Energy costs are continuing to drive up inflation because we have a system that’s tied to geopolitical speculation rather than supply and demand. The answer is to generat eclean power on and around our own shores, says Joe McDonald
Every business owner remembers that feeling of dread in the winter of 2022 as energy bills skyrocketed, and inflation figures climbed to eye-watering new levels. I remember a friend telling me over dinner that she’d just decided to shut down her catering business after five years due to an unprecedented 600 per cent jump in their electricity costs.
A couple of days later, I met another friend working for an energy trading company who had just received an £800,000 bonus and was celebrating their best year at the company. The contrast was wild to me. To have those two conversations back to back threw into sharp focus just how unfair and ineffective our legacy energy system in the UK has become.
This week’s shocking news that energy costs are continuing to drive up inflation and hold back businesses’ growth is yet another sign that we haven’t learnt from the last energy crisis and we’re relying on an outdated system to solve our current problem.
Profit for the few, pain for the masses
Because the hard truth is those who control the market are the ones who profit, while those it’s designed for – whether that’s businesses or families – are bearing the brunt.
Today’s system, tied to fossil fuel commodities such as gas and oil, is driven by speculation over geopolitical issues rather than true supply and demand. This volatility benefits people working in trading firms while everyday businesses shoulder the cost of unexpected big price jumps.
Our research shows that one in four business owners think that their energy company benefited from the last energy crisis – and they’d perhaps be right given many utilities made record profits that same year. On top of that, 71 per cent said that their business growth was impacted by the last energy crisis and almost two-thirds say their business couldn’t withstand another energy crisis this winter – so how do we expect to be a global economic leader if the majority of our country are being held back by the basics?
Misconceptions are holding us back
Today’s market setup keeps a renewable electron coupled with a fossil fuel one, essentially lumping clean and dirty energy into one big lucky dip. And if you want to know where your energy came from you need to pay your way via a certificate. This is preventing individuals or small businesses from directly transacting with low-carbon energy producers – which would not only be cleaner, but cheaper. Business owners too often feel backed into a corner, having to prioritise either cashflow or clean energy, without understanding that the latter can improve the former.
In reality, a system designed when oil and gas were the most common forms of power generation – and that has remained unchanged for over 40 years – is just simply no longer the answer. In fact, we’re looking in the wrong place altogether.
It’s time Starmer started paying proper attention to the innovation that could unlock the stalemate.
We need to wake up to a new energy future
We already have the tools to create a cheaper, fairer, better energy system. Advances in technology, a growing renewable sector and homegrown innovation can deliver a resilient energy system for British businesses, big and small – but we need a fundamental change first.
The only way to fix this is with energy sovereignty – generating power on and around our shores that is owned by our communities and decoupling it from the outdated wholesale markets where prices are set by fossil fuels.
Has the wind, rain or sun become more expensive over the last four months? Of course not. So why are energy prices rising? These are the questions our government should be asking themselves, to end this cycle where we remain at the mercy of global markets, leaving wholesale market traders to profit while everyone else loses.
Has the wind, rain or sun become more expensive over the last four months? Of course not. So why are energy prices rising?
If Keir Starmer is truly serious about his much-touted growth agenda – and his ambition to turn the UK into a clean energy superpower – then it’s time to deliver energy sovereignty much quicker, owned by communities, and priced fairly for all at the true cost of energy. And it’s imperative we businesses hold him to it.
Joe McDonald is CEO and co-Founder of tem