The German model is the best way of escaping the clutches of the energy giants

The revelation that most of the big energy companies are systemically overcharging customers by 3.7bn a year is national scandal that must be tackled.

Jenny Jones AM is leader of the Green Party on the London Assembly and Green Party Mayoral candidate for 2012

The revelation that most of the big energy companies are systemically overcharging customers by 3.7bn a year is national scandal that must be tackled.

After most of them hiked average bills up by over £100 – and in the case of npower as much as £137 – pushing even more struggling Londoners to make hard choices of heating or eating, Public Health England warned that an excess of 2,500 elderly Londoners could die this winter from hyperthermia unless they took action to protect themselves from cold weather.

Even before this latest annual winter energy company bonanza, gas and electricity bills had soared by 150 per cent – four times the inflation rate in the last decade.

The energy companies claim that price rises were due to factors not under their control, such as global market and government green energy levies, so called green taxes. These were shattered at yesterday’s parliamentary scrutiny which heard that electricity costs had actually fallen in the last three years.

Furthermore, analysis of the levy’s reveal that the proportion directly funding renewables such as wind and solar amount to just over £30 of the current average energy bill of around £1,300, with the rest spent on helping low income households and pensioner winter discount.

This also raises serious questions about David Cameron’s judgement, as well as the reach of the big energy companies in government when the PM brazenly blames the relentless rise in household energy prices on green measures with a promise to roll them back.

In 1998, when the energy market was liberalised, the regulator considered 1.5 per cent as an adequate margin for energy suppliers. If Cameron really had the interests of the general public in mind he would clamp down on the greed of big business and deal with this broken market.

The other way to save potentially hundreds of pounds from household bills is through a range of energy saving measures.

However, industry has raised concerns that the government’s new Green Deal and its sister scheme the Energy Company Obligation – designed to deliver up to 45 household measures including insulation, heating, glazing, micro-generation and other hard to treat works –  is unattractive, uncompetitive and overly complicated. A cross party panel of MPs and experts have called on the government to introduce long-term incentives to boost this faltering retrofit scheme.

On a London level, according to the Department of Energy & Climate Change, the number of Green Deal home insulation assessment completed during the second quarter of 2013 revealed that only 5,947 assessments had been completed. The Green Deal replaced the government’s previous home insulation scheme CERT, which managed to insulate approximately 21,000 homes per quarter in 2012.

This failure has resulted in a massive drop in the number of home insulation assessments, let alone completions. This is partly due to Boris Johnson’s inadequate promotion of the proven Huddersfield street by street approach which resulted in a quarter of homes being treated. The Mayor also ignored my warnings and failed to put adequate resources behind the Green Deal in its early uptake.

Instead of showing strong leadership to fix this programme and incentivise Londoners to retrofit their homes, the Mayor is instead following the government’s lead by frittering valuable resources on the ‘fool’s gold’ rush known as fracking. This will not solve our energy crisis. Instead it will pose major risks for contamination of our water aquifers with a harmful cocktail of chemicals used in the extraction of shale gases.

The government and the Mayor should follow the lead of the smaller energy companies that are actually cheaper on average than the big six and are achieving this by investing in new forms of green energy. Ecotricity’s, for example ‘bills into mills’ model has achieved 40 per cent energy generation from solar and wind, helping to insulate us from our dependence on global fossil fuel markets.

Germany already generates over a quarter of its electricity from renewables such as wind and solar and this is set to increase substantially with the coming of a generation of more efficient solar cell. Our energy needs are predicted to rise, they are working hard to bring theirs down. This offers an alternative vision for us.

I hope that the work of the Parliamentary committee will help shift the cross party consensus away from a continued reliance on big energy companies who are happy to charge the maximum price they feel they can get away with, to customers who feel it is pointless switching suppliers from one bit of the cartel to another.

We need more competition and investment in renewables offers the fastest way of bringing more small suppliers into the market. Half of Germany’s renewables market is owned by local communities; and that model of people creating their own energy supply is the best way of escaping the clutches of the energy giants.

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15 Responses to “The German model is the best way of escaping the clutches of the energy giants”

  1. Donald J Williamson

    We can learn so much from Germany on this and on their social market economics. Big Business Britain will take a lot of shifting. Wasn’t privatisation supposed to end monopolistic industries? They may be six companies, but they act as one – at our expense.

  2. Tom

    The German model has its merits yet the likelihood of it ever being implemented are minimal. The root of the problem lies in the cartel system currently employed by the big six. By breaking up this oligopoly and creating greater competition consumers would receive lower prices and a greater choice of provider.

