Energy Price Freeze Announced

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By Paul Homewood

https://www.dailymail.co.uk/news/article-11193045/Energy-bills-frozen-2-500-TWO-YEARS-says-Truss.html

We’re still waiting for a lot of detail, but there’s a few snippets of interest:

First of all, fracking is back on the agenda, as well as a boost to North Sea oil and gas exploration:

There’s support for business too for six months, but will this also apply to gas generators, which would help to bring down the wholesale electricity price?

Green levies are to be suspended, which means transferring them to the Exchequer, which is where the belong, as they are a consequence of government policy.

Labour are inevitably pushing for a windfall tax on “energy giants” (translation – Big Oil. Nobody in Labour appears to have realised that the really obscene windfalls are being by by renewable energy businesses.

But as Guido points out, North Sea oil is already being taxed to the gunnels, and left wing talk of £170 billion of excess profits for the energy giants, a figure frequently bandied around by the idiot Ed Miliband, applies to global energy businesses, most of which are registered abroad.

This bit is interesting. One of the failures of public policy in recent years, both here and in Europe, has been the neglect of the need for long term contracts for gas, relying instead on spot markets:

And here’s the crux of the problem:

As I have been arguing, renewable generators need to be weaned off ROC subsidies, and put onto CfDs instead, along with other non-gas generators like nuclear. The problem is how to “persuade”, when they can all currently make huge profits. In my view this can only happen if the government threatens to withdraw all ROC subsidies and make life as difficult as possible for them.

Deals for nuclear can probably be struck if the plants are offered a long-term supply contract, to buy all of their output.

I have seen comments in the media, by the way, that price freezes simply discourage businesses from increasing supply. This is nonsense, at least as far as this arrangement goes, because it does not restrict revenue for suppliers; on the contrary such revenue continues to be topped up by taxpayer subsidies.

I have also seen it argued that higher prices will “encourage” energy savings. Forcing people to switch their heating off is not my idea of a rational policy.

Whether such subsidies are sensible in the long run is of course another matter – but we are where we are because of years of incoherent energy policy. The alternative, a complete meltdown of the economy, is not an attractive proposition.

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September 8, 2022