Thursday 11 September 2008

Brown and the Energy Companies: He Hasn't a Clue

Today's non-event of an energy package prompts me to relate how a minister who really understood the workings of capitalism conducted his business with the energy companies.

In the early 90's Tim Eggar, Energy Minister, was seized with the fact that the UK was soon to have a surplus of natural gas - but only for 5-10 years, the data was clear, after which we would revert to net importing (as we were for nearly 20 years before that). The UK gas market was liberalising but continental Europe was not, and it would be highly disadvantageous to import through unliberalised European transit routes (the LNG revival was not forseen).

on: build a large interconnecting pipeline to mainland Europe, initially to be used primarily for exports (with some importing in winter), using these new trading flows to preciptate and stimulate competitive market conditions in Europe. Couple the infrastructure initiative with relentless political pressure for EU energy market liberalisation, and the UK would be well-placed when it needed to resume net importing, as we did in 2004.

Eggar: man of the world

It was no part of a Tory government to build pipelines itself: private enterprise must do the business. But it rapidly became evident that this wasn't going to happen spontane
ously - a typical shortcoming of the real-world capitalist system where forward economic signals, however clear, coupled with diverse ownership, are sometimes insufficient to bring about timely investments - a major cause of extreme cyclical swings and over-corrections.

So Eggar, a man of the world, set about 'persuading' the oil companies, as only a government can. In the most gentlemanly fashion, he lined up the usual suspects and told them in words of one syllable that unless they formed a joint venture to build the Interconnector he had in mind, they could whistle for future North Sea licences. Oh, and for good measure, unless the Norwegian oil co's joined in, they could whistle for a new energy import treaty the Norwegians very much wanted.

Result: in 1998, a timely new pipeline that has been highly successful - and profitable - for all concerned. Regrettably the incoming Labour regime failed to press home the EU energy liberalisation thrust, but that's another story.

Fast-forward to 2008, when any fool (yes, even Brown) can see we need a major new fleet of power stations in the coming decade and more. This state of affairs calls for people in government with a genuine grasp of the ways of the world.

But this, we plainly do not have: instead, a clown called Malcolm Wicks, under a PM whose feeble and incomprehending conversion to market economics embraces no serious understanding of what it's all about.

Will Cameron's front bench include people who know the score ? I am yet to be convinced: but we must hope it will. Otherwise, if the lights are not to go out, there will be a ghastly - and very expensive - scramble, commencing in 5 years time.



Old BE said...

Running out of power stations or at least making electricity very expensive will do wonders for our Kyoto targets. Will the EU give us a gold star for our efforts?

Sackerson said...

Most interesting, Nick. Wish you were MSM. Or are you now going to do that book?

lilith said...

No no no Sackerson. I like it that Nick isn't MSM. It means I can trust him.

Nick Drew said...

and you never know when I make break into verse ...

lilith said...

Quite, Nick :-))

James Schneider said...

Nick, did Tim Eggar or the then Government gain any political short term capital from acting as they did? It wouldn't surprise me if they didn't. I doubt very much that Cameron will have/use the best people available, but he's not incentivised to. The current Government has not been incentivised by the media or the public to do quiet, worthy things like Eggar. So we have very capable men like Hugh Bailey and Barry Gardiner nowhere near Government.

Nick Drew said...

BE - the Commission gives us lots of gold stars - for our efforts on opening our gas & power markets, and is very rude about the countries' failures. Fat lot of good it does us

Sackers - it's always nagging me, at the back of the mind ... (but MSM ? anything specific ?)

James - no, not really in any sense of a fanfare, or even much recognition: Eggar is just a competent and practical guy who likes to do things properly - and understands the way things work ! (He came from business, and quit government by his own choice in 1996, to get back into business ahead of the inevitable)

recall also that the later Thatcher govts had persuaded themselves they were in power for ever, and accordingly had at least half an eye for long-term projects and perspectives: happy days !

don't know Bailey

Lillith watch this space ...

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