The Anonymous Widower

Is A Cap On Energy Prices A Good Idea?

All political parties including the Motherhood and Apple Pie Tendency think this is a good idea, but I’m not sure.

I changed to OVO Energy, one of the smaller companies a couple of years ago, so I looked up on a comparison site to see if I could make a big saving by changing supplier.

Sixty-three suppliers would give me a saving of up to four pounds a month.

As my solar panels haven’t been installed for a year and I don’t know the full affect on my bill yet and I would be changing with solar panels, I shall not be changing my supplier now.

But the interesting figure is that sixty-three different deals were offered. That says to me that competition is working in the energy field.

An Ideal Energy Market

Most consumers would prefer a fixed low price.

But surely, that is impossible as there has to be an equilibrium between the price energy companies pay for their energy and the price they charge consumers.

What happens if there is a global crisis and energy prices are universally high?

The other problem with a low energy price, is that doesn’t encourage consumers to save energy.

The UK’s Energy System

The energy system and market is a constantly changing dynamic system and since energy privatisation in the UK, there have been massive changes to the generation, supply and use of electricity.

  • A nnetwork of interconnectors is starting to stretch over Western Europe to allow interchange of electricity.
  • Wind and solar power generation are increasing dramatically.
  • Coal is dead for generating electricity.
  • Consumers have invested in low-energy appliances.

There will be more developments in the next few years.

  • A planned interconnector to Iceland could be a game changer.
  • Solar panels and energy storage will increasingly be fitted to homes.
  • Millions of electric cars will be sold.
  • Some high-priced nuclear energy will come on stream.

All of these developments have and will continue to move the energy price up and down.

As a Control Engineer, I know that the best way to get a dynamic system like this to a stable point acceptable to all parties, is to apply as few restrictions as possible.

An energy price cap will impose a condition, that will distort the equilibrium and it might not be in the way that politicians want.

Politicians would be better to concentrate on actions that helped the current system find an equilibrium acceptable to all.

  • Make it as easy as possible for consumers to change energy supplier.
  • Avoid backing high-priced energy generation like Hinckley Point C.
  • Promote lower-cost generation and energy storage systems.
  • Fund energy research at universities.
  • Build more interconnectors.

But above all they should not distort the market.

As an aside here, I don’t object to Nicola Sturgeon setting up a tax-payer funded energy company in Scotland. In a free market, it will only promote more competition and possibly lower prices.

But it might lose Scotland a lot of money!

October 12, 2017 - Posted by | World | ,

3 Comments »

  1. But a huge chunk of our housing stock can’t be improved – that’s teh real problem

    Comment by simonjkyte | October 12, 2017 | Reply

    • I grew up in a 1930s semi in London, which had single brick walls. It has caused me lifelong health problems. Houses like this should be demolished, as you’d burning sackfulls of £50 notes to insulate them!

      Comment by AnonW | October 12, 2017 | Reply

      • I know – I am just about to move out of one: single brick walls, never intended for hiabitation, nearly all external walls

        Comment by simonjkyte | October 13, 2017


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