tag:theconversation.com,2011:/au/topics/big-six-energy-companies-16080/articlesBig six energy companies – The Conversation2022-11-22T16:52:23Ztag:theconversation.com,2011:article/1939972022-11-22T16:52:23Z2022-11-22T16:52:23ZSmart meters show your energy use but here’s how you can actually save money<figure><img src="https://images.theconversation.com/files/495895/original/file-20221117-19-2zesyu.jpg?ixlib=rb-1.1.0&rect=24%2C0%2C8155%2C5444&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">There are gaps in UK households' understanding of their energy usage</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/smart-energy-meter-kitchen-measuring-electricity-2116196165">Daisy Daisy/Shutterstock</a></span></figcaption></figure><p>Soaring energy prices are squeezing homes and businesses across the UK and Europe, prompting leaders to implement support measures such as the UK’s <a href="https://www.gov.uk/government/publications/energy-bills-support/energy-bills-support-factsheet-8-september-2022">Energy Price Guarantee</a>. Yet it is often unclear to a consumer how much they are spending on energy. For those not on prepayment meters, there is no direct fee each time a light is switched on or a cup of tea is made. </p>
<p>Energy bills also tend to be paid in average monthly sums spread across a year. This protects households from winter price rises when energy use increases. But it also means that the amount households pay for energy is not directly linked to their daily or monthly energy consumption. This separates households from their energy use and the bills they pay. </p>
<p>Smart electricity meters could change how households use energy. They track a household’s energy use and express the cost on an in-home display. </p>
<p>There are now <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1099629/Q2_2022_Smart_Meters_Statistics_Report.pdf">25.6 million</a> smart meters installed in homes and businesses across the UK. Though the number of installations varies, an additional one million smart meters are installed on average each year. </p>
<p>The UK government believe that smart meters could cut household energy bills by 2–3% on average based on trials from their nationwide <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/831716/smart-meter-roll-out-cost-benefit-analysis-2019.pdf">smart meter roll-out programme</a>. But research <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/277045/key_findings_summary_quantitative_sm_public_attitudes_research_wave_4.pdf">cautions</a> against the benefits of smart meters for households. </p>
<h2>Not so smart meters</h2>
<p>A smart meter can reveal which of a household’s appliances use the most energy. Their proponents argue that they <a href="https://www.sciencedirect.com/science/article/pii/S0301421516300039#bib13">support</a> behavioural change and incite discipline over energy use by raising household energy consciousness. But the effectiveness of a smart meter depends on the decision of an individual not to consume or waste energy. </p>
<p><a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/657766/Leeds_Core_Cities_Green_Deal_Final_Report.pdf">Research</a> that I co-authored found evidence that there are gaps in UK households’ understanding of their energy usage. In other words, many households exhibit what we call a low level of “energy literacy”. </p>
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<img alt="A technician servicing his boiler." src="https://images.theconversation.com/files/496464/original/file-20221121-23-qc5bn3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/496464/original/file-20221121-23-qc5bn3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/496464/original/file-20221121-23-qc5bn3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/496464/original/file-20221121-23-qc5bn3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/496464/original/file-20221121-23-qc5bn3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/496464/original/file-20221121-23-qc5bn3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/496464/original/file-20221121-23-qc5bn3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Many households do not understand their heating control systems.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/technician-servicing-gas-boiler-hot-water-182175488">Alexander Raths/Shutterstock</a></span>
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<p>Heating control systems can be complex, often involving timers and zonal controls that regulate the temperature across different rooms. We found that it was common for people to misunderstand these systems. </p>
<p>Some of the households interviewed admitted that they did not know how their boiler worked or how to adjust its controls. Others had their heating on continuously and simply turned the boiler on and off at the wall. This can lead to over or under heating parts of a house, resulting in wasted energy. It is therefore likely that those who respond to the prompts offered by smart meters will already be conscientious energy users. </p>
<p>However, the move away from physical heating controls may exacerbate the problem. Not all people will be able and willing to engage with smart meters. While there is a lack of research into the extent of energy literacy across different social groups in the UK, digital exclusion may leave some households still unable to control their own heating. </p>
<p>Understanding fuel bills is also a part of energy literacy. Research shows that many households have a limited understanding of their energy bills. In a 2021 survey, <a href="https://cdn.literacytrust.org.uk/media/documents/Energy_bills_and_literacy_report_-_final_002.pdf">just 46.6%</a> of the 2,520 UK adult bill payers questioned were able to identify the correct definitions of six terms commonly used on their energy bills. Without guidance, many households will be unable to use the information provided by their smart meter effectively. </p>
<p>Energy suppliers instead accrue considerable benefits from smart meters. A smart meter delivers <a href="https://www.sciencedirect.com/science/article/pii/S0140988314001649">information</a> about a home’s energy use to suppliers remotely and reduces the necessity for routine door-to-door meter reads. </p>
<h2>Finding a place for smart meters</h2>
<p>Smart meters may prove valuable for households on variable fuel tariffs, where the per unit price of energy they pay varies at the discretion of their energy supplier. The cost of energy rises during the hours where energy demand is at its highest and falls during periods of lower total energy use.</p>
<p>If smart meters are able to convey instant and future unit energy prices then consumers can shift energy intensive activities, such as washing clothing, towards cheaper periods including overnight. The National Grid is trialling a <a href="https://www.bbc.co.uk/news/business-63483668">scheme</a> which will compensate energy suppliers for offering households discounts on their electricity bills for reducing their energy use during peak times. The scheme applies to homes with smart meters, who receive an alert 24 hours before the test session. </p>
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<img alt="Two Tesla Powerwalls, the company's household energy storage system, mounted on a wall." src="https://images.theconversation.com/files/495897/original/file-20221117-23-6q2h5m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/495897/original/file-20221117-23-6q2h5m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/495897/original/file-20221117-23-6q2h5m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/495897/original/file-20221117-23-6q2h5m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/495897/original/file-20221117-23-6q2h5m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/495897/original/file-20221117-23-6q2h5m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/495897/original/file-20221117-23-6q2h5m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Battery storage can save homeowners money on their energy bills.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/austin-texas-usa-july-19th-2021-2015851994">Roschetzky Photography/Shutterstock</a></span>
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<p>Energy can also be stored in house batteries and in electric cars. Variable tariffs would allow them to be recharged when energy is cheap and used during periods of peak energy use. Initial trials conducted by renewable energy company Octopus Energy revealed that charging batteries using variably priced energy could save households up to <a href="https://octopus.energy/blog/agile-powervault-trial/">£580 per year</a>. </p>
<p>This would also accelerate the transition towards electrified household heating. If enough homes use variably priced energy to recharge storage batteries and use them to satisfy their peak energy demand, the requirement for backup energy sources to bolster electricity generation during periods of high demand is reduced. </p>
<p>Smart meters may be ineffective at encouraging greater energy consciousness. But in the future they may allow households to take advantage of a flexible energy grid built around variable pricing and energy storage. But given the current energy crisis, there is limited opportunity to switch energy tariffs. When the situation changes in the future, it is likely that smart meters will play a larger role in household energy consumption.</p><img src="https://counter.theconversation.com/content/193997/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Glew does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The government is rolling out smart meters across the UK, but at present they are providing households with little benefit.David Glew, Head of Energy Efficiency and Policy, Leeds Beckett UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1782692022-03-03T13:26:16Z2022-03-03T13:26:16ZShell, BP and ExxonMobil have done business in Russia for decades – here’s why they’re leaving now<figure><img src="https://images.theconversation.com/files/449591/original/file-20220302-17-234t11.jpg?ixlib=rb-1.1.0&rect=7%2C0%2C4941%2C3294&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Pumps at a Shell fueling station in Tatarstan, Russia, Nov. 20, 2017.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/pump-nozzles-at-a-shell-petrol-station-in-kazan-tatarstan-news-photo/876639322">Yegor Aleyev\TASS via Getty Images</a></span></figcaption></figure><p>In response to Russia’s invasion of Ukraine, British energy giant BP announced on Feb. 27, 2022, that it will <a href="https://www.washingtonpost.com/business/2022/02/27/bp-russia-rosneft-ukraine/">sell its nearly 20% ownership in Russian state-owned energy giant Rosneft</a>. BP’s rival Shell is also <a href="https://www.reuters.com/business/energy/shell-exit-russia-operations-after-ukraine-invasion-2022-02-28/">pulling out of all of its operations in Russia</a>, as are U.S. energy giant <a href="https://www.ft.com/content/76db0e18-7c7e-4b96-9ee5-81dcfca18f34">ExxonMobil</a> and Norway’s state-controlled company, <a href="https://www.equinor.com/en/news/20220227-equinor-start-exiting-joint-ventures-russia.html">Equinor</a>.</p>
