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Electricity Prices Rocketing, Just As Successive Governments Planned

September 23, 2021

By Paul Homewood

 

 

There have been a lot of crocodile tears lately amongst our political establishment concerning recent energy price rises.

But they cover up the fact that this is exactly what successive governments have been planning for years.

It all started back in Tony Blair’s day, of course, when his government signed up to the EU’s Emissions Trading System, (ETS).

The Climate Change Act soon followed, along with the first subsidies for renewable energy, which now cost over £400 for every household in the country.

As a cap-and-trade system, the ETS sets an emissions cap or limit on the total emissions allowed by all ETS operators, but within that limit the carbon market allows participants in the System to buy and sell allowances as they require. Over the years, the allowances issued have been cut back, thus forcing up the market price.

The ETS covers not only the power sector, but also large industrial energy users.

The Coalition government in its wisdom decided in 2013 to add an extra £18/tonne to that market price, known as the Carbon Price Support, AKA Britain’s Hair Shirt.

 

The objective of this carbon pricing was clear from the start – to force fossil fuels out of the energy mix and to replace them with much more expensive renewable energy.

And it was to be energy consumers who would pay this price.

For a while though, EU carbon prices remained far too low to have much effect.

That is why the Committee on Climate Change planned for a large rise in carbon prices in its Fifth Carbon Budget, published in 2015. They decided what we really needed was a “Target-consistent carbon value”, rather than a market-based one:

image

image

https://www.theccc.org.uk/publication/the-fifth-carbon-budget-the-next-step-towards-a-low-carbon-economy/

By 2030, they wanted the carbon price to rise from around £10/tonne CO2 to £78/tonne, with much larger rises to follow. According to the CCC, the carbon price would force the cost of CCGT gas generation up from £52 to £111/MWh.

And in 2018, BEIS followed the CCC’s lead, and set a similar set of targets, rising from £12.76 to £80.83/tonne CO2 by 2030:

image

image

https://www.gov.uk/government/publications/updated-short-term-traded-carbon-values-used-for-uk-policy-appraisal-2018

 

Currently UK carbon prices stand around £50/tonne, roughly where the government had expected them to be by 2026.

And if they get they and the EU get their way, there will be a lot more pain to come.

54 Comments
  1. Phoenix44 permalink
    September 23, 2021 10:26 am

    Seriously, they believed they could forecast market prices out to 2050?

    Nobody has ever forecast anything out beyond a year or two (leaving aside 100 different forecasts so one will be right).

    It is utter stupidity, basing policies that have a huge effect on everyone in the UK on something that has a 99% chance (or more) of being wrong, and a 50% chance of being wrong directionally. These are supposed to be intelligent people?

    • George Lawson permalink
      September 23, 2021 6:36 pm

      The Climate Change Committee are not intelligent!

  2. Jack Broughton permalink
    September 23, 2021 10:32 am

    We are to pay a massive tax purely to satisfy the CO2 gods. There is no advantage or benefit for the people of the UK, just extra cost, in these policies. They are simply designed to remove all fossil fuels from the economy, irrespective of the damage done in doing this.

  3. Harry Passfield permalink
    September 23, 2021 10:33 am

    (From the first para). What we need to know, who makes up the ‘expert panel’? And what are the models being used – built by whom? Are they just financial models or climate models?

    My wife laughs at me when I say the gov needs to push up the price of gas heating so they can show how attractive ASHPs will be. We shall see…..

    • Jordan permalink
      September 23, 2021 2:22 pm

      “push up the price of gas heating so they can show how attractive ASHPs will be”
      Essentially the same point as I make about driving up the price of new coal and gas fired generation to show how attractive new nuclear generation will be.
      If anybody favours new nuclear, the government is basically doing what they want. So coming to sites like this to complain about the expense is what the government expects you to do. They will oblige with …. yep, you guessed it – new nuclear build. Kaching!

