Boris Johnson’s other disaster – WSJ
Boris Johnson is fighting for his political survival amid a scandal over parties during pandemic shutdowns in 2020. And if only that was the only problem for British prime ministers. The party gate is proving so damaging because the news landed on a electorate already infuriated by Mr Johnson over soaring energy costs.
The government estimates the average household energy bill increased by 6% in 2021 for electricity and gas combined, at 1,339 ($1,837). This may hide much larger increases for some households. Some 25 suppliers failed since August, pushing thousands of businesses and some two million domestic customers (8% of all households) to new suppliers potentially at higher prices.
The cause of this fiasco is the favoritism of green energy amid a global spike in fuel prices. Retail providers were unprepared for soaring wholesale gas and electricity prices, thanks to the cap on household energy prices imposed by Mr Johnson’s ill-fated predecessor, Theresa May. This cap, which has become Conservative Party orthodoxy, prevented retailers from racking up higher profits when wholesale prices were lower to protect against supply shocks. But it also offers little lasting consumer protection. Rising wholesale prices could force regulators to raise the price cap by 50% when it is reviewed twice a year in February.
Britons are paying the price for decades of green policies that have made their energy grid less resilient and less affordable. Mr Johnson did not start this bad political trend, but he did his best to make it worse.
The main culprit is the chronic preferential treatment for renewable energy sources such as wind and solar. Since the early 2000s, the government has required utilities to buy from renewable energy producers an increasing share of the electricity they sell to consumers. London also subsidizes new renewable capacity by guaranteeing suppliers a price above the market price for the electricity they plan to sell. The cost reaches about 10 billion per year.
Renewable energies other than nuclear now account for nearly half of installed electricity generating capacity in Britain, down from 4% in 2000. The problem is that the wind doesn’t always blow and the sun certainly doesn’t always shine in the famously rainy region of the UK. Nuclear capacity has fallen to 8% of electricity generation from 16% to two decades ago, leaving gas to fill the void, the same gas that has seen rapid price increases.
It is expensive to increase the electricity supply in a hurry. The national grid operator expects to spend 3 billion in the current financial year on so-called balancing costs. This is what it has to pay to relief providers to bridge temporary gaps between supply and demand, most of which these days are caused by insufficient renewable generation.
Mr Johnson wants to make things worse. His grand plan to achieve net zero The CO2 emissions, released ahead of last year’s COP26 climate conference, would advance the full decarbonization of electricity by 2035.
Britain could have produced more gas domestically, which could have limited price increases at the margin. But Tory governments have failed to deploy new fracking technology in areas that have untapped gas, while investment in North Sea oil and gas fields has languished under green hostility. . Mr Johnsons proposed phasing out gas boilers which most homes use for central heating and hot water poses less of a threat to future gas demand, making investment in new extraction less economical.
Together, this means UK businesses and consumers are paying higher taxes and utility bills to fund renewables and are now also paying higher prices for gas-powered electricity. No wonder voters are starting to rebel.
The same goes for some members of Mr Johnson’s party. Twenty deputies published a letter in the telegraph this month, begging Mr Johnson to lift 5% value added tax on energy bills as well as various green levies which they say add nearly 25% to household spending. Lee Anderson, a Tory who won his Labor Midland seat in Mr Johnsons landslide in 2019, warned in the Daily Mail that his constituents are already disappointed with the Conservatives over energy costs.
Mr Johnson is resisting the VAT cut on the bizarre grounds that it would subsidize wealthy households. But the energy price debacle gives his party another reason to oust him besides the Covid garden party scandals. All of this is a warning to right-wing parties around the world tempted to indulge in green illusions at the expense of kitchen table realities.
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Appeared in the print edition of January 15, 2022.
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