In today’s issue:
- Yet another dearth of wind and sun has sent European power prices soaring
- The UK is following the Continent’s frightening path
- Do politicians even care, if they personally benefit?
The holidays arrived this year amidst headlines of huge spikes in energy prices across Europe. There was a perfect “winter storm” of sorts: a lack of wind and sun to power renewables, combined with cold weather…
The Green Grinch, as it were, nearly stole Christmas.
Fortunately, sufficient gas stocks were available to rescue the grid and keep the lights on. But they did so at Christmas Market prices. Given the way the European power network is sewn together, a lack of renewables capacity in one country can result in power being drawn from elsewhere, driving up power prices for everyone.
Such has been the case in Norway, a major energy and power exporter. Electricity prices have climbed to their highest level since 2009.
And Norwegians are none too happy about it. Under public pressure, the two ruling parties in the governing coalition are now reconsidering their relationship with their power-challenged neighbours.
Nor are those neighbours at all pleased either. Skyrocketing energy costs are pushing Germany toward a potential wave of “de-industrialization,” with major manufacturers shutting down plants and warning of massive job cuts.
Perhaps it should be no surprise that the German government formally collapsed the week before Christmas. France’s National Assembly is churning through prime ministers as none are able to hold a ruling coalition together for long.
Political populism continues to rise globally, fuelled in part by soaring energy costs. For the political centre to hold, securing affordable energy is essential. But if Norway cuts its energy exports, Europe’s power supply could be in jeopardy.
Compounding the issue, the US has become Europe’s largest gas supplier since the destruction of the Nord Stream pipelines in 2022. A trade conflict between Europe and the US could further destabilise the region, turning an already critical energy challenge into a full-blown crisis. Staring out across the North Sea, the British government must be relieved that the UK is not caught up in all the energy mayhem on the Continent. Or are they in fact envious?
Recent statements by Energy Secretary Ed Miliband suggest he wants to place the country in much the same position as Germany. As the Guardian reports
The UK will not face blackouts under Labour’s proposed shake-up of energy supply, Ed Miliband has said, as he unveiled plans to boost clean power by the end of the decade.
The energy secretary insisted the transition away from fossil fuels was “unstoppable.”
Miliband has been setting out the government’s “clean power 2030” plan , including measures to boost the UK’s renewable energy supply such as building canopies of solar panels on outdoor car parks.
The blueprint includes wide-ranging measures to speed up planning decisions on clean energy projects, unblock the queue of projects waiting to connect to the grid and empowering the energy secretary to have the final say on major infrastructure such as giant onshore wind farms.
The plans come as low wind and solar power generation forced Britain to rely heavily on burning gas and wood pellets. As of Thursday, about 65% of Britain’s electricity was being generated from gas and biomass, with only 5.3% coming from wind.
In gambling, this is known as “doubling down”. Psychologists will tell you that such behaviour is symptomatic of addiction. Or it could be symptomatic of corruption too. Who cares if ambitious green energy plans fail, if political cronies become wealthy from all the taxpayer-funded subsidies being thrown around?
Should it concern us that the energy secretary’s brother helps to run a venture capital fund with huge investments in green energy projects? Or that a Labour MP’s wife sits on the board of Veritas, the wind-turbine company Mr Miliband bailed out earlier this year for an undisclosed sum?
It’s probably all mere coincidence. Nor does it really matter. We’re talking about only 5% or so of UK power generation. It’s all a tornado in a teacup.
I have nothing against green energy, as long as it works. That’s my attitude towards technology more generally. But this is why I’m sceptical when the government gets involved. Do they care if it works for us, or merely for them and their cronies?
One thing is clear: across the pond, technological progress is roaring ahead, in most cases unreliant on taxpayer subsidies. Recently, one technology executive after another has dined or otherwise met with President-elect Donald Trump. Apparently, he’s a fan too.
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Until next time,
John Butler
Investment Director, Fortune & Freedom
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