      • Ray Sanders permalink
        September 23, 2021 9:58 pm

        “If anybody favours new nuclear, the government is basically doing what they want.”
        Silly argument. New nuclear can actually be very cheap.

      • Jordan permalink
        September 24, 2021 7:50 am

        If it’s a silly argument, then why does new nuclear only exist through gov’t subsidy? That’s certainly the case of HPC, and it takes the gov’t to put a new nuclear power station in its manifesto. Real economic private investments don’t need a political manifesto commitment. And nuclear generation only exists with the support of an indemnity for nuclear liabilities.
        New nuclear might be “cheap” when compared to hideously expensive low carbon “solutions”, but it cannot compete against (CO2) unabated coal and gas fired power stations.
        People come to sites like this to complain about decarbonisation policy and call for new nuclear as the “solution”. I believe they are falling for the sleight of hand – new unabated coal and gas fired power stations are the solution. If we want our energy costs and risks to be aligned with international competitors. Failing that, our industrial capacity and capabilities will just keep emigrating.

      • ThinkingScientist permalink
        September 24, 2021 10:11 am

        Jordan – absolutely agree. My only caveat with respect to nuclear is that the cost is perhaps handicapped by over regulation

      • Jordan permalink
        September 24, 2021 5:06 pm

        TS – if so, the way forward would be to line up all the relevant regulations, ask which ones are “excessive” (could be dispensed with, subject to public consultation and acceptance). Then go for price discovery on nuclear new build – a price discovery process would STILL need to be run by the government as it is essentially one of demonstrating the minimum level of public subsidy to make it happen.
        Regardless of the above, I expect the price of the next nuclear new build (possible Sizewell C) will be much higher than HPC. The reasons are the increase in commodity costs for skilled labour, cement, metals, fuel oil and power it will take to build the thing. These costs are all being inflated by general shortage. The cost increases are being worsened by self-imposed artificial costs of CO2 – the very thing is supposed to be an advantage of nuclear power.

  4. cookers52 permalink
    September 23, 2021 10:40 am

    My experience of working in the third world is that when the public energy supply becomes too expensive or unreliable the population makes its own arrangements if they can.

    My overwhelming memory of West Africa was the sound of Cummins diesel engines and the smell of wood smoke pervading everywhere.

    • ThinkingScientist permalink
      September 23, 2021 11:18 am

      Home diesel generator has already crossed my mind, also as a requirement to run computers for our business. If many people started to do it you can be sure Government would start using local planning laws to try and stop it though.

      All of this is going to end in tears. I am just watching on GB News the Business Secretary taking questions in the House on this. The MPs live in this dream world of Green and Net Zero Carbon. They just cannot see the elephant in the room: renewables are unreliable and there is no technology which will fix it. Energy is going to get more and more expensive and they won’t be able to hide it.

      Take the current crazy situation. GB News talked last week about should we nationalise the energy companies? They missed the obvious point, they are effectively already. They are private capital forced to follow public policy. The Government is trying to keep at arms length the responsibility for power increases (“its the wicked energy companies”) whilst forcing them to use expensive electricity. As the financial analyst on GBN pointed out this morning, they are not really energy companies, they are commodity traders.

      So the government on one hand is making the energy supply side unstable with renewables, is making everyone’s bills go up with renewable subsidies, is trying to price out fossil fuels and then wants to appear to “protect” the public by imposing a price cap on energy costs. The net effect of this is to make the energy companies go bankrupt when the price of gas goes up due to short supply.

      The government thinks it can control a free market with cash. It can’t. Remember the crash out of the ERM in the early 1990s? Same issue. Government policy trying to force the currency into a straight jacket. Everyone’s mortgage went through the roof due to crippling interest rate rises. Eventually market forces (and speculators) forced a crisis and exit. It killed the Conservative Parties reputation for economic competence for a generation. The current policy on energy is going to do the same if it implodes on their watch.

