Here's one for Budgie: a long and thought-provoking piece in the LRB entitled How We Happened to Sell Off Our Electricity by James Meek, on what he reckons is the disaster of our energy policy which, inter alia, allows the frogs et al to buy up our assets.
"In overseas chanceries the Thatcher doctrine came up against ambitious leaders who were no less patriotic, but not so arrogant and naive. Unlike Thatcher, they didn’t assume that if their country levelled its playing field, others would level theirs."
(You can see why I feel Budgie will enjoy it)
"Greg Thomson, Unison’s head of strategic organisation, told me ...‘When London Electricity was privatised, we adopted a policy of returning it to public ownership, and I’m pleased to think I delivered on that,’ Thomson said. ‘Obviously to the wrong nation, but you can’t be too picky’."
"Thomson remembered an early trip to a European Works Council meeting in Paris, when one of the CGT [French union] men said to him at lunch: ‘There’s only one country that’s stupid enough to sell off its electricity industry, and that’s Britain’."
Actually, it's about more than just this aspect: he tries to give a critique of a quarter-century of energy policy. It is, as I said, quite long (12,000 words) and it's hard to summarise it or offer a rejoinder in a blog post. It deserves a rejoinder because Meek is a generalist (and a Guardianista), and despite a formidable research effort he has got a load of important details wrong. Towards the end, he even seems to realise it's not as clear-cut as initially he tries to make it seem.
"That’s not to say the French people will be winners as a result of the deal ... the British government might still decide the EPR is too risky and allow extra gas stations to take up the slack ... In which case the French people will be on the hook for EDF’s expensive acquisition of British Energy and its existing, worn-out British nukes."
"That’s not to say the French people will be winners as a result of the deal ... the British government might still decide the EPR is too risky and allow extra gas stations to take up the slack ... In which case the French people will be on the hook for EDF’s expensive acquisition of British Energy and its existing, worn-out British nukes."
Well precisely. But you don't meet articles quite as interesting as this very often. So consider it recommended as a provocation !
20 comments:
Yes, i read this the other day.
I must say though the bit that stayed with me was:
'The electricity competition has now been held. It is over, and Britain lost. From the point of view of technology and capital, electric Britain is no longer a centre. It is another centre’s province.'
I would like to see a comparison of historical electricity prices in France, Germany and the UK. i.e. deregulation vs central planning.
It's the whole Anglo Saxon economic model that is wrong.
Working to short term profit with shysters scamming off a bit for themselves as they go.
Madness in fact. We are told to accept foreign ownership is to be enlightened - to be otherwise is xenophobic.
In fact the result of this swindle is enlightened middle-aged graduates living at home with ma 'n' pa or on sink estates.
Felix Dennis has it right when he says that you can share in profits but you must never give away ownership and control of essential assets.
Ugh. Economic nationalism at its worst. It's the same dreary argument as whether it is better to have a manufacturing base at any cost or to let things find their own level in the global marketplace. It's also the Britain went ahead and did what everyone else said they would do but didn't story, again.
Roym asks the single important question which is whether consumer gas and electricity prices are higher or lower in the UK vs our continental competitor countries.
In general I believe that an open, competitive market will perform better for consumers than a vertically-integrated politically-controlled nationalised monopoly.
I must concede that there might have been a positive figure on the other side of the "national" balance sheet from the "profits" of running a hugely inefficient centrally-planned system. More people must have been employed for higher wages which in a closed economy might be of some benefit to the national economy.
But as we don't live in a closed economy can it possibly be true that the benefits to the shareholders (i.e. the taxpayer) and employees of the old nationalised industry could outweigh the benefits to consumers (i.e. the same people who pay taxes) from a competitive market?
* Declaration of interest: I bought shares in National Power and PowerGen at privatisation and did very nicely out of them thankyouverymuch.
"EDF’s expensive acquisition of British Energy and its existing, worn-out British nukes."
Doubt he's right about that. EDF payed £12.5 billion for 8.7 GWe (current output) of nuclear generation capacity (+ coal-fired Eggborough). You'd need 5.25 new EPRs for that capacity, costing around £37 billion, say £45 billion allowing for interest payments etc before generation starts.
With the latest 7 year life-extensions hoped for, they hope to get about 22 years life from them on average, for about 25% of the cost of new ones. EPRs would have to last about 88 years for the same value, well beyond design-life, though they may well make it.
You'd have to do a proper NPV analysis for a proper view, but it's likely the old ones are a bit better value than the new. Depending of course on maintenance costs of course, and if they can further life-extend, how you value risk, etc.
I read about half of it before running out of steam. Ho ho.
It's a bit confused. He seems to be saying that too little price competition meant cash piles building up s costs fell. Well that is easily/was easily solved by having a stronger regulator or wider competition. He also criticised the "pool" but this has been done away with long since.
He says there was under-investment in new capacity at the same time as the dash for gas was taking place.
I think overall he has a rather misty-eyed view of the overall efficiency of a nationalised system and thinks that because a few firms took the piss in the early years because the competition regime was flawed that we shouldn't have tried it out.
Also thought the subtle suggestion that privatisation is linked to National Socialism was a bit pathetic.
I rather like Johnny Foreigner buying our assets. It's likely they'll overpay and there's a good chance the management will be improved (see Nissan and Toyota for details).
Selling public utilities to the French or for that matter anyone else is a little like giving a key to your back door to the local burglar.
needless to say, I am with BE and Tolkein ...
