Energy Prices- The Evil Corporations milking the poor… or not

 

EDF have announced that they are raising prices by 10.8%, the fifth of our sixth big energy companies to make large rises to fuel prices. Clearly this must be an example of the super rich corporations attempting to rip off the consumer. Capitalism in the energy market has clearly gone wrong… hasn’t it?

Well actually no, if we look at some facts we can see that profit makes up only 3 to 4% of  the cost of energy

 

Put simply if all energy companies made £0 profit your energy bill would barely go down. (For more details see ofgem)

So why is this? Well firstly there is the natural inefficiency that happens in an oligopolistic market. As Fatuma Ukwaju points out high barriers to entry caused by huge levels of Government involvement in the energy industry means that it is very hard for new entrants to enter the market, which keeps costs high. As she says:

On average, electricity costs 10p/ kilowatts over an hour(kwh) in the UK.

In Turkey, where there are currently 34 Energy companies, electricity costs 8p/kwh.

Canada has a whopping 20 electricity companies, resulting to average electricity costs being a mere 6p/kwh.

China has over 25 companies that supply Electricity, which has lead to their electricity costs to be a mere 3p/ kwh.

Secondly there is tax and regulation. As the UK pushes further and further on with renewable energy targets the price of energy bills rises and rises. Look at the extreme example of Denmark, it took part in a huge expansion of wind turbine building aiming to get 50% of its energy from wind.

The result? The highest energy bills in the EU. Wind energy makes up as little as 5-10% of Danish Power. Wind power by the nature of wind is intermittent, Denmark is lucky that its neighbours have strong hydro electric power which can compensate for when winds are low. In other countries wind farms require ‘backing up’ with conventional coal or gas power stations that have to be turned on and off based on the wind. Inevitably this is much less efficient and leads not only to higher energy bills but higher CO2 production as well.

Danish think tanks CEPOS found “that the effect of the government subsidy [For Green Energy] has been to shift employment from more productive employment in other sectors to less productive employment in the wind industry. As a consequence, Danish GDP is approximately DKK1.8 billion ($270 million) lower than it would have been if the wind-sector workforce was employed elsewhere.

EDF itself admits that energy costs alone only justify a 2% rise in bills. The other 9 odd percent is down to “renewable, energy efficiency and social schemes” and partly from “transmission and distribution charges”. The full statement from the company states

The company has seen a sharp increase in costs since the start of the year, with transmission and distribution charges rising by 9%, and the costs associated with the implementation of obligatory renewable, energy efficiency and social schemes increasing by more than 50%. The cost of buying energy has also risen by 4% for next year … The cost of buying energy accounts for around 50% of a typical energy bill. The other half is made up of non-energy costs.

As this article perfectly points out it is these renewables targets which hurt us the most. I urge you to read it as it puts the case beautifully and further shows how windfarms raise transmission costs for the national grid

As Lewis Page puts in the article beautifully

So it’s quite plain that the great bulk of this brutal price hike comes directly or indirectly from renewable power and energy-efficiency efforts. In other words, it comes from compulsory government programmes intended to cut our national carbon emissions. Without these programmes designed to force up our energy bills, there would be no windfarms and insulating your house would cost so much that it probably wouldn’t be worth doing, especially as energy would be a lot cheaper.

You wondered how all those windfarms get built, when they could never pay for themselves by selling electricity? This is how. You wondered why companies which make their money selling energy are always offering you cheap ways to use less energy? This is why.

You can now put a price on the government’s lofty statements of carbon virtue – and that price is steeply climbing energy bills for the foreseeable future

So why are energy prices so high. Don’t blame capitalism, as Fatuma shows the more competition (capitalism) you have in the Energy sector the lower prices are. What is to blame then? Socialism, and its bastard child Corporatism. The more we push for ‘green’ renewable energy (heavily subsidised by the taxpayer, including huge grants to very wealthy landowners) the higher the cost of energy is. The less targets the Government sets, the less we tax (imagine how much less costs would be to energy companies without corporation tax, employers national insurance, income tax, employees national insurance, VAT etc as well as fuel duty and other excise duties energy companies have to pay when using transport) the better off consumers are. The more we insist on using costly, inefficient and ineffective (they don’t even lower our CO2 output) renewables like wind power, the higher prices will be.

Everyone has to use energy to stay alive, Government increasing energy prices with taxes and targets is one of the most regressive steps possible. Every renewables target, every penny taken in tax that adds to the cost of a fuel bill is a shameless attack on the poor. If the left truly care about the worst off in our society they must say lower tax, and no to renewables.

12 COMMENTS

  1. Seems like a plausible argument to me, I don’t think there’s much to disagree with here. But I was surprised to see the parenthesis thrown in at the end: “they don’t even lower our CO2 output”! Do you have a source for that? The idea that renewable energy increases energy costs is not surprising; the idea that it doesn’t actually lower CO2 emissions is remarkable, because it undermines the whole reason for it. Surely that’s worth expanding upon?

    • It costs more energy to source, refine, mould and distribute the metal in a wind turbine than the turbine will produce in it’s 40 year existence. That energy is all coming from coal / oil / gas.

  2. Great article and tbh in comparison to what I’ve understood (from the mainstream media) I’m pretty gobsmacked.

    You are right in your argument that we need more energy companies.

    And kudos for you for mentioning Turkey

    #boom

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