Wave good­bye to cheap en­ergy rates

The Jewish Chronicle - - Business -

WITH the news con­tin­u­ing to be dom­i­nated by al­le­ga­tions over phone hack­ing and our minds turn­ing to thoughts of sun-drenched beaches and fun­filled fam­ily hol­i­days, we could be for­given for hav­ing over­looked the re­cent de­ci­sion by Bri­tish Gas to in­crease the cost of gas by 18 per cent and elec­tric­ity by 16 per cent. Scot­tish Power has also an­nounced large price rises.

With in­fla­tion still run­ning above four per cent, we will cer­tainly feel the im­pact of these higher fuel prices on our dis­pos­able in­come, es­pe­cially as the nights start to draw in and we move into the win­ter months.

Yet this could be just the tip of the ice­berg. Ac­cord­ing to fig­ures re­leased last week by the Depart­ment of En­ergy and Cli­mate Change, en­ergy con­sump­tion in the UK in­creased by 4.6 per cent be­tween 2009 and 2010.

Fur­ther, as the Sec­re­tary of State, Chris Huhne, has re­cently pointed out, we have less con­trol over its cost with im­ported fos­sil fu­els cur­rently pro­vid­ing around one-third of our en­ergy and this fig­ure set to rise to 50 per cent in less than 15 years.

To com­pound the prob­lem, ac­cord­ing to the elec­tric­ity and gas reg­u­la­tor Ofgem, we need to in­vest £200 bil­lion in en­ergy in­fra­struc­ture by 2020, of which the gov­ern­ment es­ti­mates £110 bil­lion will be re­quired to re­place ex­ist­ing power plants com­ing to the end of their use­ful lives.

At a time of se­vere pub­lic ex­pen­di­ture cuts, to say the least, this rep­re­sents a very sig­nif­i­cant chal­lenge. In re­sponse, the gov­ern­ment has an­nounced a se­ries of mea­sures, in­clud­ing the in­tro­duc­tion of a new sys­tem of longterm sup­ply con­tracts in the hope that this will en­cour­age com­pa­nies to build new power plants. Time will tell if this alone will have the de­sired re­sult.

One pos­si­ble so­lu­tion might lie with al­ter­na­tive en­ergy but this cur­rently rep­re­sents just un­der seven per cent of our elec­tric­ity gen­er­a­tion. It is dif­fi­cult to see this pro­vid­ing a quick enough fix.

It ap­pears much more likely that this huge en­ergy in­vest­ment will re­quire reg­u­lar and sub­stan­tial price rises un­til we can find ways to re­duce our over­all en­ergy con­sump­tion.

The days of cheap en­ergy look to be well and truly over. Jonathan Morris is a part­ner at the in­ter­na­tional law firm Ber­win Leighton Pais­ner LLP

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