      The government has already bailed out one fertiliser company because of the impact on CO2 production (ironic, huh?). If a big energy company fails, what then? And who’s going to want to stay in this market if price caps and inexorable energy rises leave you that vulnerable to price shifts? The whole energy policy is insane and destined to fail. Maybe not this year, but within 2-5 years perhaps. And the party in government when it happens will be unelectable for a generation, like the ERM exit.

      It will end in tears. Its inevitable. As far as I can see its only the free markets that can set us free from this insane government policy.

      • Gerry, England permalink
        September 23, 2021 1:38 pm

        Same thing I was wondering since electricity prices are only ever going up given the current path can’t be changed in much less than a decade – when does a diesel generator become cheaper and maybe more reliable.

      • Phoenix44 permalink
        September 23, 2021 2:23 pm

        If I have a buyer that will pay whatever I demand for something, the price of that something just keeps going up. As Major discovered.

        And if governments decide what and who should get something scarce then those scarce resources will be badly allocated.

        This is basic market economics. But sadly our government has no interest in such things.

      • Ben Vorlich permalink
        September 23, 2021 4:57 pm

        When I was a lad in perthshire a lot of isolated farms had military surplus diesel generators. These could be heard chugging away on frosty nights.

        Subsequently most houses were connected to mains supply. I wonder how many barns still have a generator “just in case”. I imagine these would run on just about anything.

      • Graeme No.3 permalink
        September 24, 2021 7:44 am

        Gerry, England:
        cannot help you much but in South Australia we pay 39¢ per kWh (20.3 pence per kWh or £20.3 per MWh) down a bit compared with 2 years ago. There are other charges added.
        It was estimated, by someone more au fait than I, that the switch point was 50-55 ¢ per kWh (or 26-29 pence per kWh or £26-29 per MWh).
        You would need an electrician to arrange switch and isolation from the grid while using the generator.

    • dave permalink
      September 23, 2021 11:23 am

      You mean they were running the diesel engines on wood? That is inventive!

      OT

      Professor Ynedestad of Norway predicted in 2003 that the Arctic would continue to warm modestly until about 2017 and then enter a 30 year phase of cooling in which all the ice would return:

      Click to access T0203.PDF

      This developed from earlier investigations by Norwegians, and the theories of Russian Scientists in the 1960s.

      • Phil Beckley permalink
        September 23, 2021 12:28 pm

        I wasn’t aware of this effect on the Earth’s climate, This thirty year cooling would coincide with much of a thirty five year cooling from 2020 to 2055 forecast by Grand Solar Minimum theory (Professor Valentina Zharkova) and apparently the AMO going into cool phase, and I believe the PDO as well for ten years from 2025. We may not be heading for a Maunder Minimum (the current solar cycle 25 does not look significantly weaker than 24 simply in terms of sunspot numbers) but it looks like being on the chilly side for a while. And to use Professor Ian Plimer’s words, sea breezes and sunbeams are not going to keep the country going through bad winters.

    • donald penman permalink
      September 23, 2021 12:18 pm

      I mostly only pay the standing charge for gas but if that increases I may consider capping and switch to calor gas for lighting and heating.

  5. st3ve permalink
    September 23, 2021 10:57 am

    It is indeed in govt. interest, to allow gas prices to rise to try and take the edge off the massive gas vs electricity differential.

    Expect much talk of restraining gas prices, whilst allowing actual prices to float closer to electricity.

    A godsend to allow govt to escape the otherwise inevitability of having to acknowledge they would have had to artificially crank up gas costs to have half a chance of (mis) selling heat pumps to the great unwashed.

    • ThinkingScientist permalink
      September 23, 2021 12:06 pm

      Government isn’t “allowing” gas price to rise, its being forced up by the market supply.

      And it won’t really take the edge of the differential (5x!) between gas and electricity that much because electricity generation is around 50% gas anyway. When you stop to think about that, it makes you realise how cheap gas is per KWh If electricity is 5x the price of gas per KWh and 50% of electricity is from gas, that reveals the true cost of all the other contributors.

