Wednesday, 29 October 2014

Round the clock of silliness

From City AM:

Business groups have slammed politicians for failing to take action on energy supply shortages, despite 15 years of warning signs... Spare capacity will be close to four per cent, compared with around five per cent last year and 17 per cent three years ago.

Dan Lewis, energy policy adviser at the Institute of Directors, commented: “This has been in the offing for 15 years, and it really didn’t need to happen.” He called on the government to “start thinking hard about how to find renewable energy we can realistically integrate at a reasonable rate”

The acute lack of spare capacity is because a lot of perfectly good coal and oil fired power stations were forced to shut down in the last few years. Blaming it on not having enough "renewable energy" is completley bonkers. That's like giving your car away and explaining to your boss that you're late for work everyday because they haven't invented teleportation devices yet.

I used this circular argument in the comments here yesterday for a joke, but it appears that even relatively pro-market groups like the IoD can't see through it.

And what's this?

An energy department source told City A.M.: "Labour simply didn’t invest in the energy infrastructure we need. Under Labour, the energy system was creaking but we’re turning that around with £100bn investment and more than enough reserves this winter."

For sure, the government has to play a role in all this (pollution and safety standards, and without the government, the National Grid would never have happened, being a natural/land monopoly), but it doesn't need to invest a penny in power stations.

Isn't that what private companies are supposed to be doing? There's plenty of demand for electricity and it can be produced profitably provided the government doesn't interfere too much and taxes sensibly (i.e. on the natural monopoly element).

Preparations being put in place include plans to incentivise businesses to reduce energy demand. Lewis commented: “Now they are actually proposing to pay people not to work. It’s the last thing the economy needs.”



Anonymous said...

When he writes "actually proposing to pay people not to work." it is misleading since in most [any?] cases it doesn't prevent any work, just saves energy. eg; An upmarket chain of hotels said yesterday that after turning off it's air conditioning systems for two hours a day [or something...] in four hotels it received no complaints as it was barely noticeable and they now intend to do the same across the whole chain.[cue angry complaints from punters who will now miraculously notice getting marginally warmer].

The thing is, paying business to switch off power during certain periods is actually cheaper than building new power stations. If it cancels out the need for new supply then it seems to be based on sensible criteria.

The Stigler said...


Where does the money to pay those businesses not to use power come from?

And how do you determine when it's sensible or not? Are we going to have a government department picking the businesses that get power and those that don't?

The simple solution to all of this is a Pigou tax on pollution and variable pricing of energy based on demand, and you let the market work it out its solutions from there.

Kj said...

What PaulC says is actually done, at least in the Nordic Market. Large industrial consumers get a decent discount and/or payback if they contract to close down at irregular peaks in demand. What pays for it is the peak prices in the market at the time when/if the shut-down kicks in. It doesn't increase max capacity, but it's proven to be workable for what the article adresses, spare capacity. And there is no government deciding anything, it's a contract between supplier/middleman in the electricity pool and the business.