No Dash for Gas – A little Background and a Call to Arms

I’d like to talk a little bit about why 21 people are being sued for £5 million by EDF, but first can we talk a little bit about risk? I guess we’re all a bit more familiar with risk these days. We used to be told a that the people running banks understood risk. It was said that they had mastered risk, through the combined power of algorithms, automated trading and their 7-figure bonuses. Nobody says that any more, of course, but it’s pretty clear that they understood risk just the right amount. Not enough to prevent a few of them scurrying home in September 2008 with their desk toys in cardboard boxes, or to prevent a global recession, but when the dust settled it turns out they were clever enough not to be risking their own pensions, houses or the money they made in the good times, despite the huge collateral damage they caused.

Most importantly, the risk to the survival of the financial institutions came to be borne by wider society. The size of their losses and the extent to which they were embedded in the wider economy meant that the politicians blinked first. Now those institutions are still there, with the same influence, obscene bonuses and seedy business models. In retrospect, that was never really in doubt. The central idea which allowed these institutions to wield such power, and risk such enormous sums of money – that markets are rational ways of determining the best outcomes for all – still passes for common sense in the corridors of power. So now, as an economic model built on largely illusory growth continues to deflate, instead of risks to those institutions, pensions and profits we see risks to our public services and welfare.

Even though they lost everything, they still won. That, I would contend, is the sign of a group of people who really understand how to manipulate risk to their own benefit. As with the big con, so with global capitalism: if you can’t see who the ‘mark‘ is, that means it’s you. Or rather, in this case, it’s us.

EDF

Another group of people who really understand risk is EDF energy. EDF energy is a subsidiary of the state-owned French nuclear power company Électricité de France. They own all the currently functioning commercial nuclear power reactors left in the UK (except one which is due to close in 2014), having purchased British Energy in 2008. They also own 3 gas and coal-fired power plants.

A bit of history for you: British Energy was the supposedly profitable portion of the UK nuclear industry, which was privatised in 1996. It lasted about six years, before it became financially unviable and had to be bailed out with public money. This came in the form of loans worth hundreds of millions of pounds, and the government taking on between £1.7 and £5.6 billion of British Energy’s liabilities – mainly the cost of disposing of nuclear waste and decommissioning old power stations.

Under the original privatisation scheme, which raised only £2.1 billion for the government, the private company was supposed to take on these liabilities, but apparently they were a little too risky. Of course, the financial difficulties didn’t prevent British Energy paying out a £432 special dividend to shareholders in 1999, or paying bonuses to executives. In 2004 the Public Accounts Committee of the UK parliament warned that paying bonuses to British Energy executives would mean that they were profiting from the government bailout of the company. Despite this warning, it was later reported that bonuses worth £30 million were being offered to senior executives. Sound familiar?

EDF know all about this history. They also know how the other part of the UK nuclear industry, which was such an enormous money pit it was never even considered for privatisation, has saddled the public with a decommissioning bill of (at the last count) £100 billion. Despite all this, EDF really want to build a new generation of nuclear power stations in the UK.

As I’ve said before, EDF are masters at managing risk. In contravention of official coalition policy, the government has already agreed to subsidise new nuclear power plants by underwriting the potential costs of a nuclear accident, and the costs for waste disposal, but this still left EDF with the risk that the cost of building the plants will make the electricity too expensive for them to make huge profits. After intensive lobbying EDF have persuaded the government to include nuclear (re-branded as a ‘low-carbon power source’) with renewable methods of generating power, and give them a guaranteed price for electricity.

This subsidy was originally intended to give new technologies like renewables a chance to develop and mature. If the market price for electricity is below the level at which that would be the case the difference will be made up from surcharges on customers’ bills. It was never intended for established technologies like nuclear, and effectively means that consumers are underwriting the risk that EDF are too incompetent to finish a construction project on time and to budget.

The latest news is that EDF have persuaded the government to guarantee these subsidies for 40 years. If EDF wins by constructing their plants on time and to budget, they win by getting even higher profits, and if they lose, they still win because their profits are subsidised by a levy on people’s bills.

The UK Energy Market and the Big Six

Of course, EDF are far too canny to bet their whole future business on the malleability of politicians, or on nuclear power. Like many of the UK energy giants, they also want to build gas-fired power stations. Consequently a lot of lobbying has gone on behind the scenes convincing ministers that renewable energy is far too expensive and the UK should be ploughing money into gas instead. The basis for this is some wildly speculative claims from people who hope to make lots of money out of shale gas, and the assumption that for the price of a few earthquakes and horribly polluted water supplies we will be able to put our heads in the sand and pretend that non-renewable sources of energy somehow aren’t going to run out, but instead are going to get cheaper.

You might ask why the energy giants want to bet the country’s energy supply on such a dubious premise, but if you think hard you’ll be able to work out the answer – there’s actually no risk to them. Let’s have a look at their current business model.