<p>These breakups will not be cheap. BP’s stake in Rosneft is <a href="https://www.washingtonpost.com/business/2022/02/27/bp-russia-rosneft-ukraine/">worth US$14 billion</a>. In various projects, Shell has about <a href="https://www.forbes.com/sites/jonathanponciano/2022/02/28/shell-joins-bp-abandons-3-billion-russia-investments-after-senseless-ukraine-invasion/?sh=3f7769636a44">$3 billion in assets in Russia</a>. ExxonMobil has over <a href="https://www.wsj.com/articles/exxon-to-shut-down-oil-production-in-russia-after-ukraine-attack-11646180028">1,000 employees</a> and more than <a href="https://www.reuters.com/business/energy/exxon-mobil-begins-removing-us-employees-its-russian-oil-gas-operations-2022-03-01/">$4 billion in assets</a> there. Pulling out will inflict significant financial hits on all of these companies.</p>
<p>Western energy companies have invested and operated in Russia for a long time – <a href="https://www.washingtonpost.com/business/2022/02/27/bp-russia-rosneft-ukraine/">over 30 years for BP</a> and <a href="https://www.ft.com/content/76db0e18-7c7e-4b96-9ee5-81dcfca18f34">more than 25 years for ExxonMobil</a>. They are accustomed to managing international political risks. </p>
<p>In my view, Russia’s invasion of Ukraine has completely changed Western energy companies’ cost-benefit analysis of doing business in Russia. I have researched <a href="https://scholar.google.com/citations?user=7lfhUj0AAAAJ&hl=en">multinational companies’ foreign direct investments</a> <a href="https://business.rice.edu/person/yan-anthea-zhang">in emerging markets</a> for over two decades and have closely followed Western energy companies’ investments in Russia. I expect that other Western oil majors, such as French company <a href="https://totalenergies.com/">TotalEnergies</a>, are also likely to pull out of Russia, and that it may take many years for these companies to reengage there. </p>
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<a href="https://images.theconversation.com/files/449581/original/file-20220302-13-180zag8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Two men in suits smile and extend hands." src="https://images.theconversation.com/files/449581/original/file-20220302-13-180zag8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/449581/original/file-20220302-13-180zag8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=476&fit=crop&dpr=1 600w, https://images.theconversation.com/files/449581/original/file-20220302-13-180zag8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=476&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/449581/original/file-20220302-13-180zag8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=476&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/449581/original/file-20220302-13-180zag8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=598&fit=crop&dpr=1 754w, https://images.theconversation.com/files/449581/original/file-20220302-13-180zag8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=598&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/449581/original/file-20220302-13-180zag8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=598&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">BP CEO Bob Dudley (left) shakes hands with Russian President Vladimir Putin during the Russian Energy Week forum in Moscow on Oct. 2, 2019.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/russian-president-vladimir-putin-shakes-hands-with-ceo-of-news-photo/1173086765">Mikhail Svetlov/ Getty Images</a></span>
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<h2>Big risks, big payoffs</h2>
<p>Foreign investment in Russia has never been easy. For example, in 2003, BP and a consortium of Russian <a href="https://www.thestreet.com/markets/emerging-markets/what-exactly-is-a-russian-oligarch">oligarchs</a> formed the joint venture TNK-BP, which became one of the largest oil producers in Russia. However, disputes ensued over the venture’s leadership, operations and international expansion. </p>
<p>The situation became so fraught that Bob Dudley, then the head of TNK-BP and later BP’s chief executive officer, was forced to <a href="https://www.ft.com/content/8b4968fa-40d8-40ae-b2f9-f12cd8b23f9c">flee from Russia in 2008</a>. To resolve the disputes, BP sold its 50% equity in TNK-BP to Rosneft in 2013 for <a href="https://www.bloomberg.com/news/articles/2022-02-28/first-bp-now-shell-big-oil-walks-away-after-decades-in-russia-as-war-rages">$12.5 billion in cash and a nearly 20% share in Rosneft</a>. </p>
<p>Shell got involved in the early 1990s in the <a href="https://www.shell.com/about-us/major-projects/sakhalin/sakhalin-an-overview.html">Sakhalin-2 project</a> to develop natural gas reserves in Russia’s Far East, and built Russia’s first liquefied natural gas facility there. As the project neared completion in 2006, at a cost of more than $20 billion, Shell and its Japanese partners were forced to sell a 50% share to Russia’s state-owned natural gas giant, Gazprom, for $7.45 billion because Putin’s government was unhappy with the <a href="https://www.bloomberg.com/news/articles/2022-02-28/first-bp-now-shell-big-oil-walks-away-after-decades-in-russia-as-war-rages">easy terms previously offered by the Yeltsin administration</a>. </p>
<p>During crises like these, Western energy companies weighed the potential gains and costs of operating in Russia and concluded that staying in was worth it. It’s easy to see why: Russia holds <a href="https://www.worldometers.info/gas/russia-natural-gas/#">24% of the world’s total natural gas reserves</a>. It has comprehensive pipeline networks to the west to move natural gas to European countries, and large reserves to its east that are close to some of the world’s hungriest energy markets, including Japan, South Korea and China. </p>
<p>For years, Western energy companies viewed compromise with the Russian government as part of the cost of doing business there. As long as expected gains exceeded costs, they stayed.</p>
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<figcaption><span class="caption">Oil companies aren’t the only businesses cutting ties with Russia in response to its invasion of Ukraine.</span></figcaption>
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<h2>Reputations matter</h2>
<p>Russia’s invasion of Ukraine has changed those calculations. Now, executives at oil majors need to assess possible broader damage to their corporate reputations and to relationships with their home country governments, shareholders and other interest groups if they stay in Russia. Unlike controversies within the energy industry, invading an independent sovereign nation is much too high profile of a development for companies to ignore.</p>
<p>Academic research shows that there is a positive correlation between <a href="https://doi.org/10.1002/csr.1480">companies’ socially responsible behaviors and financial performance</a>. Simply put, companies that do good tend to do well financially. The invasion of Ukraine represents a critical shift in Russia’s business environment. As BP Chief Executive Bernard Looney stated on Feb. 26, the situation unfolding in Ukraine “has caused us to <a href="https://www.reuters.com/business/energy/britains-bp-says-exit-stake-russian-oil-giant-rosneft-2022-02-27/">fundamentally rethink BP’s position with Rosneft</a>.” </p>
<p>In particular, Western energy companies that partner with the Russian government now may be perceived as weakening their own governments’ sanctions and helping to finance Russia’s war in Ukraine. Russia owns 40% of BP’s Russian partner, Rosneft; the company’s CEO and board chair, Igor Sechin, is <a href="https://www.washingtonpost.com/business/2022/02/27/bp-russia-rosneft-ukraine/">Russia’s former deputy prime minister and a close Putin ally</a>. Shell’s primary partner in Russia is <a href="https://www.investopedia.com/articles/markets/082615/5-biggest-russian-natural-gas-companies.asp">Gazprom, the state-run natural gas giant</a>. </p>
<p>To maintain their corporate reputations and relationships with key interest groups, BP, Shell, Equinor and ExxonMobil clearly have decided that it is important to cut their ties in Russia completely, immediately and publicly. BP’s current and former chief executive officers <a href="https://www.bp.com/en/global/corporate/news-and-insights/press-releases/bp-to-exit-rosneft-shareholding.html">resigned from Rosneft’s board of directors on Feb. 27, three days after the invasion began, “with immediate effect</a>.”</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1498975166151409665"}"></div></p>
<p>While the Western world is imposing severe and united sanctions on Russia in sectors ranging from <a href="https://www.cnet.com/how-to/what-is-swift-banking-ukraine-russia-crisis/">finance</a> to <a href="https://www.reuters.com/business/airspace-closures-after-ukraine-invasion-stretch-global-supply-chains-2022-03-01/">aviation</a>, Western governments have <a href="https://www.reuters.com/business/energy/us-has-not-sanctioned-russian-oil-traders-are-avoiding-it-2022-03-01/">avoided sanctioning energy exports from Russia</a>, seeking to protect their citizens from price spikes. Nonetheless, if Western energy companies remain in Russia and continue partnering with Russian state-owned companies, they could be perceived as undermining the Western response. Indeed, BP’s exit decision reportedly came under <a href="https://www.theguardian.com/business/2022/feb/25/bps-ties-to-russia-draw-uk-government-concern">pressure from the British government</a>. </p>
<p>None of these companies have many viable potential buyers for their Russian holdings. Russian firms, facing sanctions, don’t have the resources to acquire foreign investors’ assets, and other Western energy companies are unlikely to pursue them. The only potential investors are private equity firms that face less scrutiny than publicly traded companies, or companies from countries that don’t join Western sanctions on Russia. </p>
<p>Russia’s energy sector depends heavily upon Western companies’ technologies, especially for <a href="https://www.ft.com/content/fc354a6a-5dcb-11e4-b7a2-00144feabdc0">hard-to-recover oil projects and offshore projects</a>. BP, Shell and ExxonMobil will leave significant technological voids that could be hard for newcomers to fill. </p>