      I pointed out to our MP that if you currently use 50/50 gas/electric for domestic use, if you had to switch to electric only (ie no gas boiler, cooking, water heating etc) your utility bills would immediately rise by 70%. These are not marginal cost differences, no government will be able to hide from the reality. After mortgages, and maybe council tax, utility bills are the next biggest slice of domestic costs. For my home, we have no mortgage. Our energy bills are by far our biggest annual cost and it will be true for many people.

      Politicians will not be able to ignore people forever and many back bench MPs already know about the true costs. Things will get worse before eventually the whole charade collapses and grass roots, ordinary people baulk at it all.

      • Chaswarnertoo permalink
        September 23, 2021 1:19 pm

        Fracked gas in Texas is 1/4 of the price gas is here. If only we had trillions of cubic feet of gas in an easily accessible form in this country….

  6. Joe Public permalink
    September 23, 2021 11:44 am

    **Paul**

    “The Climate Change Act soon followed, along with the first subsidies for renewable energy, which now cost over £400 for every household in the country.”

    An important couple of words are missing from the end of the sentence:

    ” … EVERY YEAR.”

    • Phoenix44 permalink
      September 23, 2021 2:13 pm

      Directly. Consumers also pay the cost to industry indirectly. So it’s more like £1,000/year.

      You have to beeconkmicalky illiterate or Corbyn-level stupid to think “companies” pay anything when they sell their goods/services to consumers.

  7. September 23, 2021 12:01 pm

    So WE are endlessly obliged to pay through our ‘snooters’ so govt. can continue to massively support the hopelessly unreliable wind farms with the HUGE subsidies they demand? One solution is a log burning Raeburn with OIL-fired heating. Only needs minmal power to pump water through the rads. Almost OFF the NET!

    • bobn permalink
      September 23, 2021 4:37 pm

      We looked at all the models of wood-fired cooking stoves and installed a Thornhill eco-range. Its been brilliant for all our winter cooking and heats over half the house. We use an electric cooker & wood bbq in summer when we dont need heating as the Thornhill really warms the place up. We do have our own trees to fire the beast but we keep it going 24/7. A good log load last thing at night and there are still lively embers in the morning. Clean the firebox once a week and light once a week. Its halved my utility bill.

  8. September 23, 2021 12:02 pm

    Please add an ‘i’ to minmal!

  9. September 23, 2021 12:05 pm

    Dale Vince has been deployed
    He’s been in every news bulletin since 10pm last night.
    He is the smoothest PR man in the GreenBlob

    His gotcha is
    “We have only 1% of gas storage in Europe,yet have 10% of the demand.
    This is a failure of planning!”

    First thing is that other countries don’t have LNG terminals
    Normally we can draw quite quickly on ships of liquid gas.

    • September 23, 2021 1:09 pm

      We still have some of our own gas in the UK, but…

      North Sea gas supplier claims Britain’s own rules are stopping it helping out in crisis
      Sep 22, 2021

      A MAJOR North Sea firm said it could supply large amounts of extra gas if the Government eased rules on what is allowed on the grid.

      https://www.express.co.uk/news/uk/1495122/gas-supply-Neptune-Energy-government-rules-calorific-value

    • Robert Christopher permalink
      September 23, 2021 1:20 pm

      I don’t know why Dale is using this as as gotcha: it was the Green Blob that encouraged the removal of all things supporting Carbon based fuels. It’s why our really useful coal-fired power stations have been closing, much to the delight of Greenies.
      It’s also why Grenville Tower was over clad, requiring over 120 years for payback while its life was planned to be a couple of decades at the most. Green and logic don’t mix.

    • Phoenix44 permalink
      September 23, 2021 2:16 pm

      Glad to see he’s acknowledging that planning fails.

      So stop trying to plan the economy.