  3. swatnan

    We’ed be better off with just the one company … competition actually raises prices, because all these companies are competing for the same customers, in the same market, and are spending enormoussums of money on promotion and advertising. Cut out the frills and give us the basic product..

  4. A Rebours

    You mean Germany that has the highest electricity bills in Europe? And subsidises its renewables to the tune of €21 billion a year? That Germany? The one that’s burning loads more lignite because it shut down its nuclear power stations? That Germany?

    The Greens and the Left are going to have to overcome their opposition to nuclear power.

  5. Tom

    Basic economics dictates that competition lowers prices as firms must compete to offer the lowest prices to the public. A privatized monopoly is unlikely to work given that they would have price setting ability and could therefore charge ‘enormosussums’ to consumers. Classical economists love to deride nationalised industries for their inefficiency and wastage. This is a valid point given recent economic history yet a nationalised industry run like a competitive business that works in the interests of society seems an ideal model.

  6. swatnan

    … especially if the Nationalised industry has a strong Watchdog scrutinising it and overseeing it for the Community Benefit. And, with a Nationalised Industry you can actually force the resignation of its Chief Executive, and the Minister, if they make a botch of it.

  7. Paul 保羅 باول Billanie

    You mean like the new nuclear plant that will be heavily subsidized by the British taxpayers? And the price of the energy has already been agreed (by Cameron)

    The deal that has been agreed is an absolutely astonishing rip-off for the British taxpayer. The UK government has guaranteed to buy electricity from the new reactor at £92.50 per megawatt hour, which is almost double the actual market rate. The difference between the market rate for electricity and the strike rate of £92.50 will be made up by the taxpayer using Contracts for Difference (CfDs). This means that the electricity consumer will be paying for their electricity twice; once by buying it on the electricity market, and again through the taxes necessary in order to pay for the price fixing subsidies.

    Dr Paul Dorfman, from the Energy Institute at University College London has calculated that these CfD subsidies will cost the taxpayer around £800 million – £1 billion per year. Over the 35 year life of the contract this will add up to a taxpayer funded subsidy of £28 billion – £35 billion, which is double the estimated £14 – £16 billion construction cost of the entire facility!

  8. Doug Palmer

    I suggest you look at the reports coming out of Fukushima before you start heralding the wonders of nuclear power. It has cost us over £90 billion so far to store the waste from UK nuclear power stations. It not safe, it’s the most expensive form of power currently available and it’s not low carbon either. They burn over £3 million per annum in gas for decommissioning and cooling the waste at Sellafield. It will cost at least £67 billion to decommission Sellafield. And this government wants to spend £0.8-1 billion a year in subsidies to the French and Chinese for Hinckley C. It would take less than 2 years to build renewables that would generate the same power as Hinckley C, which won’t come on stream for at least 10 years. Renewables will also create considerable more British jobs.

  9. A Rebours

    Actually, we can use that waste as fuel in an IFR – try Googling those. Fukushima is really not as serious as it’s been painted.

    Renewables are intemittent, and solving that problem will cost an awful lot more than nuclear would.

    The IPCC says nuclear is comparable in cost and CO2 emissions to most renewables.

  10. paulstaines

    Eh? German retail energy costs 30% more than in the UK.

  11. blarg1987

    Overall on this debate there should be a mix of all sorts, so green, nuclear and fossil fuels i.e, carbon capture.

    The biggest shame that all commentators are missing both left and right is that we have developed a culture of short termism. We have lost becomming a leader in these industries exporting our technologies and innovations to around the world to just a back water all in the name of reducing costs.

    Now several decades later it may have been more cost effective to stayed as an industry leader and invested in new technologies early on.

  12. Forlornehope

    Yes we can learn so much from Germany where domestic unit electricity costs are 60% higher than in the UK and are among the highest in Europe. The innumeracy of the Greens and the new left in general is quite staggering.

  13. Chris

    well done Tory minister Matthew Hancock for switching to frack-free gas & pro-green investment electricity

  14. treborc1

    That wrong yes prices in Germany were high and they were for a reason Germany had to build it green energy, so prices went up, now since 2009 German gas and electricity prices have dropped gas by 15% electric is now 40% cheaper and although slightly higher then the UK today next year it’s expected to drop again by 25% making it much cheaper for germans and then it will keep dropping for the next ten years.

  15. Frank100

    No, it does cost more during the introduction of the German system but in future the price is projected to fall so the german bills will be lower than the UK. See the post bye treborc1 above.

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