strike action or political protest or unrest. Reliability is neither green nor cheap.
The trilemma has traditionally been balanced by using a mixed portfolio of nuclear, gas, coal and renewables (wind and increasingly photo-voltaic cells with water-heating panels to reduce demand.)
There is fourth lemma that the energy industry and politicians find distasteful to talk about:
- Profit – They need to make money. Arguably, this is also a security of supply issue, as generators that fail to make sufficient profits will close down plant, which after a while may not be economically viable to bring back on-line. ‘Profit’ is another dimension, in my opinion. The energy companies operate in a privatised, market-capitalist environment. They are owned by private investors. They are not only competing with the problems above, and with each other but with other industries in which their investors might choose to invest. Energy companies were traditionally regarded as a safe bet. They were a place to put your money for a small guaranteed return on investment during unstable market conditions. Then Ed Miliband, the UK’s ‘Leader of the Opposition’ announced that if Labour are elected at the next General Election, he plans to freeze energy prices. He doesn’t plan to freeze costs and he can’t reduce competition in international energy markets. This Government has reduced support for green technologies; the next might ban profits. It’s a real ‘quadlemma’.
If the Labour Party doesn’t know that this is a Bad Idea then they don’t understand market economics, or worse: they do understand, but they are lying to us, in the hope of turning public opinion to support nationalisation of the UK energy industry. I don’t know if that would necessarily be a bad thing but I’m a little tired of being lied to and treated like a child who should “shush while the grown-ups are talking”.
The press and the political parties have rounded on the energy industry, particularly the ‘Big Six’ but I haven’t seen any meaningful evidence to support their attack. Have you? They should stop telling us what to think and provide data, so we’ll think it for ourselves. How do the profits of the energy companies compare with the supermarkets or BT or the mobile phone providers or Google? Are any of those large companies with small tax bills that seem to have their protection earning more that the energy companies? Why not give us the data, to prove that we are being exploited? Why don’t the energy companies defend themselves more vigorously? What are they all afraid of?