  10. September 23, 2021 1:02 pm

    Boris, not a scientist, has been completely taken over by virtue-signalling over our 1% contribution to the so-called climate ‘crisis’ all based on computer modelling (and we know how reliable that is) backed by entire groups of vested interest scientists and manufacturers. Abandoning fracking because of a few thousand protestors which would have ensured our gas supply without relying on Russia-hardly a friend-and closing our gas storage; or open-cast coal which we now have to import essential for steel-making, heavily subsidized windmills which are intermittent, ditto solar, the madness of battery-powered cars with the rare essential minerals being mined by children in Africa, or totally unscrupulous China, whose disgusting ethics means they should be boycotted-except that we have now transferred a large part of our manufacturing to them. It’s truly depressing. Why hasn’t the government gone all out for Rolls-Royce small nuclear reactors, as fitted for many years in the difficult confines of submarines and which could provide all the power we need consistently with non-emitting Co2?

    • September 23, 2021 4:11 pm

      Time for humanity to ‘grow up’ on climate change, says Boris Johnson, moments before quoting Kermit the Frog. – @haveigotnews on Twitter.

  11. September 23, 2021 1:26 pm

    Howard

    Do you get this feed?

    Brian Catt (Not dead yet) 01932 772731 07770 931144

    • ThinkingScientist permalink
      September 23, 2021 3:01 pm

      Brian – are you trying to get hold of Howard Dewhirst? I can email him and you and together if you like?

  12. Gerry, England permalink
    September 23, 2021 1:40 pm

    And in other news, Danish windmill maker Vestas is shifting production out of Europe – allegedly as that is where future demand will be – which will see the factory in Germany closed. I wonder how much soaring energy costs in Germany are behind the move.

  13. Stonyground permalink
    September 23, 2021 2:02 pm

    Sorry for being OT but I see that our old friend Stephan Lewandowsky has been wheeled out to psychoanalyse those who are reluctant to have the Covid vaccine. I have had the vaccine but I see it as a judgement call and don’t condemn those who decide not to, especially for younger people for whom the risk from Covid is low.

  14. Don B permalink
    September 23, 2021 2:57 pm

    “Under my plan of a cap-and-trade system, electricity rates would necessarily skyrocket, regardless of what I say about whether coal is good or bad, because I’m capping greenhouse gases,” Obama said

    https://freebeacon.com/issues/flashback-obama-promised-electricity-costs-would-skyrocket/

    • Mack permalink
      September 23, 2021 5:44 pm

      Good point Don, you beat me to it. Pricing fossil fuels out of the market place was always the objective in order to make expensive unreliables seem attractive. Unfortunately, Obama didn’t see the shale gas revolution coming, and subsequent big emissions reductions, which rather chucked a spanner in the works for his plan of plunging our colonial cousins into fuel poverty.

  15. September 23, 2021 4:37 pm

    Now on R4 in w few mins
    “where we are going to get our energy from in the UK.
    Gas prices are soaring, a fire has knocked out a key power cable, and the weather has affected the amount of power that can be generated from our wind turbines.
    And to meet our climate targets we’re going to become ever more dependent on renewable, *and* variable, sources.

    Tom Butcher from the Met Office talks about wind forecasting.
    He says that the winds have been between 10% and 20% lower in intensity this summer.

    Professor Deborah Greaves, of Plymouth University and Head of the Supergen Offshore Renewable Energy Hub, explains how the UK is planning to increase the number of wind turbines, moving into deeper waters.”
    https://www.bbc.co.uk/programmes/m000zv3t

    • September 23, 2021 4:51 pm

      MetO guy this years winds are similar to 2018
      so not so unusual
      ‘blocking system’
      Said the low winds were predicted

      The Plymouth uni prof didn’t speak confidently
      She was pushed to say that wind tech would move into deeper water, too deep for pillars
      so would be floating
      ‘storage is the key, probably by using spare wind to make hydrogen’
      … She didn’t mention losses.