<p>Corporate leaders are used to making high-level strategic decisions that require weighing costs and benefits. What has changed the calculus for Western energy companies is the broad potential damage to their companies’ reputations and relationships with various interest groups if they stay in Russia. Clearly, executives cannot limit benefit-cost calculations to specific investments. Their overall corporate reputations can be worth billions of dollars.</p>
<p>[<em>You’re smart and curious about the world. So are The Conversation’s authors and editors.</em> <a href="https://memberservices.theconversation.com/newsletters/?source=inline-youresmart">You can read us daily by subscribing to our newsletter</a>.]</p><img src="https://counter.theconversation.com/content/178269/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Yan Anthea Zhang is affiliated with the Strategic Management Society and the Academy of Management. </span></em></p>The world’s largest energy companies are used to doing business in risky places with difficult partners. But with war in Ukraine, preserving their reputations outweighs profits.Yan Anthea Zhang, Professor and Fayez Sarofim Vanguard Chair of Strategic Management, Rice UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1562252021-08-05T10:44:39Z2021-08-05T10:44:39ZWhy the UK’s unfair energy market is unlikely to spearhead a green transition<figure><img src="https://images.theconversation.com/files/414769/original/file-20210805-25-hzjc05.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C4912%2C3264&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/double-exposure-electric-pole-sky-stock-1157896027">Art Stock Creative/Shutterstock</a></span></figcaption></figure><p>Millions of people will pay more for gas and electricity in the UK by the autumn of 2021 as the energy regulator, Ofgem, has removed a cap on prices. For some households, this could mean bills rising by as much as <a href="https://www.theguardian.com/business/2021/aug/06/millions-of-great-britain-homes-face-highest-energy-bills-in-a-decade">£153 (US$212) a year</a>, potentially pushing <a href="https://amp.theguardian.com/society/2021/jul/31/calls-for-social-tariff-on-uk-energy-bills-as-rises-push-extra-half-million-homes-into-fuel-poverty">an extra 500,000 homes</a> into fuel poverty.</p>
<p>Those heftier energy bills also fund much of the UK government’s flagship policies for the low-carbon transition. On top of their energy use, every home in the country is paying extra on their bill to cover the cost of retrofitting programmes to increase the energy efficiency of homes, help for those in fuel poverty and subsidies for renewable generation. All of these costs are added to energy bills at a flat rate.</p>
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<a href="https://images.theconversation.com/files/396077/original/file-20210420-15-lxuwos.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A bar chart showing cost of green policy as share of income from each income group." src="https://images.theconversation.com/files/396077/original/file-20210420-15-lxuwos.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/396077/original/file-20210420-15-lxuwos.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=385&fit=crop&dpr=1 600w, https://images.theconversation.com/files/396077/original/file-20210420-15-lxuwos.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=385&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/396077/original/file-20210420-15-lxuwos.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=385&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/396077/original/file-20210420-15-lxuwos.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=484&fit=crop&dpr=1 754w, https://images.theconversation.com/files/396077/original/file-20210420-15-lxuwos.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=484&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/396077/original/file-20210420-15-lxuwos.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=484&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Who foots the bill for decarbonisation?</span>
<span class="attribution"><a class="source" href="https://www.tandfonline.com/doi/full/10.1080/14693062.2020.1773754">Owen & Barret/Climate Policy</a></span>
</figcaption>
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<p>According to <a href="https://www.ippr.org/publications/when-the-levy-breaks-energy-bills-green-levies-and-a-fairer-low-carbon-transition">a 2015 report</a>, this means, in practice, that those on the lowest incomes pay a six times higher share of their income for the transition than the highest income group, who also happen to have the <a href="http://www.ledevoir.com/documents/pdf/chancelpiketty2015.pdf">highest CO₂ emissions</a> on average.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/396078/original/file-20210420-21-1wkxryc.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A bar chart comparing energy use between different income groups." src="https://images.theconversation.com/files/396078/original/file-20210420-21-1wkxryc.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/396078/original/file-20210420-21-1wkxryc.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=334&fit=crop&dpr=1 600w, https://images.theconversation.com/files/396078/original/file-20210420-21-1wkxryc.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=334&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/396078/original/file-20210420-21-1wkxryc.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=334&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/396078/original/file-20210420-21-1wkxryc.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=420&fit=crop&dpr=1 754w, https://images.theconversation.com/files/396078/original/file-20210420-21-1wkxryc.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=420&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/396078/original/file-20210420-21-1wkxryc.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=420&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Higher income groups use significantly more energy than those on lower incomes.</span>
<span class="attribution"><a class="source" href="https://www.ippr.org/publications/when-the-levy-breaks-energy-bills-green-levies-and-a-fairer-low-carbon-transition">Garman & Aldridge/IPPR</a>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>Through energy bills, people in the lowest income groups effectively self-fund their own fuel poverty support, including measures like <a href="https://www.gov.uk/the-warm-home-discount-scheme">the warm home discount</a> – a one-off winter payment of £140 towards energy bills – while also paying towards measures that mainly benefit <a href="https://www.tandfonline.com/doi/full/10.1080/14693062.2020.1773754">higher income groups</a>, like subsidies for rooftop solar panels.</p>
<p><a href="https://www.eci.ox.ac.uk/people/bboardman.html">Academic Brenda Boardman</a> warned about this problem in <a href="https://www.sciencedirect.com/science/article/abs/pii/030626199390061S">the 1990s</a>. Not only is this not a fair way to fund the national effort to decarbonise the UK’s energy system, but that same unfairness is slowing the speed and reducing the motivation for a transition in the first place.</p>
<h2>The big fix</h2>
<p>The UK’s energy market is dominated by six multinational corporations. On the website of Ofgem, the energy regulator, <a href="https://www.ofgem.gov.uk/investigations">a page</a> documents the multiple infractions of these companies, known as <a href="https://theconversation.com/uk/topics/big-six-energy-companies-16080">the Big Six</a>, from their <a href="https://journals.sagepub.com/doi/full/10.1177/1024529420964933">treatment of vulnerable customers</a> to their failure to fulfil obligations to reduce the carbon intensity of their gas and electricity.</p>
<p>Ofgem’s answer is a voluntary <a href="https://energyredress.org.uk/about-us">redress scheme</a> which companies under investigation pay into. This often funds programmes which advise vulnerable customers, such as the chronically ill, on how to navigate an (often intentionally) bewildering energy market. Npower paid <a href="https://www.ofgem.gov.uk/publications/npower-pay-ps26m-failing-treat-customers-fairly">a record fine</a> in 2015 of £26 million. The total number of fines and redress payments made in 2020 <a href="https://www.ofgem.gov.uk/energy-policy-and-regulation/compliance-and-enforcement">reached £71.3 million</a>.</p>
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Read more:
<a href="https://theconversation.com/people-who-cant-heat-their-homes-need-energy-justice-not-fuel-bank-charity-40778">People who can't heat their homes need energy justice – not 'fuel bank' charity</a>
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<p>Had this money been spent directly on low-cost renewable generation, <a href="https://www.renewableuk.com/page/UKWEDExplained">57 megawatts of wind energy</a> could have been installed, enough to power around 40,000 homes annually. </p>
<p>These six companies made profits of nearly <a href="https://assets.publishing.service.gov.uk/media/5773de34e5274a0da3000113/final-report-energy-market-investigation.pdf">£2 billion</a> in 2015 from their standard tariffs. People are often placed on these automatically and tend to remain on them, with only the most nimble customers (<a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/699937/modernising-consumer-markets-green-paper.pdf">around 30% in 2016</a>) switching. The government <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/699937/modernising-consumer-markets-green-paper.pdf">noted</a> that those least likely to switch to cheaper tariffs earn less than £18,000 a year, are aged 65 and over, with a disability, or live in social housing or the private rented sector. As a result, a significant proportion of these profits are extracted from those <a href="https://www.ofgem.gov.uk/sites/default/files/docs/2008/10/energy-supply-probe---initial-findings-report.pdf">least able to pay</a>.</p>
<p>In fact, many people living in private rentals and social housing (20% and 17% of the population <a href="https://www.ons.gov.uk/economy/inflationandpriceindices/articles/ukprivaterentedsector/2018#main-points">respectively</a>) are effectively <a href="https://www.sciencedirect.com/science/article/pii/S0301421519300102">excluded</a> from the choice of installing the solar panels and electric vehicle charging points their energy bills finance, because such freedoms tend to depend on home ownership.</p>
