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The left’s reckless drive to nationalize our energy companies won’t solve any problems

The left’s reckless drive to nationalize our energy companies won’t solve any problems
The left’s reckless drive to nationalize our energy companies won’t solve any problems

Nationalization, we are often told, is very popular. Poll the British public on public ownership of energy, water, telecommunications and even food production and you get large majorities in favour. What if you had to rephrase the question? Rather than asking if “the public” should “own energy companies,” try asking if taxpayers should bail out energy providers. Do you think that would be popular policy? Nope?

This is, in fact, what much of the left wants to do, without explaining how it will solve any of our problems (it won’t). Supposedly, with all the excess profits these rapacious energy suppliers rake in, we can feed the hungry and heal the sick with plenty of leftovers. Yet last year, when supplier Bulb was nationalized (ahem, put under “special administration”), those gigantic profits did not materialize. Here’s a clue as to why: the company had gone bankrupt.

The debate could become clearer if we used the right terms. Energy producers make significant profits. This includes oil and gas companies, wind and solar operators, biomass boilers and nuclear power plants. Yes, we can tax those profits, but getting them to increase supply should be a higher priority.

On a domestic level, energy providers should be called utility companies instead — they’re chaotic companies that send you a nasty bill every month and don’t pick up the phone when you call. In cases like Centrica, shareholders own both generation and utilities in a single group. Despite its production revenue, Centrica Group’s profits are still too low to drop many bills even though they have been confiscated in full. There are good reasons to hate these companies, but their nonexistent “overprofit” isn’t one of them.

Far from booming, utility companies now risk becoming the energy equivalent of a bad bank. They are grappling with millions of customers who will struggle to pay their bills this winter, many of whom are forced to serve or can’t cut for months if they don’t pay. The government should protect the most needy customers and perhaps many businesses as well, but why should it take responsibility for all of them, through a price freeze or nationalization? I have yet to hear a single convincing argument why UK state ownership of utilities will magically lead to more energy being produced around the world, so that prices can actually come down.

The real debate we need to have is what is the proper role of government and whether it has fulfilled it. Energy prices clearly show that the answer to the second question is “no”. The first part is more complicated.

Since climate change first appeared on the radar, the government has become increasingly involved in energy market planning, with spectacularly poor results. This has resulted in large subsidies for renewable energy and increased costs for domestic industry while cutting off reliable energy supply. The climate and the economy have been ill-served by this approach, which has simply pushed industry and energy production overseas.

It started with Labour’s plan to shut down coal-fired power stations. This was not a bad idea in itself, but forced us to replace them with alternative sources of energy, which were just as reliable. The UK had a strong and fledgling nuclear industry and could have launched a national program to build nuclear power plants modeled on South Korea’s, which proved to be both cost effective and reliable. Nuclear is the only industry that really needs direct state support because of the delays and risks involved.

But under the Conservative-Liberal Democrat coalition, we have abandoned nuclear. Then, along with other Western governments, we began to pursue a policy of discouraging investment even in benign and necessary fossil fuels like gas. There were no plans to replace these reliable and financially viable energy sources. Instead, the government threw money at renewable energy. They have a role in the energy system, but they are not enough on their own. Their expansion and lower production costs were a great technological success, but the government failed to alleviate the unreliability problem they introduced into our energy system. The wind and the sun are capricious and we cannot yet store the energy they generate on a large scale. They require the installation on the grid of expensive emergency gas power plants. It is the wind and solar parks, which are currently reaping large windfalls, which should pay this cost. That would have focused their minds on reducing it.

To justify its policy of pumping money into some technologies and not others, the government has embarked on price forecasting. His predictions were always wrong. Now consumers are being forced to pay the exorbitant energy prices guaranteed to renewable energy projects as they fail to cover their costs.

When all this failed to reduce prices for households, the government ruled that the problem was insufficient intervention and introduced the “price cap”, which quickly decimated utility providers, a small area where the competition worked as well as it could. Half of them quickly went bankrupt. Meanwhile, we have seen Europe’s import needs grow and grow even as its spare capacity dwindles, with today’s predictable results.

The current failing market, far from being a free-for-all laissez-faire, is the product of grossly irresponsible and ill-planned state interference. This interference has failed each time to prioritize the most important role of the state: ensuring energy security. In climate terms, it has failed to effectively reduce emissions, instead exporting half of them to China, where the industry is exempt from the costs we impose on ourselves.

What governments should have done, rather than subsidizing or stifling certain technologies, is to set an appropriate price for carbon, introduce a carbon price and ensure that there was enough incentives to create a safe margin of unused supply. The market could then have done its job. Instead, the current so-called “market” is now the bogeyman.

Listen to the most outspoken proponents of nationalisation, like left-wing Labor Sam Tarry, and you’ll hear plenty of talk of “extreme profits” justifying the need for a “leave-style bailout”. You won’t hear him specify exactly which extremely profitable company he wants to nationalize and how it will reduce the cost of energy. The government is simply supposed to pay for everything by taxing the profits of Shell and BP.

Our problem is not a lack of nationalized energy companies, but a lack of energy. For having presided over this disaster, the Conservatives deserve to be out of power for a generation. Instead, it is the country that lacks power as the Tories prepare for their fourth leader. She won’t have long to fix the mess before she too runs out of the way.

. will reckless left nationalize our companies energy will solve no problem

. lefts reckless drive nationalize energy companies wont solve problems

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