YESTERDAY the Energy and Climate Change Select Committee released a report arguing that energy regulator Ofgem should force energy companies to produce more detailed financial information. One of the members of the committee – John Robertson MP – told the BBC that he needed to be able to assess whether the profits of the energy companies were excessive.
It is a testament to the poor quality of financial education in the UK that preening politicians are allowed to get away with that kind of posturing. Either the MPs do not understand the consequences of the regulations they proudly vote through Parliament, or they do and this is a very unpleasant attempt to fool the public.
It is really not complicated: the government wants to radically increase our use of renewable energy, which is both very expensive and very capital intensive. To meet government targets, Liberum Capital estimates that the energy sector will need to invest £161bn by 2020 and another £215bn between 2020 and 2030. That means £376bn in total, of which only £151bn would be needed without government targets.
All of that investment has to be paid for, and that means higher profits in the energy sector. All of those profits have to be paid for, and that means higher prices for consumers. There is just no way that the government’s policy can work without much higher profits in the energy sector and much higher prices for consumers.