<p>UK consumers also pay some of the <a href="https://www.gov.uk/cma-cases/energy-market-investigation">highest pre-tax rates</a> for electricity in Europe, and energy costs in general are <a href="https://www.gov.uk/government/publications/cost-of-energy-independent-review">higher than they should be</a> considering falling gas prices since 2014 and more efficient boilers and smart meters. Meanwhile, the <a href="https://www.ofgem.gov.uk/information-consumers/energy-advice-households/costs-your-energy-bill">third of the bill</a> which pays for the maintenance and environmental upgrade of energy infrastructure is taken at the same rate from billionaires as it is from those on Universal Credit. People without solar panels will continue paying for the essential network changes that incorporate the growing amount of renewable energy, and those who cannot afford to swap their fossil fuel burning car for an electric vehicle could end up having to travel further and emit more to get fuel, as retailers cease supplying or <a href="https://www.sciencedirect.com/science/article/pii/S0301421519300102">close their facilities</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/396079/original/file-20210420-17-60vm8k.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A bar chart comparing pre-and post-tax electricity prices in EU countries." src="https://images.theconversation.com/files/396079/original/file-20210420-17-60vm8k.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/396079/original/file-20210420-17-60vm8k.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=346&fit=crop&dpr=1 600w, https://images.theconversation.com/files/396079/original/file-20210420-17-60vm8k.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=346&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/396079/original/file-20210420-17-60vm8k.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=346&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/396079/original/file-20210420-17-60vm8k.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=435&fit=crop&dpr=1 754w, https://images.theconversation.com/files/396079/original/file-20210420-17-60vm8k.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=435&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/396079/original/file-20210420-17-60vm8k.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=435&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Electricity prices from July to December 2015, including and excluding tax (p/kWh).</span>
<span class="attribution"><a class="source" href="https://www.gov.uk/cma-cases/energy-market-investigation">UK Government</a>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>While consumers fund measures which cut emissions from the UK’s energy system through bills, government policies effectively subsidise fossil fuels, mostly through <a href="https://journals.sagepub.com/doi/full/10.1177/1461452920960349">forgone tax revenue</a>. These UK subsidies result in effective investment in fossil fuel production of €11.6 billion a year, compared to the €7.76 billion <a href="https://journals.sagepub.com/doi/full/10.1177/1461452920960349">invested in renewables</a>. In this situation, the renewables consumers fund are more likely to add to the energy generated by fossil fuels, rather than replace it.</p>
<p>At the same time, renewable subsidies like <a href="https://www.gov.uk/feed-in-tariffs">the feed-in-tariff</a>, which paid people for the excess energy they generated with solar panels, have been axed. This makes it harder for people to pay to install solar power at home. Clearly, the transition to low-carbon energy could be quicker if government policy didn’t work against the best intentions of the public. </p>
<p>And the public are aware. <a href="https://www.sciencedirect.com/science/article/abs/pii/S2214629618311988">One study</a> in 2019 found widespread misgivings about excessive profits, a lack of transparency and close ties between the government and big energy companies. If people don’t trust the institutions tasked with overseeing the end of the fossil fuel era, how will they be persuaded to make the necessary <a href="https://www.theccc.org.uk/publication/behaviour-change-public-engagement-and-net-zero-imperial-college-london/">changes</a> to their own lives?</p><img src="https://counter.theconversation.com/content/156225/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Lee Towers does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The cost of decarbonising the UK’s energy system is falling disproportionately on the poorest.Lee Towers, PhD Candidate in Energy and Politics, University of BrightonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1294782020-01-14T15:02:56Z2020-01-14T15:02:56ZHow we consume electricity has changed dramatically in the past 20 years – and the market has failed to keep up<figure><img src="https://images.theconversation.com/files/309942/original/file-20200114-151880-1gegeky.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C7951%2C5304&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption"></span> </figcaption></figure><p>It’s been more than two decades since Britain’s retail electricity market was opened to full competition in 1999. Before that, retail supply was provided by state-owned entities with regional monopolies. Today, all consumers, including households and businesses, are able to “shop around” for their electricity, switching to a different supplier or tariff to take advantage of better prices and services. </p>
<p>In principle, that is exactly what liberalised retail markets are supposed to provide: greater consumer choice and protections. But that’s only the case if it’s easy for consumers to switch suppliers and for new suppliers to enter the market. That’s how markets are supposed to stay competitive to deliver low prices and a high quality of service. That was the great hope of electricity policy in 1999, but after two decades, there’s little to celebrate.</p>
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Read more:
<a href="https://theconversation.com/fact-check-are-fewer-people-switching-gas-or-electricity-company-76716">Fact Check: are fewer people switching gas or electricity company?</a>
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<p>To enhance competition, smaller suppliers have been exempt from contributing towards the cost of decarbonisation policies. Known as “the threshold obligation”, this encouraged the entry of smaller companies into Britain’s retail electricity market, but the increase from six suppliers in 1999 to more than 70 in 2019 came at a cost. Many new suppliers have gone bankrupt due to unsustainable business models, resulting in consumers footing unpaid industry bills.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/309946/original/file-20200114-151825-j30b25.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/309946/original/file-20200114-151825-j30b25.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/309946/original/file-20200114-151825-j30b25.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/309946/original/file-20200114-151825-j30b25.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/309946/original/file-20200114-151825-j30b25.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/309946/original/file-20200114-151825-j30b25.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/309946/original/file-20200114-151825-j30b25.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Consumers have bore the brunt of costly failures in the electricity retail market.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/attractive-young-housewife-wears-shirt-home-1022105656">EverGrump/Shutterstock</a></span>
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<p>The retail market is designed for a tech-savvy, informed consumer, who actively switches suppliers to benefit from a cheaper tariff. But over 50% of British consumers are on the default “<a href="https://www.ofgem.gov.uk/key-term-explained/standard-variable-tariff-0">standard variable tariff</a>”, which is the most expensive. This implies that most people are passive consumers, and don’t shop around at all. While suppliers that are exempt from the threshold obligation can offer lower tariffs, these only tend to benefit active consumers who seek out and switch to them. These consumers tend to be better off anyway, with better access to information and the time to compare choices.</p>
<p>The costs of decarbonisation and social policies are eventually recovered through electricity bills, so passive consumers end up bearing a disproportionate proportion of these costs. This has sparked debate about how to protect passive consumers from retailers who charge them more than others for the same service.</p>
<p>In January 2019, the energy market regulator, Ofgem, put a cap on the price of default tariffs to <a href="https://www.ofgem.gov.uk/system/files/docs/2019/02/information_for_elected_representatives_and_stakeholders.pdf">prevent disengaged consumers being exploited</a>. But this won’t work if the barriers to switching remain in place.</p>
<p>At the moment, consumers can’t easily access information about different electricity suppliers, and <a href="https://www.ofgem.gov.uk/ofgem-publications/39711/behaviouraleconomicsgbenergy.pdf">the market is so complex</a> that they don’t feel confident to switch even if they wanted to.</p>
<h2>Power to the people</h2>
<p>Not only has the retail market failed to achieve its original objectives for consumers, it also hasn’t kept pace with technological change and the need to transition away from fossil fuels. Since 1999, the electricity sector has undergone a transformation. Consumers can now generate their own electricity through solar panels and <a href="https://theconversation.com/the-electricity-network-is-changing-fast-heres-where-were-heading-51652">sell it back to the grid</a>. </p>
<p>There are companies that aggregate smaller consumers into groups and buy and sell electricity on their behalf. <a href="https://www.gov.uk/guidance/community-energy">Community energy services</a> allow local communities to collectively own a renewable energy project such as a wind farm and generate, store, consume and sell their own energy.</p>
<p>There are multi-service providers that don’t just sell electricity, but internet and telephone access too. These business models are possible today but were unthinkable in 1999. </p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/despite-good-progress-100-low-carbon-energy-is-still-a-long-way-off-for-the-uk-114949">Despite good progress, 100% low-carbon energy is still a long way off for the UK</a>
