Comment: Miliband’s fatuous attack on energy firms won’t fix anything
By Jane Fae
Something tells me we aren't in Kansas anymore. Which is a shame, as a report last week suggested that particular state is well on its way to meeting renewable energy targets for 2015.
However, with the announcement by Ed Milliband on Tuesday that he intends to outbid David Cameron in a 'cost of living' war over energy prices, it is difficult to escape the conclusion that we are no longer in the world of the joined up and practical. Rather, our politicians have magically transported themselves to a place where they can believe any number of impossible things before breakfast – and where energy policy is now definitely relegated to the back seat.
The case for investing in renewables in our energy infrastructure is not based on some woolly liberal hankering after greenness. The fundamental energy issues are survival and security. That is why the US regards energy policy as a matter of national security, and the framework for that policy is embodied in its very own Energy Security Act.
The basic issue is one of availability. Some traditional energy sources are running out while others are becoming increasingly undependable due to the politics of suppliers or of the regions through which supply must pass. Self-reliance makes both economic and political sense and we ignore that at our peril.
If you doubt that, just for a moment imagine the UK, five years hence, dependent on Vladimir Putin’s successor to keep its power stations running.
Part of the debate is about energy sources. Part is about the efficiency of energy transmission, which, in turn, sub-divides into questions of network efficiency and economic management of scarce resource.
One peculiarity to electrical energy supply is that is almost unique amongst commodities, in that it cannot be stored. Yes, some limited storage facilities – mostly pumped hydro – do exist. But we must await a technological revolution, unlikely to deliver significantly before 2030, before the game changer of electrical storage makes any major impact upon the scene.
No matter. Utilities and policy wonks the world over had a cunning plan. While government argued over the right mix of fuels to use, the energy industry itself would plough on with the 'smart grid'. This, conferences and policymakers excitedly learnt, was the magic talisman, capable of extracting quart after quart out of pint pots.
Or to put it more prosaically: implementing a smart grid and 'demand-side management' in New York State would probably do away with the need for two additional coal fired power plants. Excellent stuff! And exactly what hard-pressed politicians needed to hear.
But here comes that Cassandra bit. The vision was clear. Smart grid comes in many forms, according to how much of it a nation decides to deliver. At its simplest, it exponentially increases the amount of information within transmission and distribution grids, thereby allowing utilities to manage customer demand through finer and finer use of pricing signals.
This 'peak curtailment' would, it was hoped, nudge consumers to use less energy at peak times, thereby reducing the amount of 'spinning reserve' in the system and therefore reducing the overall need to build more.
Add a new business model, including the right of utilities to switch non-critical business (and consumer) systems on and off using intelligent technology, and the savings increase yet another notch.
What could possibly be better? New hi-technology solutions reducing overall costs and pushing into the distant future, perhaps forever, the need to add significant capital items.
Except it doesn't work quite like that. It was never going to work like that – because of free market and consumer power. The first signs of difficulty emerged in the United States, where the growth of smart grids has slowed or stopped in many states following arguments between utilities and consumer organisations over who should pay for the investment. According to utilities, consumers will benefit eventually, so should pay for improvement now. Consumers, however, argue that utilities will also benefit, so they should carry a large part of the costs.
Elsewhere in Europe, we see the results of unfocussed investment going to waste. Italy, for instance, is by far the continent’s biggest investor in smart grid technology but because it invested billions of euros in 2005-7 and focussed on just one part of the smart grid (the smart meter) without corresponding investment in other necessary bits, it may have produced one of the biggest white elephants in recent history.
As for the UK: remember that bit about smart grid needing price flexibility for optimum working?
That, of course, is exactly what David Cameron has ensured it cannot do: for by giving in to public pressure and insisting that energy companies offer their customers the lowest possible prices at all times, he has in effect ruled out the use of pricing signals to manage energy demand.
As Cameron, so, now, Milliband, with his fatuous attack on the energy companies and his positioning of the entire debate as poor 'us' vs bloated 'them'. Both, it would appear, miss the essential point, attributed to Benjamin Franklin that "if we don't hang together, by Heavens we shall hang separately".
If we can't deliver a smart grid, the next best thing would be to spruce up the existing transmission and distribution (T&D) grid. A feature of energy is that grid performance is only as good as the weakest part of it.
That's why China is currently rebuilding its national grid, with some $270 billion investment planned in new ultra-high voltage transmission lines alone between now and 2020. This 'strong smart grid project' combines infrastructure investment with a major shift toward smart technologies.
Unfortunately for the UK, the current market model does not favour investment in the T&D network. The returns are too low. So while politicians continue arguing over consumer pricing and the right energy mix, vital national infrastructure investment is simply not happening. An argument, perhaps, for asking whether the money about to be spent on HS2 could not be better spent on our energy networks?
Energy policy requires the making of unpopular decisions now to ensure energy security in ten, twenty, even thirty years. Turning it into a bidding war, in which rival politicians vie with one another to see who can squeeze cheaper energy out of the existing utilities is foolish and a mistake for which we will all pay the price in our twilight years.
What is needed now are decisions based on heart, brain and courage. Sadly, on the evidence of the past twelve months, our current political leadership lacks all three of these. And in this story, the wizard prepared to dish out these qualities is nowhere to be seen.
Jane Fae is a feminist and writer mostly on gender issues, but she spent three years researching and writing energy issues for business. You can read more of her writing here and follow her on Twitter here.
The opinions in politics.co.uk's Comment and Analysis section are those of the author and are no reflection of the views of the website or its owners.
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