Long term increase in Gas Prices

Last week two of Britain’s biggest energy suppliers shocked the nation by announcing that gas and electricity bills would increase by up to 9% from next month. This announcement catapulted the government’s energy policies back into the limelight, policies that have attracted a lot of criticism since the coalition’s rise to power. David Cameron responded to this by announcing that energy companies would be forced to place their customers on the lowest tariff possible. Even this policy, however, has been targeted by consumer groups who believe that it will only serve to reduce what little competition there is in the energy market and so increasing energy bills in the long term.

 

This autumn is proving to be a critical time for the energy industries of the UK as we await the long overdue energy bill that will define the future of energy production in this country. This bill aims to modernise our energy infrastructure through over £100bn of investments which will replace our ageing power plants and overhaul our transmission grid. The choice at stake could not be more critical, do we follow a low carbon policy or do we continue to rely heavily on fossil fuels for our energy? At least one thing is agreed upon, that coal fired power stations have to go as they are the least efficient and the most polluting by far. On top of this, there has been a huge reduction in public support for nuclear energy following the meltdown at the Fukushima nuclear plant in Japan due to the Tsunami in March 2011. Now the government has to decide what will fill these gaps in energy production.

 

The chancellor states that the subsidies for renewables need to be cut to meet budget demands and that Britain should instead fulfil its energy needs by a massive expansion of gas fired power stations.

The current disarray of the government’s energy policies was neatly illustrated in the leaking of an email that was sent from the chancellor to the energy secretary Ed Davey. In this email the chancellor states that the subsidies for renewables need to be cut to meet budget demands and that Britain should instead fulfil its energy needs by a massive expansion of gas fired power stations. Subsequently, it has been decided that 20 new gas fired power stations are going to be built over the next 20 years.

 

On top of the obvious environmental arguments against this, there has been a backlash from the business community who believe this to be the wrong decision. The leading business lobbying organisation in the UK, the CBI, has said that it is crucial that we do not have a reliance on any one energy source, especially if the fuel will have to be imported, as is the case with gas. A reliance on imported gas will leave us exposed to global price fluctuations leading to more rises in energy bills while leaving us no chance of meeting our emission reduction targets. The threat of cutting low carbon subsidies means that many companies are considering withdrawing hundreds of millions of pounds of investment from new low carbon projects, putting thousands of jobs at risk.

 

An emphasis on renewables would give the UK more control over the future of its own energy production and it would surely serve to stabilise the cost to the consumer, the 9% rise in energy bills evidence of how temperamental the price of gas can be. Renewable energy is (nearly) free to produce and with sufficient subsidies it would be easy to stimulate the initial investment needed for the installation. Renewable projects would also secure jobs and allow us to meet our greenhouse gas emissions targets. After all, if the world’s biggest oil exporter (Saudi Arabia) can commit to a 100% renewable switch over, why have we chosen a path of gas over renewables? Cameron’s famous statement that this coalition would be the “greenest government ever” is in jeopardy.