Discussing Energy Economics on the Internet

RSPB Changes Tack On Wind

Posted in UK,Wind by Cheryl Morgan on the March 26th, 2009

Despite having plenty of good prospects for wind energy, the UK has lagged behind both other European countries and America in deployment of wind farms. The problem is well known: planning permission. NIMBYism is a major issue – the British public has got it into its head that a wind farm is a terrible eyesore than is to be resisted at all costs. However, environmental groups, including the Royal Society for the Protection of Birds (RSPB), have also campaigned strongly against wind farms on the grounds that they are a danger to our feathered friends.

Not any more. Much to the delight of the British Wind Energy Association (BWEA), the RSPB has published a report titled Positive Planning for Onshore Wind. Produced by the Institute for European Environmental Policy (IEEP), the report states that risks to wildlife can be minimized by sensible planning and choice of location. Ruth Davis head of Climate Change Policy at the RSPB said:

“This report shows that if we get it right, the UK can produce huge amounts of clean energy without time-consuming conflicts and harm to our wildlife. Get it wrong and people may reject wind power. That would be disastrous.”

Actually, of course, the British people rejected wind power en masse a long time ago, and the RSPB should accept a large share of the blame for that. But it is good to see them change their stance. Possibly their minds were powerfully concentrated by the government’s enthusiasm for the Severn Barrage scheme which, if it goes ahead, is predicted to destroy large areas of wetlands that are vital to many bird species. The main advantage of the barrage, as far as the government is concerned, is the ability to get a huge amount of new generation from only one public inquiry, rather than have to fight environmental protesters in many small battles all over the country.

The full RSPB report is available here.

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UK Retailers Get Free Loans from Customers

Posted in Retail by Cheryl Morgan on the March 26th, 2009

According to the consumer advocacy organization, Which?, energy companies in the UK are getting large amounts of money in interest-free loans from customers. It works like this: customers get a lower tariff if they pay by direct debit, but rather than charging them the correct amount of the bill each month the utility helpfully smooths the pain by charging a flat amount each month. In theory this should average out at the correct amount each year, but the companies generally seem to manage to estimate usage that causes the customer to pay for more energy than they are actually using. Eventually, of course, the money has to be paid back, but in the meantime the utility has been getting a free loan.

For those of us who live in the UK the only real surprise about this is that it has taken people so long to catch onto this scam. Now that Which? has made a fuss, and politicians have noticed, hopefully Ofgem will do something about it.

Coverage of the issue is available via Platts, the BBC and The Times.

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On Retail Competition

Posted in Retail,Texas,UK by Cheryl Morgan on the March 3rd, 2009

Over at Knowledge Problem, Michael Giberson reports that a shake-out is occurring in the Texas retail market and asks whether vertical integration might have been a better option for Texas.

I don’t have Sally Hunt’s book to hand, and I know that there are complex issues involved in this case, but here are some quick thoughts.

1. The end result of vertical integration is a situation like we have in the UK where there is no serious wholesale market in electricity, and consequently much less transparency in the market. Transparency, in general, is a good thing, and I don’t like doing without it.

2. Texas is experiencing a shake-out of retailers because it, like California, made the foolish assumption that the retail market would see enthusiastic and successful new entry. All of the experience around the world suggests that this does not happen. Energy retailing is a business in which economies of scale are everything, and new entry is practically impossible. The Texas market will eventually settle down to a small number of very large companies all of which, I suspect, will also have retail businesses in other states.