SPEAKING during a debate last week in the House of Commons on the looming winter fuel crisis, I posed the question, why do the people of Wales derive little benefit from our status as an electricity exporting superpower?
Jonathan Edwards MP writes: The British Government are in a state of panic as a whole host of electricity and gas companies are likely to hit the wall in the coming weeks and months, just as we are about to enter the colder months of the year.
The domestic energy market has been failing for many years and a part of the solution offered by Ministers to deal with the continuously rising domestic fuel prices of the big six companies (British Gas, N Power, EDF, SSE, EON and Scottish Power) – who have been accused of cartel-like behaviour – has been to encourage start-up challenger domestic suppliers.
These companies have undercut the big 6 with cheaper deals but now find their business models challenged as the price of wholesale gas rises.
The British Government have said that they will not save any energy supplier from going under but will help those left standing pick-up stranded consumers.
Reconsolidation of the market to a handful of suppliers, however, will have its own long terms consequences.
Markets only work where there is competition, as we know from bitter experience in the domestic energy sector.
The increase in the wholesale price is eye-watering.
The Oil and Gas UK Trade Body estimating that prices have increased by 250% since the beginning of the year, and 70% in the last month alone.
A number of factors are responsible for the jump in prices.
Demand for gas is exceeding supply as the global economy reheats after the pandemic.
Benign weather conditions in recent weeks have impacted UK offshore wind developments’ generating capacity.
The main electricity connector with France was damaged last week by fire, and supply will be running at 50% capacity until March next year according to National Grid.
High demand for liquefied natural gas in South East Asia means less has reached Europe. Lastly, production from the Scottish oil fields is less than normal due to maintenance and issues arising from the pandemic.
Families will therefore inevitably face increased energy costs, not only for those on the gas network but also electricity prices due to the importance of gas for electricity generation.
The price cap set by OFGEM will increase by 12% next month, with further increases looking inevitable in the new year.
Food prices will also rise, adding to other Brexit related pressures, as the Carbon Dioxide supply collapses.
Considering the importance of CO2 for food production across the whole supply chain, from livestock slaughter to frozen food storage, it’s questionable why its production for industrial use has not been seen as a strategic priority and even a matter of national security.
The UK finds itself more exposed than other States as it is a large net importer of gas and electricity.
The UK is the second-largest importer of electricity in Europe, 19.7 TWh, and is, therefore, more susceptible to fluctuations in wholesale energy prices.
Conversely, Wales is a massive net exporter of electricity, producing twice our domestic requirements, consuming 14.9 TWh of the 30.2 TWh generated in our country.
Only France (41TWh), Germany (30TWh) and Sweden (22TWh) export more electricity than Wales.
As a percentage of production, however, Wales outperforms every other European country.
France’s exports only account for 9.3% of production, Germany 5.7% and Sweden 31.1% compared to 50% for Wales.
Indeed, nearly every other country in Europe runs an electricity deficit, somewhat denting the arguments of Welsh unionists that our country cannot function as an independent country.
The problem for us in Wales is that despite our strength in electricity generation, there is little dividend for our people, with nearly a third of households living in fuel poverty and our people facing the highest energy prices in the British State.
Being tied to a failing UK electricity system, therefore, has economic and social consequences for Welsh families.
We would be in a better place to face the looming winter crisis if the Welsh Government had control over energy policy.
The trajectory of Welsh policy seems quite simple to me.
The UK Green Growth Index places Wales in second place when it comes to the potential for renewable development.
Our national government should set up its own public energy company and start building up a portfolio of generating capacity, instead of merely allowing private developers to utilise our natural resources.
That’s a model which has now been adopted by the Scottish Government. The public company should then enter the domestic supply market.
Furthermore, the Welsh Government should seek all the leavers to enable us to maximise our national potential for renewable growth; for instance, control of the Welsh seabed from the Crown Estates.
Scotland have those powers so why are Welsh unionists opposed to similar powers for Wales?
Ultimately, we need power over energy policy as a whole to maximise the economic benefit of Welsh resources and tackle the major social problems our communities face when it comes to energy poverty.
During the debate in the House of Commons, the British Government said they would renew interest in hydroelectricity in order to increase the resilience of the UK’s domestic supply.
The Times responded that the people of Wales should run for the hills as it doesn’t take a genius to work out where these developments will be located.
The energy crisis, therefore, highlights the ultimate choice facing the people of Wales.
Continue to let our country be exploited for the needs of others or grab hold of the reins and ensure that the people of Wales get a dividend from our strength in electricity production.
