Days of Reckoning:

The energy side of the crisis, however, requires sweeping restructuring which goes well beyond anything the government or the opposition are currently prepared to countenance – not least because the economic models they operate on are so out of step with the real world that they fail even to understand the problem, still less offer a workable solution.

Why the energy cap failed

The state-imposed energy cap, which is the focus of establishment media attention today, was always the wrong solution to the wrong problem.  As I explained four and a half years ago:

“The energy cap will end up upsetting everyone and solving nothing.  This is because, while the failed quasi-market arrangements are an irritant, they are not the true cause of the problem.  The same arrangements were in place prior to 2008; when complaints about overcharging and switching supplier were limited to the affluent classes.  It isn’t the system that has changed; it is the broader operating environment.

“The harsh reality is this: the cost of energy is rising remorselessly.  The cheap North Sea gas, on which Britain built the current energy infrastructure, is gone.  In its place are increasingly expensive gas imports – something that the eye-wateringly expensive fracking of UK shale deposits is not going to change (assuming there is any gas to recover).  Renewables only appear cheap because of the sleight of hand of measuring cost per Kw/h at the point of generation (rather than the point of use).  None of the infrastructure and balancing costs are included, nor are the inefficiencies and relatively low (25-30 years) lifespans of renewables factored into comparisons with coal, gas and nuclear plants (that last for 50 or 60 years).  Nevertheless, with fossil fuel availability falling, and nuclear having a few popularity problems of its own, renewables are going to become the greater part of our energy mix whether we can afford it or not.

“Here’s where government price caps fall down. One way or another, the energy infrastructure has to be built and maintained. Indeed, if you want the additional energy required for a growing economy, you need to build a lot more energy capacity. Someone has to pay for that. And if we are sticking with the current quasi-market arrangement, that someone is investors. And nothing drives private investors away from a business faster than state-imposed price caps.