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<p>Existing market regulations prevent these new services from being brought into the market by new players, because their business models aren’t aligned with traditional electricity suppliers and the existing system. If one of these new providers wanted to offer consumers free electricity with the purchase of an electric vehicle, this might require a consumer to have more than one supplier for the same premises – one which supplies electricity to the vehicle and another that satisfies the rest of the consumer’s demand. But at the moment, you’re <a href="https://www.elexon.co.uk/wp-content/uploads/2018/04/ELEXON-White-Paper-Enabling-customers-to-buy-power-from-multiple-providers.pdf">only allowed one supplier</a> as your single point of access to the retail market.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/309950/original/file-20200114-151829-zevbsk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/309950/original/file-20200114-151829-zevbsk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/309950/original/file-20200114-151829-zevbsk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/309950/original/file-20200114-151829-zevbsk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/309950/original/file-20200114-151829-zevbsk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/309950/original/file-20200114-151829-zevbsk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/309950/original/file-20200114-151829-zevbsk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Prosumers have become a major part of electricity supply in the UK since 1999.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/leicester-uk-january-26-2019-solar-1370757959">Nrqemi/Shutterstock</a></span>
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</figure>
<p>Regulations need to keep pace with this transformation. With the growth of “<a href="https://theconversation.com/beyond-bitcoin-how-blockchains-can-empower-communities-to-control-their-own-energy-supply-99411">prosumers</a>” – people who generate their energy as well as buying some – the electricity market is changing. Top-down structures in which traditional suppliers act as the primary liaison may no longer be the dominant model in the future.</p>
<p>As the cost of solar panels and battery storage falls, more people will take to generating their own energy, and the electricity system will become more decentralised. That means more power and control for consumers over their own energy use and bills. </p>
<p>But in order for everyone to benefit, the government should reconsider its current policy of funding renewable energy projects through an extra fee on electricity tariffs. Tariffs are charged <a href="https://www.ofgem.gov.uk/data-portal/breakdown-electricity-bill">based on how much electricity someone buys</a> from the grid. A prosumer, with rooftop solar panels that generate their own electricity, needs to buy less energy from the grid, resulting in higher prices for remaining consumers. </p>
<p>Britain’s retail electricity market has changed beyond recognition in the last 20 years. Energy policy has to catch up, and fast, to meet the urgent challenges of decarbonisation and fuel poverty.</p><img src="https://counter.theconversation.com/content/129478/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Rahmat Poudineh does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The next 20 years of Britain’s electricity policy must look very different from the previous 20.Rahmat Poudineh, Senior Research Fellow and Director of Research, Oxford Institute for Energy Studies, University of OxfordLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/895912018-01-30T22:18:06Z2018-01-30T22:18:06ZThe importance of teaching youth to guard against energy ‘fake news’<figure><img src="https://images.theconversation.com/files/204072/original/file-20180130-107703-1uzmwkn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Wind turbines are seen at Pincher Creek, Alta.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>Robert Frost’s brilliant poetry in <a href="https://www.poetryfoundation.org/poems/44272/the-road-not-taken">“The Road Not Taken”</a> describes the divergence of two roads and the profound difference it made for the writer to pursue the less travelled one.</p>
<p>Canada has reached a point in its efforts to address climate change where the paths before it have diverged. </p>
<p>One leads in the new exciting direction of energy production using renewables, with creative ideas to harness what nature has provided us. The other well-trodden path is full of the pitfalls that got our planet into the mess it’s in now.</p>
<p>The students of today who will inherit this crisis are previewing the newest and brightest ideas on the internet with a feeling of hope; change is coming and they can see it. </p>
<p>Advances in conservation, batteries and plummeting costs of wind and solar generators have provided a sense of optimism. </p>
<p>Tesla, Elon Musk’s company, has developed a battery that is storing electricity and is now powering Adelaide, Australia. <a href="https://www.ecowatch.com/tesla-australia-battery-2514064636.html">Tesla insists</a> “a sustainable, effective energy solution is possible.” </p>
<p>Students are being educated in the lexicon of the future. They have been introduced to environmentally significant terms such as <em>sustainable</em>, <em>renewable</em> and <em>stewardship</em>. These concepts become the keywords for any internet search pertaining to solutions for global warming. </p>
<p>As a longtime teacher and education scholar, I know that teaching critical thinking is of paramount importance, especially as it applies to research on the internet. </p>
<h2>Corporate PR can mislead our youth</h2>
<p>In terms of energy, public relations ploys by the oil, coal and nuclear industries can be convincing, and can lead our youth down the proverbial garden path. Being able to critically evaluate such claims is part of scientific literacy. </p>
<p>A <a href="https://www.sciencedirect.com/science/article/pii/S0360131503001350">project investigating the use of internet resources</a> found that teachers who established a criteria for judging websites and devised key search terms sharpened pupils’ understanding. </p>
<p>Michael Engle of Cornell University has created <a href="http://guides.library.cornell.edu/criticallyanalyzing">a guide of 10 things to look for</a> when analyzing sources and providing a critical appraisal. The most difficult area to teach is content analysis, where audience, objective reasoning, coverage, writing style and evaluative reviews are scrutinized. </p>
<p>Educators too must be critical of content — including from sources we tend to trust unreservedly.</p>
<p>Our federal government, for example, has traditionally been accepted as a reliable source, and we have sent students to government websites to obtain honest and legitimate facts and figures.</p>
<p>Prime Minister Justin Trudeau, an educator by trade, <a href="http://www.cbc.ca/news/politics/paris-agreement-trudeau-sign-1.3547822">enthusiastically promised Canadians</a> at the April 2016 meeting on the Paris climate accord that his government would harness renewable energy resources. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/204082/original/file-20180130-107713-zdptnh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/204082/original/file-20180130-107713-zdptnh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=452&fit=crop&dpr=1 600w, https://images.theconversation.com/files/204082/original/file-20180130-107713-zdptnh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=452&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/204082/original/file-20180130-107713-zdptnh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=452&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/204082/original/file-20180130-107713-zdptnh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=568&fit=crop&dpr=1 754w, https://images.theconversation.com/files/204082/original/file-20180130-107713-zdptnh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=568&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/204082/original/file-20180130-107713-zdptnh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=568&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Prime Minister Justin Trudeau signs the Paris Agreement on climate change during a ceremony at the United Nations headquarters in New York in April 2016.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Sean Kilpatrick</span></span>
</figcaption>
</figure>
<p>Yet his natural resources minister is promoting a “clean” energy campaign that is <a href="http://cins.ca/wp/wp-content/uploads/2017/11/421_RNNR_Rpt05_GR-e.pdf">allocating precious research dollars</a> —$76 million over 10 years — for nuclear energy, a source that is not renewable or sustainable.</p>
<p>Nuclear research facilities across Canada have been pawned off to an <a href="https://www.winnipegfreepress.com/business/pinawa-eyes-nuclear-powered-future-465364263.html">international private consortium</a> that is attempting to quickly remove long-lived <a href="https://www.epa.gov/radiation/radionuclides">radionuclides</a> from the public consciousness and build more reactors on site. </p>
<p>There appears to be a disconnect within government, on their websites and in their funding, which also includes $5.8 million <a href="https://www.ourcommons.ca/DocumentViewer/en/42-1/RNNR/report-5/page-39#7">for the development of a mini-reactor</a> from Sustainable Development Canada.</p>
<p>As educators, we rely on respected, legitimate sources to obtain information for our students. Uncovering them from the plethora fake news sites is a skill that takes time to develop in our youth, using a clear research framework such as that from Cornell University.</p>
<p>The path the government of Canada has chosen, however, for our students’ energy future is sprinkled with the clickbait of hopeful language, but leads to the hackneyed route of the past. </p>
<p>Providing students with the critical framework to pursue the road less travelled will lead to a future of energy possibilities.</p><img src="https://counter.theconversation.com/content/89591/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Taylor does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Critical thinking is of paramount importance, especially as it applies to research on the internet – and to our energy future. Educators have a duty to ensure students avoid fake news on energy.David Taylor, Instructor, Faculty of Education, University of WinnipegLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/767162017-05-08T09:37:02Z2017-05-08T09:37:02ZFact Check: are fewer people switching gas or electricity company?<figure><img src="https://images.theconversation.com/files/167207/original/file-20170428-12970-1gnaa39.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">via shutterstock.com</span></span></figcaption></figure><blockquote>
<p>We wanted to see more competition. We wanted to see more people able to switch between energy users [sic], that, over the last three or four years has not happened. This is a market that is not working perfectly and therefore we are intervening to make markets work better.</p>
</blockquote>
<p><strong>Michael Fallon, defence secretary and former energy minister, speaking on the BBC <a href="http://www.bbc.co.uk/programmes/b08n1xr8">Radio 4 Today programme</a>, on April 24</strong></p>
