Sunday 7 August 2011

If The Meltdown Doesn't Bankrupt Us, Huhne Will

Might seem a bit parochial to be posting on UK energy policy in the circs, but hey, perhaps a modest distraction ...
We've posted briefly before on Huhne's electricity White Paper, and commenters noted how bizarre are the numbers he claims on future electricity price increases.

Stating that his 'reforms' will save households £40 on their bills by 2030 is a completely brain-dead thing for him to do (though Coalition MPs have all been solemnly briefed to repeat this to constituents as though they believed it): and anyway the numbers are all coming apart at the seams.

It all depends on a fragile set of assumptions, in particular that the wholesale prices of both oil and gas will rise strongly, at the same rate, over the 20-year period. This is followed by some detailed (and easily challenged) hanky-panky with the counterfactuals.

However, the main flaw lies in the gas price assumption. If gas were to rise less steeply than oil the whole edifice falls apart. And there's good reason to believe this will happen - so good, in fact, that the DECC wallahs have felt obliged to run a few cases on that basis. And - lo & behold - they can easily come up with scenarios that show electricity prices 52% higher by 2020 as a result of the 'reforms'. And those are just the scenarios they feel inclined to share with us: how about if GobalRecession2 trashes the prices of both oil and gas ?

Of course, every man jack now wants subsidies. The generators have long since realised they can issue ransom notes at every turn: and now the manufacturers are in on the act. The 'fuel poverty' lobby will soon be demanding free fuel for hard-working families.

This is the way to a third-world energy economy (to accompany the rest of our fast-degenerating situation) where every aspect of pricing, investment and power-plant operation is dictated centrally. We've been there, done that & got the CEGB T-shirt. And a pretty disreputable garment it is, too.


Pic and caption: DECC website ! Taking the piss - or what ?


Steven_L said...

Beam him up, Bobby.

Anonymous said...

Sorry to disagree a little bit but were it not for the over-investment by the CEGB in the 1970's the lights would have gone out long ago, as the privatised companies can't or won't build new plant to save their lives.

John Thomas said...

To claim the prices of anything 20 years from now is absolutely ludicrous, electricity prices are going up 15% this year plus we have once almighty dollar almost in free fall, not all Obama's fault, it start in Clinton's time, took off under Dubya, rising again under Obama, the trouble is the US national debt seems to be rising exponentially where is the dollar going to go, who knows (the yanks only pay in dollars). The UK£ is not doing not much better it has bearly strayed from 85p for months, UK banks have lent to the PIGS or guaranteed loans so we are knackered on that side. If Huhne can see in his crystal ball what anything will be in 20 years time when others just see mist, I think he is deluded. In 20 years I will be probably pushing up daisies so I will be out of it, come to think of it Huhne will probably will also pushing up said daisies so no one will be able to hold him to account.

Nick Drew said...

she'll not take much more o' this, Cap'n Steven !

the privatised companies can't or won't build new plant - it's definitely won't, anon - they've all built lots in the 20 years since CEGB. Now they are just holding out for subs and, to be fair, can easily claim regulatory chaos as their reason for holding off: Prisoner's Dilemma, writ large.

JT - yup, 10- or 20-year price forecasting is a mug's game - though you'll find plenty willing to do it (for a fee ... and people pay for it !)

Budgie said...

Please, pretty please ND, don't write about Hoohne any more. I have just had to take yet another dose of heart pills to calm myself down.

Nick Drew said...

fixated ? moi ?

rwendland said...

Aren't the gas power plant builders, more quickly built than the rest, just waiting to see if a) GobalRecession2 reduces leccy demand and/or gas prices, b) if the nucs ever do get built.

Being the fastest movers, they can wait until the lie of the land is much more certain, and avoid building too much plant that would become less-profitable? I don't see much point building much gas plant until the EU regulated 2015 old coal plant closures - ie decisions 2012/3 onward.

CityUnslicker said...

Shake Gas is going to make gas a lot cheaper than oil over the next 20 years. In fact, it maybe that Gas becomes incredibly cheap.

I guess there are no predictions for this in the model.

Nick Drew said...

Mr W, that's exactly it, they are in the wings with their Section 36s in hand and their brownfield sites readied

in the meantime someone may even bung them a sub to build a peaking plant (hahah!) or (more likely) a capacity payment

and as you say, gas prices are looking to have passed their Fukushima-peak

CU - much as I like the idea of 'shake gas' (+:
in fact their model knows all about shale and its possible impact, & hence the scenarios they have run that I cited

may we hope the whistle gets blown on all this before he has spent too much of our money & wrecked too much of the market ? though GR2 would be a rather high price to pay ...

another anony mouse said...

ND, that's my concern. WILL the whistle actually get blown on this and the Crapper stopped before it's too late. Otherwise, we're all just typing inconsequential ramblings. :/

btw, I do love your posts for the information and commentary, but they depress me so - who advises these ppl such that they make these, on the face of it, crazy decisions??

Elby the Beserk said...

I see now that the government are making placatory noises regarding businesses getting subsidies to help them deal with green taxes. Which is just great eh? Not only do the less well off get to subsidies those who are well enough off to invest in "green" energy, now we are to be taxed to deal with a monster cock-up by the government.

We're in Ireland in September. Property prices in West Cork are still plummeting, and an exit from this god forsaken country becomes more and more tempting.

Electro-Kevin said...

Of course 'green' policies cannot be reconciled with an open border immigration policy and ever increasing population levels.

Let's understand what these 'green' taxes are really for then. They are to prop up the welfare state which the coalition refuses to take a hatchet to.

Britain is a socialist state in all but name. Party members of all colours support it.

How else is it to be paid for but through the redistribution of the wealth of the productive sector ?

A token amount of energy taxes will go to carbon reduction. The rest will go to propping up the public sector.