  16. Ben Vorlich permalink
    September 23, 2021 4:49 pm

    Gas Crisis Reveals Imminent End of Europe’s
    Fossil Fuel Age
    Nafeez Ahmed
    22 September 2021

    https://bylinetimes.com/2021/09/22/gas-crisis-reveals-the-imminent-end-of-europes-fossil-fuel-age/

    • September 23, 2021 4:54 pm

      The BLT is a super-lefty conspiracy site run by Peter Jukes
      It’s super anti-Brexit
      It basically tells middle class socialists what they want to hear.

      • Stonyground permalink
        September 23, 2021 6:00 pm

        BLT, isn’t that a kind of sandwich?

    • September 23, 2021 6:24 pm

      Nafeez is well known for shouting “look over there, there’s a conspiracy theorist”
      yet that is him projecting himself

      From Twitter
      written by Nafeez Ahmed.
      He wrote conspiracy blogs about 9/11, and was full of praise for Robert David Steele – conspiracy theorist and anti-semite.
      He is not a good source

      Nafeez Ahmed is a sci-fi writer, and whilst I have not looked at this particular “investigation”, I have found his previous work to be little more than conspiracy theory

      Nafeez Ahmed is a professional conspiracy theorist.
      You should be embarassed for diseeminating his wild bullsh*t.

      • September 25, 2021 5:45 pm

        His Book The London Bombings: An Independent Inquiry Paperback was quite good. It had some blank pages that the government censored.
        It is not a theory that was a conspiracy.
        The only question is who was behind it.
        The evidence at the inquest was clear. Each of the train carriages had multiple large holes in the floor. This was left unexplained but does not fit the official story.

      • September 25, 2021 10:50 pm

        Suggesting that there is an explanation, but that it was withheld is a Conspiracy Theory .If it is a secret then a large number of people must know the truth
        We are asked to believe that everyone of those large number of people has not yet spoken up or let slip.
        Once some time has past it becomes very unlikely
        So then it’s more likely there was no coverup,

  17. 2hmp permalink
    September 23, 2021 5:08 pm

    As a one-time economist/analyst I would suggest that any market size forecast beyond two years is a guess however good the empirical evidence.

  18. September 23, 2021 5:27 pm

    8pm R4 Britain’s Energy Crisis

    Joining David Aaronovitch are :
    David Sheppard, Energy Editor at the FT
    Dr Sharon George, Senior Lecturer in Environmental Science, University of Keele
    Michael Bradshaw Professor of Global Energy at the Warwick Business School
    Sir Dieter Helm, Professor of Economic Policy at the University of Oxford
    https://www.bbc.co.uk/programmes/m000zv4b

  19. AZ1971 permalink
    September 23, 2021 5:47 pm

    King Louis XIV was guillotined in 1783 for less tyranny than this.

    • Curious George permalink
      September 23, 2021 7:21 pm

      XVI, not XIV.

      • Graeme No.3 permalink
        September 23, 2021 10:31 pm

        And 1793. The revolution started in 1789.

        Poor old Louis was the fall guy for decades of mis-rule. Even his grandfather Louis XV noted “Apres moi le deluge” much as certain (past) politicians might have said.

  20. September 23, 2021 6:26 pm

    Coming up after 6:30pm on ITV
    “The first female president of Magic Circle tells us her tricks
    comes with a Climate message”

  21. September 23, 2021 8:31 pm

    The first story on BBC local news
    ‘Council planning dept find company’s planning application complies with planning law, so as normal, they won’t object”

    They didn’t phrase it like that
    They opened by playing Boris’s climate speech
    then “OMG during a Climate Crisis the council planning dept will not object to the oil field”

    Raithlin Energy say .are 285 million barrels in the field
    That is a lot of money for the area and a lot of mining tax.

    Basically today’s item is just PR to help the objectors next week at the councillors vote
    The presenter said ‘look at this windfarm next door”

  22. September 24, 2021 9:00 am

    Electricity Prices Rocketing

    In good time for electric cars, electric heating etc. 🙄

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