NEWS that Britain looks set to have a glut of electricity in the summer but a shortfall in the winter goes to the heart of one of the most important questions facing the country. How can a nation once famous for its unique and abundant energy resources be facing such a policy failure? What has gone wrong and why?
The pressures facing the steel industry in recent months have exposed the tip of a bigger iceberg which has been threatening British manufacturing for years. Ministers have stood wringing their hands blaming others but the reality is that Britain’s slow motion energy crisis can be traced directly to Brussels and Whitehall’s slavish adoption of European Union diktat.
Before the EU referendum on June 23, it is important to understand and detail the extent to which Brussels has both steered and influenced our energy policy for years.
This intervention has led to premature power station closures, high renewable energy targets and prices amongst the highest in the developed world, more than twice those in the United States.
In the last five years the EU’s Large Combustion Plant Directive has forced the UK to close a staggering 12,000 MW of coal and oil-fired power stations early and today the new EU Industrial Emissions Directive will mean the premature closure of remaining plants like Eggborough and Drax.
Many Yorkshire power station workers, such as those at Ferrybridge, have already been made redundant to meet these draconian rules.
Indeed, the gravity of the situation became clear earlier this month. The announcement by both the Eggborough power station and another coal plant near Warrington that they would now close much earlier than anticipated was met with Whitehall panic.
The Government suddenly announced that tens of millions of pounds of public subsidy would be used to keep them open.
Ministers have suddenly realised that these plants will now be needed to keep the lights on this winter and beyond; this erratic policy failure and the resultant subsidy will now cost consumers more through their electricity bills.
Britain has been legally obliged to source 33 per cent of electricity by 2020 from renewable energy, following agreement at a 2007 EU summit. Billions of pounds of public money raised from consumers’ electricity bills has been spent to subsidise the new wind, solar and wood pellet sectors to try to reach this target. This is against gas, coal and oil prices nearing a 10-year low.
There is an important and telling split at the top of the Department of Energy and Climate Change (DECC). In January the Energy Secretary, Amber Rudd, claimed that leaving the EU would have “unknown” consequences for Britain’s energy security and the UK would lose its influence on European energy markets and face rising bills.
But last month her ministerial colleague at the DECC, Andrea Leadsom, dismissed these warnings and called on Britain to leave.
Leadsom also rejected her boss’s claim that if Britain left the EU then bills would rise. She rightly made the point that energy is traded on a global market and that energy security is not dependent on the EU. Indeed when one looks at the vital power stations which Britain has closed as a result of EU rules then membership has clearly had a negative and deeply damaging impact on British energy security and prices.
In order to plug the electricity supply gaps which are appearing following early power plant closures DECC is now having to spend tens of millions of pounds to pay small and highly polluting stand-by diesel generators to avoid power cuts.
These small plants are paid a premium to turn on when National Grid feels supplies on the grid are too low and demand is high; their owners are making millions from these policy failures.
This brings us onto the important issue of the prices consumers and industry pay. As a result of EU policy, we have some of the highest gas and electricity bills in the world.
Brussels drives up prices in two ways: by setting high renewable targets and direct legislation. As a result, a medium-sized business in the EU pays 20 per cent more for energy than an equivalent firm in China, 65 per cent more than in India and nearly 100 per cent more than those in the US.
These artificially high energy prices, helped by other British home-grown taxes, have already closed down swathes of Britain’s steel industry such as Redcar and now threaten to shut other areas of heavy manufacturing.
Britain’s energy policy has been in the grip of EU lawmakers and a subservient Whitehall for far too long. On June 23, there is an opportunity to end this undemocratic and corrosive situation by voting to leave the EU. This can help protect consumers and industry from yet more bad EU policy and consequent rising prices. It would allow real security of supply to be delivered in the national interest. The stakes are huge.
Tony Lodge is a research fellow at the Centre for Policy Studies. He is author of The Great Green Hangover – how to cut bills and avoid an energy crisis which is published by the CPS.