27 Oct 2013

Green Taxes or greedy power companies?


Subsidies for environmentally friendly power sources are regularly maligned as leading to higher prices for customers - but what's the truth? DEREK WALL takes a look

The CEOs of Europe's 10 largest energy companies met earlier this year at the Brussels museum of Rene Magritte to lobby the European Union on energy matters.
Magritte was, of course, a surrealist well known for his paintings of umbrellas raining upon us.
Given the surreal policy objectives of the group, which wants to slash funding for renewables, the venue might seem appropriate.
Yet hardly a day goes by without an attack on renewable energy in the British media.
With electricity and gas bills climbing, the energy sector is keen to blame "green taxes" for rising energy bills, while suggesting that environmental energy will lead to the lights going out.
In Con-Dem Britain, where wages are often falling compared to inflation, most of us are having trouble paying the bills. Ed Miliband's demand that energy bills be cut has, for once, wrong-footed his opponents, both Blairites in Labour and our present neoliberal government.
The energy companies deny that they are fat cats and some blame their 10 per cent energy bill increases on environmental costs.
Ukip and a variety of reactionaries claim that wind turbines are the most dangerous form of energy and that there must be a war against environmental charges.
The Conservative Environment Minister Owen Paterson - famous for claiming the badgers have moved the goal posts - is a climate sceptic who wants to smash environmental protection. He has argued that climate change may bring benefits and is said to have a phobia of wind turbines.
So there are some powerful forces arrayed against renewable energy, but is the claim that it is pushing up bills correct?
There certainly are an array of complex charges that have environmental implications.
The objection of the energy corporations, especially the Magritte group, is that they will put prices down and cut their profits.
How can we be in a position where energy prices are rising but energy companies claim that their industry is uneconomic?
Adam Smith, despite being an advocate of the "free market," cautioned in The Wealth Of Nations that businesspeople would always like to get together to work out how they could rig markets for their own benefit.
He noted: "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."
European energy corporations have invested heavily in fossil fuel-based energy plants. But subsidies for renewable energy have pushed down wholesale prices and they are suffering.
The more that energy policies work to promote renewables the less profit they will make and the harder they will find it to remain in business.
Increased wind energy generated by community groups and solar from individuals' roof tops have the potential to put their business model under threat.
The array of supposed "green taxes" have had a modest effect on bills in the short term, but in the long term, as even the Daily Mail has admitted, will cut bills and thus cut company profits.
A good example is the "smart meter," which all homes will be required to have by 2020.
This will add a shocking £3 to the average bill but will make it much easier to see where we use electricity and so allow us to cut our bills.
Likewise subsidies for insulation and solar power are problematic for energy companies.
If you install a solar panel and get a grant for insulation, this cuts your bill. Over the long term all these measures will lead to significant cuts rather than rises in your bills.
Many sources of renewable energy have large fixed costs for installation but once set up can run virtually for free.
A solar panel gets the sun for free, a gas-powered station requires a constant supply of costly gas.
There is some truth nonetheless in criticism of green charges. In the short term they raise bills and could be funded in other ways.
The religion of the market means that we have to pay for ecological and other reforms.
Why not fund energy policy out of general taxation and raise corporation tax or the top rate of income tax?
A long-term shift from tax on corporations to taxes on individuals, shifts the burden on to the poorest.
This clearly is unacceptable.
And why even make power generation a source of corporate profits?
The new power station at Hinkley will see the French and Chinese state-backed companies that will build and run it guaranteed a price for their electricity which is above the market rate for decades into the future.
The mania for privatisation has meant that a number of textbook examples of natural monopolies, where competition doesn't work, have been sold off to fat cats.
Royal Mail, water, rail transport - all of these industries would be better nationalised.
All investment which is expensive in the short term will be ignored by private owners if they can, and issues of social justice and environmental quality will be ignored too.
While it is good that Miliband is challenging rising energy bills, he won't dare call for nationalisation. Yet privately run energy just does not work.
We need and are on the road to a renewable energy future.
Fossil fuels are rising in price over the long term and are the cause of climate change.
We need a different kind of energy supply system. Private corporations won't invest, but if the system was state-run and the richest started paying their fair share of tax it could easily be funded.
More and more energy will be produced by individuals and communities. In Scotland, for example, villagers in some projects collectively own wind turbines and feed into the grid.
The grid needs to be modernised. "Smart grids" work by balancing energy inputs over large areas.
Methods to store electricity need to be enhanced and funded.
State ownership and planning of larger power stations and the grid is necessary, but diverse local energy suppliers can feed in too.
The energy corporations are dinosaurs and sadly, rather than recognising that they need to be replaced with a system that works, Miliband merely wants to shave their profits a little.
A green solution involves evolving our energy system so that it is more sustainable.
We musn't be fooled by the climate sceptics who use populist rhetoric to fatten profits for corporations and ignore the needs of future generations.

Derek Wall is international co-ordinator of the Green Party of England and Wales

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