Mr W - we need to wait & see what CfD strike price is offered, I guess
also, whether the subsidised renewables regime trashes the baseload price for nukes and anyone else not receiving a bung - it's pretty much done for gas right now, here and even more so in Germany
also, what the Capacity Mechanism will actually look like ...
in fact, Regulatory Risk is pretty appalling !
thank heaven the gas market itself is more-or-less beyond UK regulatory interference
meanwhile, our (delivered) electricity prices are well and truly less than in Germany ...
Let's see if the lights go out in 2018, Nick.
This country is in even deeper doo-doo than it was in the '70s in IMHO.
deep doo-doo, yes, Kev
lights going out ? governments will do just about anything to stop this (at our expense) so, on balance, prob not
Well thank you, ND, for thinking of me.
Blue Eyes said: "Ugh. Economic nationalism at its worst."
How ironic.
It is culturally nationalistic to make the assumption that Johnny foreigner is not nationalistic.
And that is the problem of the English: they have a tendency to sneer ('how tewibly nationalistic, dahling') at everyone who doesn't have the automatic cultural assumptions of ............ the English. Now how nationalistic is that?
I can never be guilty of that charge, Budgie.
As they say in Parliament, the long-term is merely a succession of short-terms.
As any fool knows the correct time for a strategic investment is always ten years ago.
For me, after lunch is a long way off.
"lights going out ? governments will do just about anything to stop this (at our expense) so, on balance, prob not"
*Probably* not.
At the very least you make it sound as though it's going to be very expensive and it all seems very wing-and-a-prayer to me.
This has nothing to do with *nationalism* on my part (Blue) - I just have this unshakeable unease that a non-British supplier will (rightly in times of trouble) concentrate all its efforts at home before elsewhere.
I also have this unshakeable belief that we are putting ourselves in a strategically vulnerable position making it harder to de-couple from Europe or to exercise self determinance.
I am not sure that this degree of economic displacement is what Mrs Thatcher had envisioned would come from her privatisations.
The oddest thing about the past thirty years has been the fervent belief in the value of market exposure - particularly outsourcing - combined so paradoxically with an equally fervent belief in the NHS and welfarism.
At least half of that time was spent under Tory rule and not even they seem to have the guts to go for the truly free market economy that they espouse.
Why ever not ?
Because they know, deep down, that it is their duty to keep the basics in place. It's a pity they didn't see one of those basics as being energy security.
Privatisations and outsourcing(however well intentioned) were heavily subsidised by social taxes and household credit (propping up depressed wages) and have clearly failed to deliver on investment and so here we are - with a nationalised electricity grid but in foreign ownership - considering whether or not the lights will go out (something that should not even be an issue.) all because we have this "Anything but British" mentality.
Kev, the very possibility of the lights going out stems only from the imposition of the 'decarbonisation' agenda, and the appalling regulatory uncertainty this has brought
which has absolutely nothing to do with these issues
Budgie, you and your angels are dancing on the head of a pin, (and very entertaining too)
Nick - Lights going out is one of my concerns and I get your point. It needs to be dealt with.
The other stems from the now discredited belief that state owned energy is not the best way to deliver.
When people ask for comparison with bills - pre and post energy privatisation - they MUST, in all fairness, factor in the cost of outsourced wages, revenues and profits and its impact on the consumer's tax bill.
Budgie, love the comment dahling. Presumably apart from my offensive use of the word nationalistic, you agree with my main point?
I see that Bernard Ingham's Supporters of Nuclear Energy group is arguing *against* Johnny Foreigner EDF's proposed nuclear new build at £130/MWh. They've written to the boy George objecting, pointing out that at the price EDF's income would be £163bn over 50 years from two EPRs. I wonder what their motivation is, and if they would say the same about a UK nuclear company?
Also the FT says govt want to limit Chinese investment in the competing Horizon new nuclear company to under 50%. So limiting Johnny Foreigner seems flavour of the month.
With a generic technology like gas/coal generation I'd not be at all bothered by foreign ownership, as in extremis we could nationalise and easily operate them ourselves. But it is a bit different with nuclear, as the essential specialised technical support services would be abroad, and nationalising against the owners desire would make it very difficult or impossible to operate them for long. Mind you the same could be said of any nuclear technology sourced from abroad, but if we own it from the outset there is less risk of upsetting the support services abroad.
NB The US won't allow EDF to build/operate a nuc there because of foreign ownership. Earlier this month:
"Foreign ownership blocks licence for Calvert Cliffs 3"
"The Nuclear Regulatory Commission’s Atomic Safety and Licensing Board has ruled that [EDF owned] Unistar is ineligible to obtain a license for its proposed Calvert Cliffs 3 nuclear power plant in Maryland, because it is completely owned by a foreign corporation.
... if Unistar fails to find a domestic partner within 60 days of the 30 August ruling that the proceeding will be terminated."
... Areva seems to be getting excited about a China linkup - according to the FT:
"Areva ... stresses the EPRs it is building in China have been on time and on cost, partly thanks to the discipline and project management skills of partner China Guangdong – one of the world’s top nuclear developers, with 18 nuclear plants under construction.
Areva points to a presentation by China’s National Energy Administration which shows the EPRs being built in China are 11 per cent cheaper than the AP1000s, in terms of average investment per unit of installed generating capacity."
Hmmm. Either Areva is desperate for a partner that is not EDF, or sees that Chinese builders are the a) only chance to build EPRs at a vaguely economic cost, and/or b) can supply cheap capital to finance EPR new builds.
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