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Boris Johnson’s other disaster – WSJ

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Boris Johnson’s other disaster – WSJ

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An electricity consumption meter dial outside a customer’s home in Danbury, UK, Thursday, October 21, 2021.


Photo:

Chris Ratcliffe/Bloomberg News

Boris Johnson is fighting for his political survival amid a scandal over parties during pandemic shutdowns in 2020. And if only that was the UK Prime Minister’s only problem. ‘Party-gate’ is proving so damaging because the news landed on an electorate already infuriated by Mr Johnson over soaring energy costs.

The government estimates that the average household’s energy bill has risen by 6% in 2021 for electricity and gas combined, to £1,339 ($1,837). This may hide much larger increases for some households. Some 25 providers have gone bankrupt since August, pushing thousands of businesses and some two million domestic customers (8% of all households) to new providers potentially at higher rates.

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The cause of this fiasco is the favoritism of green energy amid a global spike in fuel prices. Retail providers were unprepared for soaring wholesale gas and electricity prices, thanks to the cap on home energy prices imposed by Mr Johnson’s ill-fated predecessor, Theresa May. This cap, which has become Conservative Party orthodoxy, prevented retailers from racking up higher profits when wholesale prices were lower to protect against supply shocks. But it also offers little lasting consumer protection. Rising wholesale prices could force regulators to raise the price cap by 50% when it is reviewed twice a year in February.

Britons are paying the price for decades of green policies that have made their energy grid less resilient and less affordable. Mr Johnson did not start this bad political trend, but he did his best to make it worse.

The main culprit is the chronic preferential treatment for renewable energy sources such as wind and solar. Since the early 2000s, the government has required utilities to buy from renewable energy producers an increasing share of the electricity they sell to consumers. London also subsidizes new renewable capacity by guaranteeing suppliers a price above the market price for the electricity they plan to sell. The cost is around £10 billion a year.

Non-nuclear renewables now account for nearly half of installed electricity generating capacity in Britain, up from 4% in 2000. The problem is that the wind doesn’t always blow and the sun doesn’t certainly not always shines in Britain’s famous rainy nuclear region. capacity has fallen to 8% of power generation from 16% two decades ago, leaving gas to fill the void, the same gas that has seen rapidly rising prices.

Accelerating electricity supply in a hurry is expensive. The national grid operator plans to spend £3bn in the current financial year on so-called balancing costs. That’s what it has to pay relief providers to bridge temporary gaps between supply and demand, most of which these days are caused by insufficient renewable generation.

Mr Johnson wants to make things worse. Its grand plan to achieve net zero CO2 emissions, released ahead of last year’s COP26 climate conference, would advance the full “decarbonisation” of electricity by 2035.

Britain could have produced more gas domestically, which could have limited price increases at the margin. But Tory governments have failed to deploy new fracking technology in areas that have untapped gas, while investment in North Sea oil and gas fields has languished under green hostility. . Mr Johnson’s proposed phase-out of the gas boilers that most homes use for central heating and hot water threatens to reduce future gas demand, making investment in new extractions less economical.

Together, this means UK businesses and consumers are paying higher taxes and utility bills to fund renewables, and are now also paying higher prices for gas-powered electricity. No wonder voters are starting to rebel.

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The same goes for some members of Mr Johnson’s party. Twenty MPs published a letter in the Telegraph this month pleading with Mr Johnson to lift 5% value added tax on energy bills as well as various green levies which they say add nearly 25% to household spending. Lee Anderson, a Tory who won his Midland seat from Labor in Mr Johnson’s landslide in 2019, warned in the Daily Mail that his constituents were already disappointed with the Tories over energy costs.

Mr Johnson is resisting the VAT cut on the bizarre grounds that it would subsidize wealthy households. But the energy price debacle gives his party another reason to oust him besides the Covid garden party scandals. All of this is a warning to right-wing parties around the world tempted to indulge in green illusions at the expense of kitchen table realities.

Journal editorial report: Kyle Peterson, Mary O’Grady, Dan Henninger and Paul Gigot forecast what’s to come in 2022. Images: AFP/Getty Images Composite: Mark Kelly

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Appeared in the print edition of January 15, 2022.

Boris Johnson’s other disaster – WSJ

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