Why Wales needs independence from volatile energy markets

By Patrick O'Brien   |   Columnist   |
Sunday 17th April 2022 12:30 pm
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Energy prices are on the rise (Pixabay )

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AS I WRITE this, in the middle of an April afternoon, the National Grid is reporting that 46.8 per cent of the electricity it’s transmitting has been generated by renewable fuels, nearly all of it (35.1 per cent) wind.

Nuclear and biomass are accounting for the bulk of another 22.1 per cent, with all these sources together totalling just under 70 per cent.

Gas-generated electricity is contributing just 29.5 per cent.

By the evening, apart from a few minor differences, the breakdown is the same.

Consider now the swingeing £693, 54 per cent, increase in the energy price cap — the maximum suppliers can charge households — that took effect at the beginning of April, a rise that will pile about £700 a year extra onto already sky-high electricity and gas bills and cause real distress for many people in rural Wales immersed in longstanding daily struggles to make ends meet.

Ofgem, the energy regulator, says the price cap spike has been “driven by a record rise in global gas prices.”

People on low incomes now reeling from this devastating and, actually, unconscionable, price hike will be infuriated by Ofgem’s nonsensical claim that the cap “protects” them from being “overcharged”. That assertion is so transparently untrue it’s laughable.

Ofgem says the price cap “ensures customers pay no more than a fair price for their energy”. Yet more astonishing nonsense. A “fair price” decidedly is not one that results in impoverishment, worry, unheated homes, empty stomachs and, as a consequence, ill-health for untold thousands, causing further pressure on the NHS.

Ofgem peddles the myth that the price cap “stops energy companies from making excessive profits”. No it doesn’t. British Gas (BG), the UK’s biggest power-supply company, has thrived during the energy crisis. In 2021, it recorded an adjusted operating profit of £118m, up 44 per cent on 2020.

The cap also does something else. For many energy suppliers, including BG, it provides uninterrupted satisfaction for company shareholders, together with the prospect of more gleeful hand-rubbing following a further forecast cap increase this October.

Thus do the rich get richer and the poor poorer.

BG says: “Seventy-five per cent of our electricity comes from renewable sources – way above the UK suppliers’ average of 40 per cent.” That BG is giving powerful backing to renewables is highly commendable. But what its statement says, and what it actually means, is not the same thing, because it cannot guarantee that the electricity it supplies is from a green source. The reality is that its electricity is matched from a renewable source; in the case of wind from the power it buys from wind-power generators and from renewable energy certificates. BG’s other 25 per cent is from nuclear power.

Now bear in mind that Ofgem says this month’s price cap leap has been “driven by a record rise in global gas prices”. BG needs to explain how it can possibly justify a 54 per cent electricity price increase for seven million customers given that it doesn’t buy any electricity at all from gas plants, but solely from renewable and nuclear facilities.

Another of the big six suppliers, French-owned (85 per cent by the French government) EDF, which provides about 20 per cent of the UK’s electricity and gas, says 66.6 per cent of its electricity is from nuclear plants, 20.5 per cent from renewables and a mere 9.3 per cent from gas. EDF is very specific: it says these fuels, plus 3.5 per cent coal, “have been used to generate the electricity we supply to our customers.” As with BG, that is not strictly accurate (see above). EDF, too, must explain why, despite buying hardly any gas-derived electricity, it’s raising its price by 54 per cent.

Both companies — and other electricity suppliers who buy no, or little, gas but are also charging around 50 per cent more — may perhaps say they need to buy more electricity than is available from the 70 per cent of supply from renewables, nuclear and biomass distributed by the National Grid. If so, can they point to a shortfall that justifies a massive 54 per cent price rise?

Meanwhile, UK government statistics show that, during the energy crisis, the UK exported unusually large amounts of gas. Between last September and November, exports were double the levels of near-record lows in 2020, with foreign buyers snapping up gas from the Irish Sea and the North Sea.

This is of pressing relevance to counties including Ceredigion and Gwynedd, for many years some of the poorest areas in Europe, and Welsh MPs and Senedd members must unite to urgently involve themselves in pushing for a curb on exports with the aim of lessening pressure on gas prices for the UK market.

Their intervention would follow calls for a multi-billion-pound windfall tax on companies such as BP and Shell, with the money going to help hard-pressed consumers. Tellingly, in November, BP chief executive Bernard Looney described his company as “literally like a cash machine” as it handed out billions of pounds to shareholders.

Very importantly, political action over the energy market should simultaneously extend to making it easier for Wales to be independent from a volatile, profit-orientated system that is making many lives poorer and meaner. Grants for solar panels, air and ground-source heat-pumps and domestic-scale wind-turbines would be an excellent place to start.

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