<p>The Conservatives are expected to outline an election pledge to <a href="https://www.theguardian.com/money/2017/apr/23/tory-energy-bill-cap-will-save-families-100-damian-green-says">introduce a cap</a> on energy prices in their manifesto. The reason – as outlined by Michael Fallon – is that not enough people are taking advantage of cheaper energy prices from alternative suppliers. </p>
<p>The Conservative Party press office pointed The Conversation to recent <a href="https://www.gov.uk/government/statistical-data-sets/quarterly-domestic-energy-switching-statistics">government figures</a> to back up their claims about what are known as “sticky customers”. A spokeswoman said: “Whilst we have started to turn around falling numbers of people switching since 2013, approximately 70% of people still don’t switch and the level is below what it has been recently.”</p>
<p>So, how many people are actually switching? The <a href="https://www.ofgem.gov.uk/data-portal/retail-market-indicators">most recent figures from Ofgem</a>, the energy regulator, show that the number of domestic consumers switching their gas or electricity supplier has increased rather than fallen over the last year or so: 30% of domestic consumers switched in 2016, up from around 24% in 2015. The number of people switching from one of the big six energy companies to small suppliers who tend to be new entrants to the energy market increased from a tiny percentage in 2010 to 41% in 2016 for both gas and electricity respectively.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/167199/original/file-20170428-12984-tf8rxn.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/167199/original/file-20170428-12984-tf8rxn.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=345&fit=crop&dpr=1 600w, https://images.theconversation.com/files/167199/original/file-20170428-12984-tf8rxn.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=345&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/167199/original/file-20170428-12984-tf8rxn.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=345&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/167199/original/file-20170428-12984-tf8rxn.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=434&fit=crop&dpr=1 754w, https://images.theconversation.com/files/167199/original/file-20170428-12984-tf8rxn.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=434&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/167199/original/file-20170428-12984-tf8rxn.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=434&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">More people have begun switching.</span>
<span class="attribution"><a class="source" href="https://www.ofgem.gov.uk/data-portal/retail-market-indicators#thumbchart-c6191152955871075-n95441">Ofgem</a></span>
</figcaption>
</figure>
<p>So the picture painted by Fallon is wrong. People are switching – not everyone, but an increasing minority, and they are often moving to new entrant companies.</p>
<p>But what is a high enough level of switching? A <a href="https://assets.publishing.service.gov.uk/media/54e75c53ed915d0cf700000d/CMA_customer_survey_-_energy_investigation_-_GfK_Report.pdf">2015 survey of domestic consumers</a>, conducted as part of a lengthy <a href="https://www.gov.uk/cma-cases/energy-market-investigation">Competition and Markets Authority (CMA) investigation</a> into the energy market, compared the energy sector with other major markets. It found that 27% of consumers changed electricity supplier between 2012 and 2015, compared with 52% who had changed their car insurer. However, only 24% had changed their mobile phone provider, and only 12% had changed their mortgage or current account. So why aren’t the Conservatives also thinking of intervening in the mobile phone market or other markets, where consumer engagement is lower than energy?</p>
<p>Ofgem published a <a href="https://www.ofgem.gov.uk/consumers/household-gas-and-electricity-guide/understand-your-gas-and-electricity-bills/energy-plans-what-standard-variable-rate-tariff-and-how-does-it-compare">league table</a> of major suppliers’ energy tariffs allowing consumers to check the sort of savings they might make if they switched. But some people simply don’t want the hassle of switching. Others may not be driven by price in relation to their energy bills – for example, they may prioritise buying renewable electricity rather than the cheapest electricity. More information is unlikely to have much of an impact on these consumers.</p>
<p>Capping energy prices on some or all of the available tariffs would tend to level the playing field between different energy suppliers, so reducing price differentials and therefore any incentive to switch. In other words, the two policy measures would not seem to fit together and a cap on energy prices could actually see a drop in switching. </p>
<h2>Verdict</h2>
<p>Fallon’s claim that people aren’t switching enough is wrong on the basis of the most up-to-date figures. Energy markets aren’t perfect, but intervening to cap energy prices and encourage switching are like rearranging the deckchairs on the Titanic. </p>
<p>Competition may help make energy more affordable, but relentlessly driving down prices is not the way to encourage investment in new energy capacity or the development of more sustainable ways of producing and using energy. The focus on energy caps and switching is too narrow and too short term to contribute to the development of a sustainable energy system.</p>
<h2>Review</h2>
<p><em>Michael Waterson, professor of industrial economics, University of Warwick.</em></p>
<p>There is much here to agree with. More people are indeed switching energy supplier, and small and medium-sized suppliers are finally making an impact. Capping energy prices is not a good way to encourage switching. However, it is clear that many people are not engaged with this market and, at the same time, spend considerable amounts on energy, making it a political issue. But politicians’ headline-seeking “solutions” are unlikely to create workable outcomes. Really we need to understand more how to encourage consumers’ active search in products where the link between what you pay and the services you get for that payment is opaque. </p>
<p><em>The Conversation is checking claims made by public figures. Statements are checked by an academic with expertise in the area. A second academic expert then reviews an anonymous copy of the article. Please get in touch if you spot a claim you would like us to check by emailing us at <a href="uk-factcheck@theconversation.com">uk-factcheck@theconversation.com</a>. Please include the statement you would like us to check, the date it was made, and a link if possible.</em></p><img src="https://counter.theconversation.com/content/76716/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bridget Woodman is involved in an EU funded Horizon 2020 project on developing Local Energy Markets which is led by the UK energy company Centrica.</span></em></p><p class="fine-print"><em><span>Michael Waterson has received funding from the Economic and Social Research Council in the past for energy switching work and currently receives funding for work on electricity at the upstream level (bulk energy storage) from Engineering and Physical Sciences Research Council. The views in this article do not reflect those of the research councils. </span></em></p>The Conservatives claim the energy market is broken. Are they right?Bridget Woodman, Course Director, MSc Energy Policy, University of ExeterLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/766812017-04-28T11:55:55Z2017-04-28T11:55:55ZAn energy price cap could kill competition – here’s a better idea<figure><img src="https://images.theconversation.com/files/167029/original/file-20170427-15112-h7e0wg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">vectorfusionart / shutterstock</span></span></figcaption></figure><p>The Conservatives have announced their manifesto will include a pledge to <a href="http://www.bbc.co.uk/news/uk-politics-39685106">cap the price of energy bills</a>. This comes just two years after Labour campaigned to freeze household energy prices</p>
<p>The Tories are yet to flesh out the details of their plan, but it has already drawn strong reactions both for and against. The price of energy stirs deep emotions in part because it is a necessity, one which absorbs a <a href="http://www.cerre.eu/sites/cerre/files/Affordability_FinalReport.pdf">much higher proportion</a> of the income of those in poverty and “just about managing” than of richer households. </p>
<p>But there are two other important features: the first is that electricity and gas are essentially the same whoever supplies it (with a few exceptions for renewable generation or billing services). The second is that many people are paying more than they need to. Around 70% of British households are on the default “standard variable tariff” even though, thanks to competition between energy firms, cheaper prices are available to those willing to switch suppliers. </p>
<p>This raises the question of whether we should worry if people simply don’t take advantage of these deals. After all, what counts as “fair” in the energy market? Is it about equal access to the best offers, or whether we end up paying the same price?</p>
<p>Some people may find the process difficult, for example because they have built up debt which they need to repay, or because they don’t use the internet, or find bill comparisons challenging. These people are missing out on the best deals. Most people don’t face such barriers, however – they’re held back by a lack of information, or put off by the time and effort it takes to switch supplier. </p>
<p>The problem is that a competitive market keeps the energy firms on their toes. When customers can easily choose the best deals, suppliers will compete to offer lower prices and new services. If people don’t switch, these firms have less incentive to innovate.</p>
<p>An effective price cap would lower the highest prices, but it would also limit the “headroom” for new firms to undercut prices. So while a cap can lower the price for some consumers, it may reduce competition. </p>
<p>Relative price caps, which tie one set of prices to another, are particularly likely to damage competition. We saw this effect when the energy regulator introduced non discrimination clauses between different regions in 2009, which was followed by <a href="http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0297.2012.02537.x/full">softer competition</a> between the companies, higher profits – and <a href="http://www.iaee.org/ej/ejexec/ExecSum_WPZ.pdf">higher prices</a>.</p>
<p>Regulating prices is a good plan if the aim is to ensure fairness ahead of lower average prices. But such a move is likely to sacrifice the benefits of a dynamic energy market, and higher average prices will be felt most keenly by low income households who already spend a much higher proportion of their incomes on energy. </p>