A little background: while the Tory government of the 80s and 90s had a mania for privatisation, they couldn’t get around the fact that the electricity network was a single interconnected grid distributing an identical ‘product’ (electricity) to all households and business, with no obvious way to differentiate it. They got around this by creating three distinct types of companies when they privatised the electricity sector – suppliers, generators and distributors.

Distributor companies were given a monopoly over the grid and transmission to houses and businesses in a particular area, but the separate category of ‘supplier’ company was created. Suppliers charge each customer for the electricity they use, and buy electricity wholesale from generating companies to make sure the same amount was being fed into the grid that their customers were using. This allowed the creation of an artificial market in electricity.

Again, the logic behind this is that the market is a rational way of determining the best outcomes for all, and that decisions about future energy investment should be taken by private, rather than public, entities. The reality was that supplier companies quickly found that being at the mercy of the market for your energy supply was not pleasant, and was far too risky for profits. They solved this through ‘vertical integration’, bringing together generator and supplier companies, so that both entities could rely on a steady price and profits could be guaranteed.

Through acquisition and vertical integration the UK energy sector has quickly become an oligopoly, with the Big Six (EDF, British Gas, E.ON, npower, Scotish Power and SSE) controlling 99% of the energy market. Because they have a stranglehold on both supply and generation, it is almost impossible for any other player to gain a foothold.

Because we get most of our electricity from burning fossil fuels, and because of vertical integration, the only cost the energy companies cannot control is the price they pay for gas and coal. As we’ve seen over the last few years, the Big Six have simply increased the prices they charge their customers as global prices of hydrocarbons rise (though they have been slower to reduce them on the occasions global prices have fallen). The consumer has assumed the risks of fluctuating global energy prices, while they enjoy risk free profits.

Why The Dash for Gas?

Climate change, of course, represents a challenge to this harmonious picture of corporate welfare. Naturally, the immediate risks of climate change are externalised, and will not greatly impact the big energy companies. Instead they will be largely felt by other people, other species and other generations. However, the changes in the way we generate electricity necessitated by climate change do represent a risk to their oligopolistic business model. The way I see it, the threat is manifested in three ways.

Firstly we are looking a transition away from established technologies in which the Big Six have so much knowledge and expertise that no other players can seriously challenge their dominance. They can be pretty sure that no upstart company is going to work out a much more efficient way to burn coal, set up a new power station down the road, and start undercutting them. With renewables they can be far less certain of maintaining their privileged market position.

Secondly it’s not at all certain that the way we generate electricity in the future will mean that large generation plants will always be more efficient than smaller ones. A taller wind turbine with larger blades is more efficient than a tiny one stuck on your roof, but are 100 of the larger ones much more efficient than one on its own? What about when we’re talking about solar, wave or tidal energy? If larger isn’t necessarily better, this is a real threat to the current model of a few energy behemoths running a handful giant generation plants. The scenario of an energy sector comprised of lots of small-scale, community owned, renewable projects is the Big Six’s worst nightmare.

Thirdly there is the threat to the current demand-matching model of electricity generation. At present the idea is that consumers will turn on appliances as and when they need them, and power stations will feed electricity into the national grid to match the demand. Obviously, renewable generation can’t easily be scaled up and down in this way, though this isn’t as serious an issue as it is portrayed by right-wing journalists and the denial industry. Properly seen, this is an engineering problem and the solution is to reduce demand through energy efficiency, spread out renewable generation sites over a large geographical area, build more connections from the national grid to other countries and to start building a smart grid.

Smart Grid technology would mean that various household electricity usage, such as fridges or the charging of electric vehicles, could be raised or lowered depending on the current capacity of the grid. Giving consumers the ability this amount of control over their power usage would be a fundamental shift away from the old model, empowering people at the expense of energy generating companies and enabling a decisive break from the polluting technologies which they can easily control and profit from.

From this it is obvious why the energy industry is lobbying heavily for the transition away from established technologies to be as slow as possible, for the transition to be implemented so as to maintain the market position of the large companies, and why they are so keen to denigrate renewables and maintain that we need supply-matching power plants as ‘backup’.

Once the UK’s energy infrastructure is designed around gas-fired power stations generating a sizeable proportion of the electricity on the grid, it doesn’t matter to the Big Six if the price of gas doesn’t decrease in accordance with the industry’s wild predictions. The cost will just be passed on to the consumer because that’s the only way we’ll be able to keep the lights on.

Captive Politics and People Power

The story of corporate capture of politics is a story too long, depressing and familiar to get into now. Suffice it to say that the Big Six have been very successful at managing the response to climate change in a way that presents no serious risk to their privileged market position or profits. This isn’t just limited to the energy industry in the UK: it’s speaks volumes that 5 years after the collapse of the financial markets in 2008, the major international effort to deal with the ‘greatest market failure the world has ever seen‘ is based upon the creation of an artificial market.

