"The Conservative party is drawing up radical plans to break up the "Big Six" energy companies in an attempt to increase competition and reduce customers' bills, setting the Tories on a collision course with the industry. Greg Clark, the shadow secretary for energy and climate change, wants to force the big suppliers to divest the bulk of their power plants to allow new entrants into the market" (Grauniad)
Wow. Where do we start ? Firstly, Clark had better decide whether he intends to follow anything approaching NuLab’s fantasy-plan for renewables – because if so, he’ll need the Big 6 to make it happen.
Hopefully, though, someone will tell him what everyone in the industry knows, viz that 30% renewables by 2020 is utterly, utterly infeasible, in which case let’s move on. Remember this ?
However much the EC likes to think they are all mutually reinforcing, the drivers of the ‘policy triad’ are inherently in tension. Improving competition trumps renewables so far as I am concerned, and vertical integration is anathema. But before we break up our vertically-integrated Big 6 – shades of breaking up the ‘Big 3’ ten years ago – let’s please remember the major setbacks that have been suffered since 2001, when the UK looked to be set fair for a highly competitive energy future.
Firstly, the collapse of Enron and the ‘merchant energy’ business model in 2002, and with it liquidity in the forward markets. Then, the complete failure to enforce the EC directives on EU gas-market opening in time for when the UK became a net importer of gas in 2004. Next, the banking crisis which snuffed out much of the intelligent new sources of liquidity that had almost replaced Enron & Co: and finally the cementing of the vertical integration model when EDF was allowed to buy BE (the last big structural long) and sold on a large slice to Centrica (the last big structural short).
Mr Clark, even if competition trumps renewables on your agenda - and we haven’t mentioned security of supply yet, either - this isn’t an easy situation to unpick. My energy manifesto is two years old now and may need updating - looking forward to a bit more detail in yours …