<h2>Alternatives to price caps</h2>
<p>Smart meters, set to be rolled out at considerable cost over the next few years, are intended to help lower bills as people will realise how much energy they’re using – and when. But the benefits depend on people actually acting on this information. </p>
<p>Protecting consumers from making decisions about the energy market now may mean we are all rather lazier about engaging with opportunities in the future.</p>
<p>The government could of course go even further than a cap and simply give everyone free energy at the “meter”, or some form of free energy allowance paid for by taxation. But this might encourage people to use more energy, which would harm the environment. And is energy any more essential than housing, food or water, none of which are provided by the state for free?</p>
<p>There may be a better way to ensure fairness while also retaining the benefits of competition: hold an auction to supply the “sticky” customers. That refers to the 55% of energy buyers who have been on the more expensive tariffs for at least three years. In a recent <a href="https://assets.publishing.service.gov.uk/media/5773de34e5274a0da3000113/final-report-energy-market-investigation.pdf">investigation into the energy market</a>, the Competition and Markets Authority recommended that suppliers should give the details of those customers to the regulator, who might then make the contact details available to competing suppliers. Instead of encouraging competitors to approach these customers individually, they could be invited to make a better offer to them as a group. </p>
<p>There are many challenges to designing such an “opt-out” auction, but it has the benefit of providing a potentially better deal for the “disengaged” while <a href="https://competitionpolicy.wordpress.com/2016/03/11/the-cmas-energy-market-provisional-remedies-right-direction-but-inadequate-and-missing-an-important-trick/">harnessing the true power of competition</a>. While auctions provide competition for the market itself rather than acting as a competitor within the market, they still give firms an incentive to provide the best offer. In doing so, auctions are less damaging to competition than most forms of price cap, and certainly less damaging than a price freeze.</p><img src="https://counter.theconversation.com/content/76681/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Catherine Waddams receives funding from the UK Energy Research Centre, though this article is not based on this current research. She has previously received funding from the Economic and Social Research Council for her research into energy markets. This article does not reflect the views of any research council or centre.</span></em></p>Energy firms should compete over the ‘stickiest’ customers, who won’t switch suppliers.Catherine Waddams, Professor of Economic Regulation, Norwich Business School, University of East AngliaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/613852016-06-27T17:08:58Z2016-06-27T17:08:58ZEnergy market investigation a let down for consumers paying more for power<p>On any other Friday the government’s major report on the energy market rip-off would have been headline news. It was the result of a <a href="https://assets.publishing.service.gov.uk/media/576d3f15e5274a0da9000092/energy_market_final_report.pdf">two-year investigation</a> by the Competition and Market Authority (CMA) into why household bills keep rising – a process that started with a probe by energy regulator Ofgem way back in 2008. </p>
<p>But <a href="https://theconversation.com/uk/eu-referendum-2016">Brexit</a> meant that the report, published on June 24, passed by largely unnoticed. This is a shame, as bills keep rising, and the CMA’s proposals won’t solve the problems in the energy markets.</p>
<p>Here are four key ways the government’s investigation has let down consumers:</p>
<h2>1) The big six will still dominate</h2>
<p>The UK energy market is dominated by a “big six”: Centrica, SSE, EdF, EoN, Scottish Power and Npower. They are involved in both the wholesale (generation) and retail (supply) markets, controlling <a href="https://www.ofgem.gov.uk/sites/default/files/docs/2015/09/retail_energy_markets_in_2015_report_0.pdf">around 90%</a> of the sector. </p>
<p>The CMA isn’t too worried about this sort of “vertical integration”, pointing to the recent emergence of new challengers such as Nottingham-based <a href="http://www.iresa.co.uk/">Iresa</a>, the low returns on offer in the wholesale market, and the low possibility of price discrimination in the same wholesale market (where electricity generators charge different suppliers different prices).</p>
<p>There are a number of problems with this. The low profits from generation don’t reflect effective competition and a lack of market power – it just shows these big companies are able to <a href="http://wrap.warwick.ac.uk/4939/">keep their generation profits low</a> because of higher profits on the retail side of the business. Previously (prior to 2002) they were able to balance out their revenues in the opposite manner, with low revenues from the retail trade counterbalanced with higher cash flow from the wholesale business. </p>
<p>In any case, despite the new entries, the big six still control the vast majority of the energy market. It’s questionable if these new entrants will stick around – as many new companies <a href="http://www.city.ac.uk/__data/assets/pdf_file/0004/107392/Boroumand_Finon_Electricity_retailers_competition.pdf">disappeared in the past</a>. And even if these firms cannot use price discrimination this is not a guarantee against abuse of market power in a sector where wholesale prices are passed onto customers.</p>
<h2>2) Responsibility shifts from companies to consumers</h2>
<p>The CMA found that more than half of customers never switch their suppliers and around 70% are on the most expensive tariffs, despite often substantial <a href="https://www.gov.uk/government/news/switch-to-save-27-billion-up-for-grabs-by-switching-energy-supplier">gains from switching</a>. Its estimates suggest that energy customers have been overcharged to the tune of £1.4 billion per year, something the CMA largely blames on a lack of switching by consumers.</p>
<p>This lets companies off the hook, however, and shifts the responsibility for competition onto customers in an industry struggling with market domination by a few firms. One of the remedies proposed by the CMA is a price cap for vulnerable customers. However <a href="http://www.ft.com/cms/s/0/c3434584-e693-11e5-a09b-1f8b0d268c39.html#axzz4Ci8OQMiW">experts</a> from in and outside the CMA investigation challenged the narrow definition of “vulnerable” which only included those on prepayment meters (just 16% of domestic users).</p>
<h2>3) Reversal of Interventions after Retail Market Review</h2>
<p>Measures introduced after Ofgem’s <a href="https://www.ofgem.gov.uk/gas/retail-market/market-review-and-reform/retail-market-review">Retail Market Review</a> in 2010 have been identified as the second culprit for the problems in the energy markets. Aiming for “simpler, clearer and fairer” conduct in pricing energy, these interventions lowered the number of tariffs each supplier could offer to four. Ofgem also required price comparison websites to provide full rather than partial information about available offers. </p>
<p>The CMA says these measures made energy markets less competitive. But this ignores the widespread dissatisfaction with the previous situation in which each supplier offered a large number of tariffs which many customers found complex and confusing. </p>
<p>The CMA’s analysis privileges “competition” over social and consumer welfare: competition at any cost, be it through artificial complexity created by extra tariffs or information withholding by comparison websites.</p>
<h2>4) It has taken far too long</h2>
<p>The six large energy suppliers have effectively been under investigation since 2008, starting with the Ofgem probe. The long periods involved in such investigations mean consumers continue to be exploited in the interim. This is particularly noteworthy as privatisation is conventionally expected to reduce the inertia and heavily bureaucratic procedures, often associated with public provision.</p>
<p>But aside from a false dawn that lasted a few years immediately after privatisation, the energy sector failed to deliver on its own promises of lower prices. In 2014 British households spent 75% more for electricity and 125% more for gas in real terms than they did in 2004. This is despite the fact that gas consumption declined by around 30% in the same period while electricity consumption went down by <a href="https://www.gov.uk/government/statistics/energy-consumption-in-the-uk">around 15%</a>.</p>
<p>It is high time, therefore, the public sector takes control of the UK’s energy through nationalising the industry progressively over time. This would not only eliminate abuse of market power by big players, but also secure the UK’s future energy supplies and reduce its carbon emissions.</p><img src="https://counter.theconversation.com/content/61385/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Hulya Dagdeviren does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A major report on why energy bills are so expensive was published the day after the vote for Brexit.Hulya Dagdeviren, Professor of Economic Development, University of HertfordshireLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/443892015-07-08T05:23:50Z2015-07-08T05:23:50ZSmart meters might be the only way to escape the Big Six and their overpriced energy<p>The UK is a rich, stable country with oil and gas reserves, lots of wind, and more than enough scientists and engineers to make the most of its resources. So why do so many people in the country continue to tolerate high energy bills and poor service?</p>
<p>The question of what can be done to encourage energy consumers to become more active and engaged has come to a head after the Competition and Markets Authority (CMA) published <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/442500/EMI_PFs_Summary.pdf">provisional findings</a> from its investigation into the UK’s energy market. </p>
<p>One of the things the report considers is the attitudes and behaviour of the energy consumer – ordinary bill-payers like you or I. And one of the findings is that inactive, disengaged consumers are partly responsible for tolerating weak competition. Energy suppliers exploit this inertia to increase their profits. </p>
