Sanjoy Sen is a chemical engineer in North Sea oil and contested Aberdeen North at the 2015 general election.
Public disquiet over household energy costs has been exercising governments for some time now. So much so that, during this general election campaign, both main parties have effectively committed to a ‘vote for us, save money’ approach. But, with energy matters rarely that straightforward, is now the time for a more open discussion?
The typical annual utility bill (£1,200 for gas and electricity) equates to around £3.50 a day. For that, you stay warm, get the dinner cooked, keep the lights on and power the TV and PC. And, whilst we’re here, let’s reflect on what it takes to provide every home in the country with this 24/7 service: drilling for gas, constructing new nuclear power plant, installing offshore wind turbines and operating a nationwide transmission grid.
Lectures on personal finances tend not to go down well: not everyone wants to hear that they spend more on their morning latte than on their daily energy. But perhaps it’s worth putting a few facts out there, and initiating a debate sensitively. Even if green subsidies (some £110 a year) are trimmed back and a competitive tariff picked, a household might do well to find its bill much below £3 a day. Certainly, energy shouldn’t be over-priced – but we need to recognise what it does cost.
In recent years, consumers have become increasingly adept at shopping around, especially for non-essential purchases. (Whether it’s a foreign holiday or just a new book, a large chunk of overall satisfaction now derives from telling everyone about the on-line bargain you just bagged). And, thanks to those price comparison websites and their interminable advertising, many of us are also getting smarter with the ‘boring’ essentials, picking up more competitive mortgages and car insurance.
No-one’s proposing interventions in other sectors (not all of which function perfectly), so what’s unique about energy? In short, see above: largely thanks to a lack of debate and clarity, public outrage has pushed the issue up the agenda, forcing government to act. Sadly, the same lack of information makes it harder to see the end-game: at what point does the public consider it is paying a fair price? (And are there going to have to be further price cuts imposed to hit this level?)
Getting gas and electricity to customers’ homes is not without significant cost: suppliers need to recoup their investments if they’re going to remain in the UK market, let alone commit to the major new infrastructure now required. Any moves which drive out key players might therefore prove somewhat counter-productive. (Incidentally, the presence of a ‘big six’ needn’t in itself preclude competition: there’s a similar number of major supermarkets and they seek to beat each other on a daily basis via transparent pricing.)
None the less, many would argue that the energy giants have brought any government intervention upon themselves. Complex tariff structures and impenetrable billing have made analysis and comparison challenging. And the plight of those in fuel poverty, often those on low incomes (trapped on pre-paid meters) and the elderly (lacking access to web-based offers) rankles. Whilst much of this could have been addressed earlier, more competitive longer-term fixes and better rates for low-income users might start to address the current disquiet. It’s a long way back until the utilities can begin to enjoy even the ambivalence most of us hold towards our mobile ‘phone suppliers, though.
Reducing consumption is a key element key in driving down consumer costs. But efficiency gains won’t make much impact if the rising costs of generation can’t be addressed. That might be managed via a judicious balance of the new and old.
The shift to renewables has led to higher unit costs and its intermittence requires a ‘spinning reserve’ of fossil fuels running in the background – a double blow to customer bills. But, as scale increases and technology improves, offshore wind costs are already beginning to fall. Moreover, viable, competing technologies are fast emerging in energy storage: whilst Elon Musk, Tesla’s founde, believes in improved battery storage (not just for his electric cars but also for homes), energy multi-nationals and governments are getting increasingly excited by the prospects of a hydrogen economy.
But for a steady baseload of supply, large-scale nuclear remains a key player in the mix. And delivering those kilowatt-hours to customers as cheaply (not to mention reliably and safely) as possible calls for established, off-the-shelf designs. At its logical conclusion, this would take something identical and replicating it across the UK. One option might be the new Korean APR-1400, whilst some engineers have even suggested an updated Sizewell B. Sadly, of course, nothing in energy is that straightforward.