Britain's Energy Chaos Shares
Plunge Amid Warning Of 1970s-Style Blackouts
Shares in leading energy firms dropped by up to five per cent today as the markets reacted to Labour’s 1970s-style plan to freeze power bills. Energy firms said capping prices would halt the investment needed to avoid blackouts and lead to gas and electricity shortages. --James Chapman and Matt Chorley, Daily Mail, 25 September 2013
In our April 2013 report ‘A Crisis in UK Energy Policy Looks Inevitable’ we
argued that the inherent contradictions and implausibility of UK energy policy
would eventually trigger a crisis. We pointed out that the political risk faced
by the sector would undoubtedly rise as these forces played out. Yesterday
those concerns crystallised with the announcement by the leader of the Labour
party of a 20 month price freeze for power and gas bills across both the
domestic and business sectors should Labour win the May 2015 General Election. --Peter
Atherton & Mulu Sun, Liberum
Capital, 25 September 2013
Centrica’s largest shareholder has accused Ed Miliband of “economic vandalism” and said that energy companies should pull investment out of the UK, putting the country at risk of the “lights going out”. Neil Woodford, the head of equities at Invesco Perpetual and one of the UK’s most influential fund managers, said that Labour plans for a price cap on energy bills would damage the investment case for the UK and block the billions of pounds of new money the Government admits it needs. “If Centrica and SSE cannot make any money supplying electricity to the retail market then they won’t supply it. The lights will go off, the economy will shut down. --Kamal Ahmed, The Daily Telegraph, 25 September 2013
Ed Miliband wants to cap gas and electricity prices for 20 months. Yet price controls have been tried thousands of times throughout history in hundreds of different markets and always fail. And what would happen were wholesale prices to shoot up, bankrupting firms? What would happen to competition? Wouldn’t companies all hike their prices on the last day before the new rules came into place? And why should firms assume that the cap wouldn’t be permanently extended? Why would anybody want to bother investing in Britain? –Allister Heath, City A.M. 25 September 2013
Germany’s top economic adviser has called for a radical rethink of the country’s energy policies, warning that the green dream is going badly wrong as costs spiral out of control. The concerns were echoed by Germany’s powerful industry federation, the BDI, which said it can longer remain silent as green romanticism plays havoc with German power supply. The group said in a new report that the costs of the so-called “Energiewende” have already gone beyond tolerable limits. “The international competitiveness of German industry is in danger,” it said. --Ambrose Evans-Pritchard, The Daily Telegraph, 22 September 2013
Fears that power bills could cripple German industry combine with growing angst over US shale output, which has slashed American gas costs to a quarter of German levels. German chemical companies are switching plant to the US. Günther Oettinger, the EU’s energy commissioner, has called for a complete shake-up of Germany’s strategy. “We need industry; we cannot be the good guys for the whole world, if no one follows suit,” he said. --Ambrose Evans-Pritchard, The Daily Telegraph, 22 September 2013
German Chancellor Angela Merkel faces one task above all others when she returns to her desk on the seventh floor of the Chancellery: fixing the biggest shift to clean energy of any developed country in history. Merkel needs to keep a lid on soaring electricity bills that have provoked consumer and industry anger and clamp down on rising pollution as her government phases out nuclear reactors that have been the backbone of German energy policy. In what would be a watershed move for developers of wind and solar plants, Merkel may abolish the EEG system of awarding uncapped above-market payments to developers for 20 years, according to William Pearson, the London-based director for global energy and natural resources at the Eurasia Group. --Stefan Nicola, Bloomberg, 24 September 2013
Centrica’s largest shareholder has accused Ed Miliband of “economic vandalism” and said that energy companies should pull investment out of the UK, putting the country at risk of the “lights going out”. Neil Woodford, the head of equities at Invesco Perpetual and one of the UK’s most influential fund managers, said that Labour plans for a price cap on energy bills would damage the investment case for the UK and block the billions of pounds of new money the Government admits it needs. “If Centrica and SSE cannot make any money supplying electricity to the retail market then they won’t supply it. The lights will go off, the economy will shut down. --Kamal Ahmed, The Daily Telegraph, 25 September 2013
Ed Miliband wants to cap gas and electricity prices for 20 months. Yet price controls have been tried thousands of times throughout history in hundreds of different markets and always fail. And what would happen were wholesale prices to shoot up, bankrupting firms? What would happen to competition? Wouldn’t companies all hike their prices on the last day before the new rules came into place? And why should firms assume that the cap wouldn’t be permanently extended? Why would anybody want to bother investing in Britain? –Allister Heath, City A.M. 25 September 2013
Germany’s top economic adviser has called for a radical rethink of the country’s energy policies, warning that the green dream is going badly wrong as costs spiral out of control. The concerns were echoed by Germany’s powerful industry federation, the BDI, which said it can longer remain silent as green romanticism plays havoc with German power supply. The group said in a new report that the costs of the so-called “Energiewende” have already gone beyond tolerable limits. “The international competitiveness of German industry is in danger,” it said. --Ambrose Evans-Pritchard, The Daily Telegraph, 22 September 2013
Fears that power bills could cripple German industry combine with growing angst over US shale output, which has slashed American gas costs to a quarter of German levels. German chemical companies are switching plant to the US. Günther Oettinger, the EU’s energy commissioner, has called for a complete shake-up of Germany’s strategy. “We need industry; we cannot be the good guys for the whole world, if no one follows suit,” he said. --Ambrose Evans-Pritchard, The Daily Telegraph, 22 September 2013
German Chancellor Angela Merkel faces one task above all others when she returns to her desk on the seventh floor of the Chancellery: fixing the biggest shift to clean energy of any developed country in history. Merkel needs to keep a lid on soaring electricity bills that have provoked consumer and industry anger and clamp down on rising pollution as her government phases out nuclear reactors that have been the backbone of German energy policy. In what would be a watershed move for developers of wind and solar plants, Merkel may abolish the EEG system of awarding uncapped above-market payments to developers for 20 years, according to William Pearson, the London-based director for global energy and natural resources at the Eurasia Group. --Stefan Nicola, Bloomberg, 24 September 2013
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