As the USA presses home its advantage with cheap gas, Germany is countering with cheap coal. The Uk needs to be wary of just how much a march our leading industrial competitors in the west are stealing by going for cheaper energy, to say nothing of all those coal fired power stations being added to the formidable industrial output of China.
The interesting thing about Germany’s choice is she is doing this despite living within the EU’s complex and expensive emissions regime. The immediate cause of the dash for coal in Germany is the political decision to close the nuclear power stations. There is also the need to provide continuous power back up to Germany’s substantial renewable sector, where power ceases when the wind drops. With Germany in this mood, now would be a good time to review the EU’s legislation in this field to see if it is still needed or if it still appropriate to modern conditions.
Just how green is say offshore wind power if you need back up stations burning fossil fuels? How much energy does it take to construct the offshore wind farms in the first place? At what point does the cost of power become so high that high energy using industries switch from us to parts of the world keen to burn more and more cheap fossil fuel to win?
The Uk has particular need of cheaper energy for two reasons. The first is the government’s pledged strategy of an industry and export led revival. It will take cheaper energy to keep some of the high energy using industries we have, like steel,ceramics, chemicals, aluminium and glass. It will need cheaper energy to encourage more industries here, and to help give them more of a competitive edge.
The second is the need to end the squeeze on the consumer. Real incomes have been under the cosh since 2008. A combination of tax rises and price rises has left most consumers with insufficient income to maintain or expand their living standards. The Bank has promised us success at last in getting price rises down below earnings growth. The latest fare, fuel and food price rises threaten this happy forecast.