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Government Interventions at Energy Market: Pro Et Contra

Interventions at Energy Market: Pro

According to International Monetary Fund in 2011, the amount of the subsidies in energy sector reached 8% from aggregate expenditures of the world governments trying to decrease power prices in such a manner.

The energy sector remains the point at issue in Great Britain up until now. Despite the prices slump for coal and gas observed last year, private consumers’ bills remain at high level heretofore. Labour Party holds an opinion that in this regard the government should continue to intervene. At the last year party congress the Labour Party Leader Ed Miliband announced that the Labour Party government would freeze the prices, abolish regulatory authority Ofgem and crash the alliance of basic suppliers of energy products. However, the number of analytics consider that high prices are the consequence of the wrong energy policy. Commencing from 2008 the UK governments realized microsteps on electricity market management implementing alternative energy sources development mechanism having set the goal to decrease the level of carbon emission to atmosphere by 2030. This resulted reforms of the energy market set forth in Energy Act 2013 signed by the former Secretary of State for Energy Ed Davey. The legislative draft guaranteed the long-term tariff fixation for the power generation facilities with low level of carbon emission. The list includes renewable energy sources, atomic power energetics and systems of carbon collection and saving. In addition, the Energy Act guaranteed them the protection from changes at the electricity retail market.

Nevertheless, after the Conservative Party election win the situation had been changed. The conservatives having the majority in government have decreased the interventions level. The government representatives already announced the termination of subsidization of inshore windpower plants. Thereafter it was announced that the market should approach the prices decrease independently.

Dieter Helm, Professor of Energy Policy at the University of Oxford conceives that the government has set the correct goals in climate protection issues. But unfortunately the mechanisms intended to increase the share of alternative energy caused the private consumers’ bills increase for 32% fell down on the task to decrease the emissions level. Also Mr. Helm stated that the  government policy was based on the wrong assumption about the hydrocarbonic fuel types growth which will eventually will result in parity accomplishment on energy prices generated with the help of RES. The Secretary of State for Energy Ed Davey believed that his steps would protect the British from high gas prices so he has supported projects such as construction of wind power plants. Notwithstanding unexpectedly the prices for coal and gas had decreased that paradoxically lead UK to increase the power generation at coal-fired power plants instead of investments increase to gas facilities, which are more environmentally friendly. The same situation developed in Germany where the government had also subsidized alternative energetics. Mr. Helm states that “as a result, emissions level was higher than expected, the prices of electricity also appeared higher”.

According to analytics when the government plays the role of the major electricity consumer, it becomes impossible to forecast prices and the development of technologies requiring subsidies. A case in point is the project on building the lagoonal electric power plant in Swansea Bay where very expensive technology had been chosen for realization providing precious little benefits in terms of environmental performance, competitiveness and security.

In one of his books, Mr. Helm expressed the opinion that the Government should go for the new way of emissions decrease. In particular, it is necessary to set the maximum carbon emissions and introduce the system of payments for the pollution caused by coal-fired power plants. It is also necessary to increase the budget in the area of research and implementation of such technologies as the graphene structures and photovoltaics.

With this view agrees Simon Skillings, one of the leading theorists in the field of energy market reform. He stated that the government has no right to hand over the complete control of energy to market structures, as some critics suggested. Otherwise, the goal to reduce the level of carbon dioxide emissions in 2050 by 80% will fail. In addition, the amount of payment for emissions determined by the European Commission is not high enough to encourage the flow of investment into alternative technologies. Mr. Skillings also considers that it`s not enough to set the goal and wait for its performance. It is necessary to build the chain of consumption and production entirely. Mr. Skillings also states that the subsidizing of such technologies, as NPI and RES will be more expensive than using gas or coal, but this situation is true only for a brief time, besides the government should focus on reducing the bills through the integration of the UK energy market with other EU countries and the development of energy-saving technologies.

The remarkable thing is that the same opinion expressed the former UK Secretary of State Davey announced during March debates about the necessity for greater involvement of governmental bodies in energy issues. In addition, Mr. Davey noted that coalition energy policy is successful. In particular, due to it the number of power plants using RES has increased since 2010 by 165% and the price of electricity produced by solar and wind power stations has fallen sharply. It stands to mention that Amber Rudd, the new Secretary of State for Energy is well known as adherer of the sector adjustment with market instruments and stands for government intervention reduction.

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Government Interventions at Energy Market: Pro Et Contra


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Views: 1645 Added: 30-10-2016