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Energy Blog Energy Prices Issue is a Self-Defeating Cycle

Energy Prices Issue is a Self-Defeating Cycle

Chris Hurcombe
by Chris Hurcombe November 6, 2013
Energy Prices

Whilst the focus on commercial Energy companies and price rises has been very much a British issue these last few weeks as three of the big six revealed plans to push up the cost of their tariffs, new research from Reuters has revealed that it is a similar story across Europe.Pressure from the European Union has seen legally-binding targets placed on it’s member states to commit to a certain percentage of renewable energy production by 2020. However, as much as many countries would like to be producing cleaner, cheaper energy – the initial outlay to commit to building wind farms and solar powered facilities is proving too much to bear.

As much of the continent is still staving off the possibility of further economic downturn, both state funds are limited and investment scarce as financial powers from further afield remain cagey over investing where stability is yet to be achieved.

This has lead many governments – including the UK and Germany – to place the effort of improving energy efficiency in homes and businesses on energy companies. However, with many commercial energy companies on slim margins of their own and – in the estimates of the European commission over ‘a trillion euros’ of infrastructure investment needed by the end of the decade, more capital is going to have to generated from somewhere.

All this planning has now lead to the point where wholesale energy prices are down compared to where they were six years ago, but retail prices to customers and businesses for their energy rise with alarming regularity.

“The cost of funding government policies for renewable energy, social support and energy efficiency is increasing faster than any other part of an energy bill,” said Paul Massara, chief executive of RWE npower.

“These initiatives are all important, but consumers need to be aware that delivering them is causing energy costs to increase and will continue to do so for some time.”

And despite time being a huge factor, promises are still being made by EU member states to both Brussels and their populace that lead to ever-increasing pressure from all sides.

Politicians in departments of energy continent-wide are making promises to freeze energy bills to their voters, which will come by negotiating lower energy with the commercial energy firms, all the while promising increased renewable energy to the European Union, which can only be funded by the energy firms, which can only afford it by pushing up prices.

This cycle seems to have rapidly become inescapable, with external investment seemingly the only way to escape it. Following interest from the Middle East, China and Korea in recent months, would an external surge of capital only be a temporary repreave from the UK’s energy troubles? Or would just getting as far as meeting the EU’s goals in renewable energy allow us more flexibility in our investment in the future?