Do we really want lower energy prices?

Graph from the Daily Mail, 16th August 2013. It shows that increases in prices of electricity has resulted in a reduction in consumption. The question is

Graph from the Daily Mail, 16th August 2013. It shows that increases in prices of electricity has resulted in a reduction in consumption. The question is this: “Is this a good thing, a bad thing or just an ‘obviously true’ thing?”

The gist of news stories about our energy supply in the last few weeks is that energy – electricity and gas – is ‘too expensive’. However I disagree: I think that energy is not just ‘too cheap’, it is much too cheap. Let me explain.

Cheap energy feels great. When energy is cheap, poor people can keep warm in winter: in the vernacular of the press, they can heat and eat. And importantly they don’t worry about their fuel bills which makes them both warm and happy. Likewise transport becomes cheaper, and everything that we manufacture or grow becomes cheaper to produce and move – and so we make more things and sell more things to people who are not using their money to pay fuel bills. So the economy grows, and we all – on average – benefit.

However there are two problems with cheap energy. Firstly  when energy is cheap we use more of it. And then we spend less on things which helps us reduce energy consumption. For example, if energy is cheap it makes less sense to insulate houses well. Then when energy prices do rise, we will find ourselves doubly disadvantaged. The cause of this expected rise is not to do with the environment but simply that many more people on the planet want to use the finite amount of coal and gas to which we have access. Of course, if we took advantage of cheap energy to increase our investment in energy-saving measures then that would make sense: but sadly that is the opposite of what happens.

The second problem is that cheap energy is dirty energy. Cheap electricity comes from coal and gas and is associated with emissions of carbon dioxide into the atmosphere. As I mentioned in a previous post, the amount of carbon dioxide emitted is phenomenal and rising year on year. To the best of our knowledge and understanding, it has, in our lifetimes, changed the climate of the planet and we expect the effects to increase over the coming decades. This effect is irreversible. Energy sources which don’t cause this pollution are all much more difficult in one way or another than burning fossil fuels. In other words, energy produced sustainably is more expensive.

So cheap energy feels good, makes everyone happy (except me), and gives rise to economic growth. However, it causes us to reduce investment in energy-saving measures and makes sustainable energy generation uneconomic. It also makes the effects of Global Warming – whatever they turn out to be – worse.

So what can we do? The only realistic way to reduce energy consumption is to increase the price of energy – see the graph at the head of the page. This makes sense in the long term, but results in suffering in the short term. Is it still possible to imagine a United Kingdom in which some sense of social justice could ameliorate the effects of increasing energy prices? I would like to think it is, but I am not sure.

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2 Responses to “Do we really want lower energy prices?”

  1. cartoonmick Says:

    Who knows who is right and who is wrong and who will be effected or not ?

    There are many ways this climate thing may pan out.

    Here is a link to a very short imaginary tale as to how it may end . . . . .

    http://cartoonmick.wordpress.com/2013/07/17/the-final-chapter/

    Cheers

    Mick

  2. gdw100 Says:

    I agree. I don’t know what these politicians think they’re doing but the idea that we’ll have cheap energy is just a lie and they must surely know it.

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