In the UK, one of the very few notes of hope in this bleak cacophony has been the willingness of people to stand up and physically intervene to prevent major carbon-intensive infrastructure projects. Over the prospect of new coal-fired power stations, or the third runway at Heathrow, direct action has been a major factor in preventing the go-ahead of schemes pushed by craven government ministers at the bidding of big business.

This has not been appreciated by the big energy companies or their bag-carriers in government. We have repeatedly seen collusion, aimed at stifling protest, between the police, energy companies and shadowy branches of central government. The police’s ability to unilaterally set pre-trial bail conditions is increasingly being used to try to punish activists and disrupt their lives before they have even been charged, let alone found guilty. In some cases these have even stipulated where people should sleep every night or that they should not ‘associate’ with housemates or work colleagues.

Most infamously, the police have been spending hundreds of thousands of pounds of taxpayers money every year to infiltrate protest movements with spies. Answerable to the Association of Chief Police Officers, instead of a publicly accountable body, they have been paid to infiltrate, befriend, manipulate and sleep with groups of people whose only ‘crime’ has been to threaten the profits of big business.

Meanwhile, the ability of corporate lobbyists to influence policy has only increased under the coalition. Eager to roll back the meagre policy gains that have been won on climate change, they have found a natural ally in George Osborne, a man of such unlimited incompetence and malignant arrogance that, not satisfied with having wrecked the economy – his nominal area of responsibility, he also appears to be actively trying to destroy the climate as some kind of demented hobby.

West Burton

Throughout 2012 Osborne has been working within government to weaken the UK’s carbon reduction targets. His unstated but obvious intention is to break the terms of the Climate Change Act, which was passed in 2008 with support across all political parties including from David Cameron. In December last year Osborne announced tax breaks for shale gas extraction, despite public warnings from governmental advisers that his strategy will cause the UK to breach its own legally-binding targets. There is absolutely no electoral mandate for this. In fact, it is completely contrary to even the Tory manifesto from 2010, which called for  ‘low carbon economy’ and specifically mentions the target which the Climate Change Act is designed to deliver.

In short, the dash for gas is a completely undemocratic, illegal and ill-thought out policy, designed to protect the business model of a handful of corporate giants at the expense of the planet. None of the institutions of traditional politics seem to be capable of preventing this so people decided to take matters into their own hands. Just under three weeks after Osborne presented his plan for shale gas tax breaks to the Tory party conference, 21 people occupied West Burton gas-fired power station, which is currently under construction by EDF, and shut it down for a week as a protest against this hugely retrograde step.

You might say that EDF, by pursuing a short-sighted and catastrophic business model that we will all eventually end up paying for, is openly courting the risk that saner individuals might try and put a stop to it. You might say that’s just the risk they take for what they’re doing, and that protest of this kind is the only option when traditional politics is failing so visibly.

You might also think that if ‘No Dash For Gas’ were doing something wrong they should be taken to a criminal court and put before a jury. But EDF, the police and prosecutors don’t want to take the risk that a jury of ordinary people in possession of the facts would acquit the protestors, as has happened before.

Instead any charges against ‘No Dash For Gas’ which would have had to be heard by a jury have been dropped so that the case was heard in a Magistrate’s Court, and EDF has adopted an altogether more insidious strategy. They are attempting to sue the activists for £5 million, betting that the risk of losing their homes will scare them off from protesting in the future, that the risk of paying back EDF a portion of their wages for years hence will scare people into not taking direct action.

Let’s have no illusions about the type of people behind this. EDF have a record of fighting dirty and trying to squash opposition – in 2011 a French court fined them £1.3 million and sent two members of staff to jail for spying on Greenpeace. Nottinghamshire police, who already have a reputation for collusion with the energy industry and dirty tricks against activists following the policing operation where Mark Kennedy acted as an agent provocateur, appear to have been closely involved in drawing up the case.

This is now about more than the dash for gas, EDF’s business model and even the climate. This is about whether people who care so much about an issue they are prepared to risk their bodies and their liberty should be made to lose their houses and spend a lifetime in hock to the very companies they have dared to confront. EDF are gambling that they can get away with this outrageous attempt to restrict our right to protest – that ordinary people are not going to be outraged enough by this to stand up and be counted.

EDF don’t believe that the risk to their reputation and business is large enough to pass up on the opportunity to intimidate their critics into silence. EDF think they understand risk, and that we’ll keep on picking up the tab the way they do business, while they continue picking up profits. That’s your right to protest under threat here. That’s your future going up that chimney in smoke. Do you want to risk it?

Dave Cullen Is a supporter of No Dash For Gas – Twitter: @humbleetc

 

Take action to support No Dash for Gas

Leave a Reply

Your email address will not be published. Required fields are marked *