Power for the People demo, London. Photo: Robin Prime.
Energy: Public ownership is the rational solution
9th January 2014
There is one glaringly obvious solution to the UK's energy problems, says Andrew Cumbers: re-nationalise the profiteering, under-investing energy companies that have created the mess.
Governments have been content to preside over a system that represents a monumental failure of public policy by any conceivable measure.
Beyond the recent furore over increasing energy prices, all mainstream political parties remain wedded to the status quo of a privatised energy sector.
Even Labour's well-publicised pledge to freeze energy prices if it wins the next election, and its more recent call to break up the Big Six energy companies (which dominate the sector), does little to challenge the overall structure of the energy market and its domination by private and foreign interests.
A monumental failure of public policy
Since the energy sector was privatised in the 1980s, all governments have been content to preside over a system that represents a monumental failure of public policy by any conceivable measure.
Prime among these must be the failure to deliver cheap energy to consumers. The UK has the fourth highest electricity prices in the European Union despite having an abundance of renewable and non-renewable resources.
Associated with this are shocking levels of fuel poverty. Twice as many pensioners die from the inability to afford to heat their homes every year in the UK (as a proportion of the population) than Finland with its much more severe winter climate.
The UK also faces a looming crisis in energy security and a real possibility of "the lights going out" because of the failure of the Big Six to invest in new infrastructure - both grid and power sources - as an older generation of power stations (nuclear, coal, oil and gas) come to the end of their lives.
Finally, the UK remains at the bottom of the European Union league table in terms of its climate change obligations, with less than 4% of total energy consumption currently from renewables.
(See also "Power for the People!" by Ellie Harrison in today's Ecologist.)
Bewildering and perverse
UK energy policy is not only bewildering, but perverse. Setting its face against any form of strategic planning or public ownership of the sector, there is a wilful deceit over what "private ownership" and market solutions" actually mean in practice.
Private ownership of course means large corporate, and predominantly foreign, ownership.
Sometimes our private owners are actually the French, Danish or Chinese state. At other times, it is US private equity companies such as Berkshire Hathaway, which controls electricity distribution for the north of England.
The "markets" that are constructed in the energy sector (they do not exist naturally!) are not markets in any shape or form that Adam Smith would have recognised.
They are not only devoid of real competition but they take almost all of the risk away from the private sector - and put the cost of that risk onto the consumer and taxpayer.
The most recent government attempt to deal with security of supply issues and the faltering renewables targets are a prime example of market distortion; guaranteeing inflated prices over a long term period to cajole privatised companies to invest in a carbon-free energy future.
Even Conservative voters want public ownership
Political elites are governed by perverse logics and the continuing imperative of being (big) business friendly. However public opinion overwhelmingly supports public ownership!
A recent survey by YouGov found that 68% of the public - including amajority of Conservative voters - wanted the energy sector to be renationalised. This is actually the most sensible option in terms of keeping prices low, delivering energy security and shifting towards post-carbon sources of power.
This reality is being recognised in other countries, notably Germany, where there is an interesting trend towards more localised forms of public ownership.
Keeping the lights on and shifting towards a post-carbon future will cost upwards of £100 billion (at the most conservative estimate) over the next decade. As a country, we will have to pay for this in some shape or form.
Public sector = lower bills + public profit
A publicly owned sector will be far cheaper in delivering this than the existing privatized regime, because governments can borrow at much lower interest rates - particularly for longer term investments - than private companies.
It would also mean that future revenues from energy go to the public purse rather than private profit.
Andrew Cumbers is Professor of Political Economy at the Adam Smith Business School, University of Glasgow.
He is the author of Reclaiming Public Ownership: Making Space for Economic Democracy (Zed books) and lead author of a recent report for the Jimmy Reid Foundation: Repossessing the Future: A Common Weal Strategy for Community and Democratic Ownership of Scotland's Energy Resources.
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