<p>Only a minority of the UK’s 27m electricity customers, or the 23m gas customers, are regularly shopping around for the best deal, or switching their energy supplier. In fact, 19m buy both their electricity and gas <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/442500/EMI_PFs_Summary.pdf">from the same supplier</a> and most of them remain on open-ended, standard variable tariffs (SVTs), rather than fixed term, non-standard tariffs, which are generally (but not always) cheaper. </p>
<p>While this consumer apathy persists, the “Big Six” energy suppliers have little incentive to compete aggressively on either price or service.</p>
<h2>Why do people put up with it?</h2>
<p>The first point to make here is that not all energy consumers are the same. However, it could be argued that a failure to acknowledge this has been one of the key problems with the energy market. Privatisation promised increased choice and competition, but the constraints of the supply chain and a shared infrastructure have worked against the development of a truly free market. How different do you really expect EDF and npower to be when they both carry the same electricity on the same grid? </p>
<p>Instead, the UK energy consumer has been bewildered by complicated pricing and paralysed by the belief that changing supplier involves too much hassle and carries the risk of ending up worse off in the long run. Previous sharp practice, using door-to-door sales techniques (which <a href="http://www.thisismoney.co.uk/money/bills/article-2168690/E-ON-ends-doorstep-selling-cleans-way-charges-customers-energy.html">ended in 2012</a>), has left a legacy of mistrust towards the whole industry. Some regulations designed to protect consumers, such as a ban on regional price discrimination and an enforced reduction in the number of tariffs, may have actually <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/442500/EMI_PFs_Summary.pdf">weakened competition</a>.</p>
<p>There are consumers who are prepared to search for the best deal, either by using a price comparison website, or by joining a buying consortium such as a <a href="https://theconversation.com/no-more-big-power-plants-civic-energy-could-provide-half-our-electricity-by-2050-38183">community energy scheme</a>. They may also have invested in technology to monitor their energy consumption patterns. However, as the latest energy market report points out, these consumers tend to be relatively <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/442500/EMI_PFs_Summary.pdf">wealthy and highly educated</a>. They may be motivated by a desire not just to save money, but also by environmental concerns to reduce their carbon footprint.</p>
<p>Many other consumers do not or cannot search for the best deal. This may be because they don’t have the necessary numeracy skills, internet access or confidence to make an informed decision. They may be poor, old or living in rented accommodation and more pre-occupied with their immediate short-term finances, leaving them <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/442500/EMI_PFs_Summary.pdf">unable or unwilling</a> to make long-term financial choices. Another cause of inaction and apathy is the fact that gas and electricity are perceived as rather boring, undifferentiated commodities; necessary evils that are difficult to get excited about. </p>
<h2>An energy supplier - aimed at you?</h2>
<p>For the energy market to work more efficiently and fairly, both the regulators and the energy providers must understand and serve the different types of energy consumer, by segmenting the market in an appropriate way.</p>
<p>One study of the Swiss energy market identified <a href="http://www.sciencedirect.com/science/article/pii/S0301421511007920">six clusters of energy customer</a>, based on their knowledge, values, capabilities and habits. These segments were characterised as “idealistic energy-savers”, “convenience-oriented indifferent energy consumers”, and so on. </p>
<p>The researchers concluded that each group needs to be targeted with different messages and incentives, tailored to their particular characteristics and circumstances. This makes a lot of sense – a wealthy person obsessed with cutting their carbon footprint is hardly likely to be swayed by an advert promising cheap energy aimed at an entirely different demographic.</p>
<p>Another method of segmentation based on <a href="http://ieeexplore.ieee.org/stamp/stamp.jsp?arnumber=6784499">cost-of-service</a> has been proposed as a possible basis for supplier strategy in the future. The authors of the study, two Stanford scientists, pointed out that two different consumers of energy may have the same overall power usage, but the cost of supplying them can vary greatly, because of their different consumption patterns, such as usage at peak and off-peak times. They argue detailed information on the presence of certain household appliances such as tumble dryers is a strong predictor of energy usage.</p>
<p>Combined with detailed data from smart meters (which are planned to be installed in all UK households by 2020), energy suppliers could gain valuable insights into each customers’ energy needs and behaviour. This knowledge could allow them to offer individualised tariffs, perhaps to incentivise off-peak usage of expensive appliances such as tumble dryers.</p>
<p>At the same time, data from smart meters, combined with greater trust in the information provided by comparison websites, will be key to consumers becoming more engaged in understanding their own energy usage and encouraging them to switch suppliers on a regular basis.</p><img src="https://counter.theconversation.com/content/44389/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Harvey is affiliated with The Labour Party.</span></em></p>Personalised energy services would stop everyone getting ripped off.David Harvey, Senior Lecturer in Marketing , University of HuddersfieldLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/401222015-04-14T18:31:45Z2015-04-14T18:31:45ZManifesto Check: Labour ready to go green, but remains grey on detail<p><em>Welcome to The Conversation’s Manifesto Check, where academics from across the UK subject each party’s manifesto to unbiased, expert scrutiny.</em></p>
<p>Labour’s energy and climate policies appear to be based around two main ideas: more government oversight of energy markets to ensure a fairer deal for customers and greater direction to efforts to tackle climate change; and support for the green economy as a driver of new employment. </p>
<h2>Green jobs</h2>
<p>The headline promise to create a million additional green jobs is optimistic but based on a reasonable analysis of employment trends.</p>
<p>An increase in low-carbon jobs is a logical by-product of the decarbonisation of the economy scheduled through the carbon budgets established by the previous government and continued by the coalition: more people servicing wind farms, for example, and fewer servicing coal-fired power stations. According to a recent UKERC study, <a href="https://www.google.co.uk/search?q=ukerc+low+carbon+jobs&ie=utf-8&oe=utf-8&gws_rd=cr&ei=-LQsVazdBtDpaOjfgpAG">renewable energy is also more labour intensive than fossil fuel-based energy</a>, which suggests a natural net increase in jobs.</p>
<p>Other green economy job types also exist. The <a href="http://www.bls.gov/green/home.htm">US Bureau of Labour Statistics</a> defines green jobs as relating to renewable energy; energy efficiency; pollution reduction and removal, greenhouse gas reduction, and recycling and reuse; natural resources conservation; and environmental education and enforcement.</p>
<p>However, the <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/224068/bis-13-p143-low-carbon-and-environmental-goods-and-services-report-2011-12.pdf">UK Department for Business Innovation and Skills</a>, estimated that in 2011-12 there were just under a million low-carbon jobs in the UK. A further million means doubling this total. A wider definition of “green jobs” would yield a larger figure, of course, but more detail is needed before a promise of a million new green jobs could be seen as other than optimistic.</p>
<p>Augmenting the Green Investment Bank might fill some funding gaps but the lion’s share of finance will need to be charmed out of <a href="http://onlinelibrary.wiley.com/doi/10.1111/geob.12047/abstract">financially motivated overseas investors and the emerging cleantech investment sector</a>. Achieving one million jobs would almost certainly also require large-scale manufacturing and exports in areas where the UK is strong in research and development, such as wind and solar-photovoltaics, but where <a href="http://www.telegraph.co.uk/news/earth/energy/windpower/10227981/Two-thirds-of-huge-UK-wind-farms-built-by-foreign-companies.html">commercial production has tended to go overseas</a>.</p>
<h2>Clean economy</h2>
<p>The commitment to speeding up the decarbonisation of the economy is also shown by the promise to remove carbon from the UK’s electricity supply altogether by 2030 – beyond the requirements of the <a href="https://www.gov.uk/government/policies/reducing-the-uk-s-greenhouse-gas-emissions-by-80-by-2050">Climate Change Act</a>. </p>
<p>This is somewhat undercut, however, by the promise to permit the extraction of unconventional oil and gas – aka fracking – provided that a robust environmental and regulatory is in place, as this would increase fossil fuel extraction.</p>
<h2>Price freezing</h2>
<p>Imposing an energy price freeze would be merely the latest in a series of moves between free and regulated energy prices. Energy prices are regulated in many countries, and were in the UK until privatisation in the 1980s. Although a price freeze could in principle wreck the profits of energy companies if wholesale <a href="http://uk.businessinsider.com/brent-oil-price-forecasts-2015-2014-12?r=US">energy costs rebound after their free-fall in 2014</a>, the freeze is only intended to last until 2017 and Labour is aware that energy companies need to make money if they are to continue to provide energy investment. </p>
<p>However, price guarantee feed-in tariffs for renewable energy mean that investment will continue to flow, so this promise is really an electoral gesture and signifies very little.</p>
<p>It is difficult to evaluate Labour’s promise to combat manipulation of the energy market by obliging the Big Six energy companies to split their generation and supply businesses, although standard economic theory suggests that this could be effective.</p>
<p>Summing up, Labour’s energy policies show ambition and awareness of the challenges, but a lot more detail is needed.</p><img src="https://counter.theconversation.com/content/40122/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Labour’s green jobs numbers add up, but the picture’s less clear on fracking.Hugh Compston, Professor of Climate Politics, Cardiff UniversityIan Bailey, Professor of Environmental Politics, University of PlymouthLicensed as Creative Commons – attribution, no derivatives.