How will the 2017 general election affect our energy markets?
Amongst the madness of this snap general election, it is important to remain objective and not to believe the huge amounts of propaganda delivered by each party. Election upon election we hear hundreds of idyllic proposals in party manifestos that never come to fruition; this is something that we need to realise is always going to be the case. Party campaigners will always need to find an angle on their audience to secure their vote when it comes to the big day, just make sure you’re realistic about what you expect from your chosen party.
Here’s our opinion on the general election with regards to UK energy markets. To give a more insightful view of the realistic outcome of the June 8th vote we will compare only proposed action by the Conservative party and the Labour party.
Energy Bill Caps
Theresa May, the current prime minister and leader of the conservative party, has said that she wishes to introduce a cap on energy bills to prevent people overspending on standard variable tariffs. According to May, energy bills in the UK only ever go up, which is actually incorrect. Gas and electricity bills have seen quite severe increases over the last 10 years, this is without a doubt correct; however, between 2014 and 2016 we have actually seen an average reduction of 11.28% in gas prices and 0.47% in electricity prices, which is definitely a step in the right direction. This is quite largely due to the drop in wholesale and generation prices.
It is true that energy suppliers, especially those in the ‘Big Six’, are reluctant to drop their tariff prices to the level of independent suppliers such as First Utility and Flow Energy, which does account for around 85% of homes in the UK, but this is changing. As independent companies continue to claw back a larger proportion of the market share, Big Six suppliers are feeling greater pressure to be more competitive and increase their customer service levels. We do need to realise, however, that May’s proposition will only really affect those who have not yet switched tariffs. Standard variable tariffs, which are known for being needlessly expensive, are default tariffs for those who do not switch and are thus generally the most expensive on the market. The £100 a year region of savings that May has suggested can be easily beaten by switching your tariff and potentially saving 3 or 4 times that amount.
The Labour party, the main opposition to the conservatives, have also shared the same sentiment as the above in that they wish to lower energy bills by implementing a cap. However, they have gone that one step further by suggesting notions of a renationalised energy market. Not only have they suggested this, but also the renationalisation of the rail and postal services in Great Britain all whilst abolishing tuition fees. Depending on your standpoint on nationalisation, this may sound fantastic, but it is extremely unrealistic from an objective financial perspective. But that’s not what we’re discussing here. If this were to come to fruition, then, well… we wouldn’t be here, but more importantly, neither would choice of energy tariff.
Great Britain has one of the most advanced energy markets in the world. We may not be the cheapest, but we certainly aren’t lacking in options and ways to reduce our energy bills. We have no evidence to support or reject the idea that renationalisation would or would not be beneficial for customers on a large scale. It is extremely likely, however, that it will only benefit those who do not switch their tariffs. There is very little chance of a national supplier offering the whole country the current cheapest on the market, which means those who want to save real money, will be paying more involuntarily. Jeremy Corbyn, the labour leader, wants to give more to the masses, rather than the select few, which is fantastic, but this is not an issue of class. People are free to switch whenever they wish, just many choose not to educate themselves on the benefits and are happy to receive a standard variable tariff. This should not result in the loss of choice for those who want to save serious money.
Renewable Energy & Climate Change
Fracking technology drilling into the earth's surface
The Labour party have vowed to put a ban on fracking and put a heavier focus on nuclear energy. Fracking, for those who aren’t aware, is a process of retrieving oil from within the earth by pumping a fluid and sand several hundred meters into the earth to separate the rock formation. We do not yet know the long terms hazards of this method, but we are already aware of the severe contamination threat that it poses. The conservative party, however, have been pushing for a fracking industry here in the UK much like that of the United States. The fracking method has already been used well over a million times across the pond and is something that might see its way across here should the Conservatives come to power.
Green energy hasn’t yet been mentioned in any great detail by either party and thus hasn’t really been seen as a top priority as of yet. What we do know, however, is that Labour have pledged to make sure that renewable energy efforts are increased, therefore attempting to make renewables a larger part of our energy mix. Given our relationship with the United States, however, this could be difficult to sanction for either party. Following Donald Trump’s rise to presidency in January this year, it seems as though progression in limiting the effects of climate change is set to take a back seat. Trump has said on various occasions that he ‘doesn’t believe in climate change’ and as such has cut the budget for the Environmental Protection Agency (EPA) by 31% and the US Department of Energy by 6%. It is likely that we will work with the USA to tackle a number of the same issues and as of yet, we don’t know where climate change and renewable energy will sit on that list of issues.