Lost in Space and a Broken Energy Market: Blame it on a Small State’s Obsession | will huton

Jtwo years ago and it is already clear that this century demands challenges and responses for which the mindset of British Conservatives, with one or two honorable exceptions, is wholly unprepared. This century doesn’t need a small state – it needs a nimble state. More years of denial and the UK will experience very serious economic and social problems.

Last week appeared a vignette of the stupidity of a small state, ceding a major area of ​​21st century economic activity to France and undermining our national security – with close observers believing that no minister even knew the extent of their rudeness. I am talking about the merger, on French terms, of the former British space company OneWeb with the French Eutelsat, giving a boost to the EU space effort. These Brexiters are remarkably incompetent to do Brexit. But then the incompetence comes with the territory.

OneWeb was Britain’s opportunistic way to reclaim the ground we had lost in space due to Brexit and the resulting forced exit of Europe’s Galileo and Copernicus programs. Rescued from insolvency by a bold £500m bid by the UK government two years ago, OneWeb owns valuable “shells” of allocated orbit and spectrum rights, estimated to make up an incredible 15% of all the space available for the provision of services on Earth. This real estate space is the basis for a unique constellation of satellites and the next phase of commercial space development and sophisticated communications – worth in the coming decades tens of billions. Last week, Conservative ministers let it slip through our fingers.

The war in Ukraine had forced OneWeb to postpone its satellite launch program, at certain expense. All shareholders agreed except the British: tax cuts were bigger, the state should be shrunk, and the market should rule. Eutelsat saw the opening, secured OneWeb’s board approval and offered the deal to buy out the risk-averse Brits.

But under the face-saving trinkets about retaining a board seat and a preferred share, Britain will no longer have control over future space systems developed by OneWeb or how one of its spectra is used. Johnson may be a liar, a corrupt constitutional vandal, but he had the nerve to launch the deal (led by Dominic Cummings). Britain’s stated aim is to be a globally competitive space power. Forget. Make sure Prime Minister Truss won’t dare attempt OneWebs.

But it is exactly this nimble mindset of the state that is needed across the whole range of policies – no jokes about tax cuts, aspirations, the magic of markets, the attack of awakening and the return of high schools.

Our broken energy market is a good example. UK consumers face some of the highest energy bills in Europe. This is not a surprise: the approach embodied by the OneWeb agreement has been applied to the electricity market. The electricity tariff is not the average price of electricity produced by different electricity generators, as it was when it was imposed by the “big state” Central Electricity Generating Board, guaranteeing the absence violent price spikes. Surprisingly, our bills are set at the price needed to bring the most expensive generator into the grid to top up the necessary base load – not reflecting the contribution of renewables and low-cost nuclear. Consumer tariffs are therefore the highest possible, reflecting the increase in the price of gas on the spot market.

The market madness doesn’t stop there either. Unlike a car, a television or a new dress, electricity does not vary according to the producer: it is invisible. There is nothing to differentiate electricity; it is the material least likely to constitute a market. But in the conservative mindset of small states, markets are always best, so the doctrine is that different producers – wind farms, nuclear power, gas-fired power plants – form a market selling electricity to each other in a short period of time. Long-term contracts? Average the costs of all generators, rather than just the most expensive generator? It involves too much big state.

The war in Ukraine and soaring oil and gas prices blew up that whole design. Thirty suppliers went bankrupt. Bills were always going to rise, but a more rational system of electricity generation and pricing, as well as putting in place incentives to quickly build low-cost renewable capacity, could have caught some of the sting. As Professor Michael Grubb of UCL argues, the price differential between cheap renewables and hyper-expensive gas is now “unacceptable”.

What to do? Every energy producer should be required to incorporate as a public benefit corporation in emergency legislation, constitutionally obliging them to put consumer interest before profit as a corporate purpose. In engaging with these newly incorporated power generators, regulator Ofgem is expected to collate their now open costs and calculate a standard tariff for all consumers that reflects the lower generation costs of renewables and nuclear power. Expensive gas generators that would now make losses can ask to be nationalized (as the French recently did with EDF) or be offered loans and grants on favorable terms over 50 years to help them out. It should be the producers who should be partly affected by the increase in gas and oil prices; the blow should not be borne by consumers.

Planning laws should be instantly relaxed to allow the construction of onshore wind farms, with local communities sharing some of the revenue. Interestingly, Grubb proposes the creation of “green power pools” in which renewable energy producers store their cheap energy to sell to consumers. There should be an emergency home insulation program and the creation of a nationwide network of electricity charging stations for cars. Rebates on consumer energy bills should be targeted to the poorest.

This is the 21st century nimble state in action – a design Liz Truss and Rishi Sunak know won’t win them any votes from the aging members of the Conservative party who deify Mrs Thatcher. Instead, it’s better to give away Britain’s stake in space and attack cheap renewables as “woke”. This pleases the Conservative Party. The chasm between the real world and the conservative world has never been deeper.

Will Hutton is an Observer columnist

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