High energy costs here to stay: Co-operative News

Posted on August 14, 2008 · Posted in Co-operative News

 The Paul Gosling Column

The price of a barrel of oil had just fallen from $147 to $124 a barrel when this sentence was written. But that is no cause for celebration. Almost at the same moment, one of the largest suppliers of energy in the domestic UK market – France’s EDF – raised its prices by 17% for gas and 22% for electricity.

 

Days before, British Gas warned that gas prices are set to rise 60% in the near future. This is after average rises of 15% in the early part of this year. According to price comparison analysts uSwitch.com, average household energy bills for EDF customers will rise from £1,007 to £1,211 with immediate effect. They were ‘just’ £907 in January. They had risen by a third in seven months.

 

With extreme understatement – and perhaps misleadingly – uSwitch.com stated that the “days of cheap energy are over”. Actually they were over a while ago, but society is now coming to terms with the permanence of high energy costs. Part of the cause is speculation on the energy markets. But speculators usually make money when there is an underlying problem.

 

In the energy markets there is not just one problem, but many. The global population is rising sharply. Energy consumption is growing in the developing nations, especially China and India. Oil and gas supplies are diminishing, suppliers are using their negotiating position more effectively and extracting supplies from remaining reserves is becoming more expensive. Coal supplies are diminishing and anyway create high levels of carbon emissions. Carbon taxes are increasing costs for the use of traditional energy sources. Alternative energy supply options – wind, wave, tidal, solar and nuclear – all tend to be more expensive than traditional sources. And gradually the state subsidies of the nuclear industry are being withdrawn, forcing consumers to pay something closer to the real costs of nuclear energy and the long-term storage costs of nuclear waste.

 

Collective action will be central to society’s response to this global energy crisis, just as it was in the past. Often it was local authorities that established the UK’s gas and electricity supply networks that ultimately merged into the national corporations that Margaret Thatcher privatised. And in the United States, settlers in the more remote rural areas set-up energy co-operatives to supply electricity in places where electricity distribution companies could not make sufficient profit.

 

Today, co-operatives remain a major force in the US energy sector. There are over 900 energy co-ops in the US. Touchstone, one of the largest electricity distibuting businesses in the US, is a secondary co-operative consisting of 660 local energy co-ops. Its members operate across 46 states and are responsible for electricity distribution across 75% of the US land mass. Together, the energy co-ops have 36 million member-owners. Whenever we think of the US as the home of free market capitalism, we should also remember that it is also a society in which co-operatives provide much of the supporting infrastructure – providing services where the corporations cannot achieve what they regard as adequate returns.

 

Increasingly, co-operatives are also providing the energy infrastructure in Europe. The largest windfarm in Europe is Copenhagen’s Middelgrunden Wind Turbine Co-operative, which has 8,000 members and provides 4% of the city’s electricity. In Cumbria, the Baywind Energy Co-operative has been a pioneer and is being copied by other co-ops. Italy has a long tradition of energy co-ops, which, as in the US, have provided electricity to villages in remote areas for many decades. We are beginning to see electricity-generating co-ops play a potentially important role in developing nations, with a solar plant established in the Philippines four years ago by the Cagayan de Oro Electric Co-operative.

 

Co-operatives can and should play a central role in the energy industry globally. Running an energy supply business as a corporation involves a contradiction that does not serve society well. Businesses earn more by selling more. But it is against society’s wider interests for more energy to be sold. For the sake of combatting climate change, there needs to be a reduction in the amount of non-renewable energy generated and consumed. Despite the attempts of the energy giants to portray themselves as socially responsible businesses, ultimately they are no such thing.

 

Energy supply is an industry perfectly suited for consumer co-operatives. Consumers as owners gain most by reducing their energy expenditure. Energy co-ops can gear themselves most effectively as low energy businesses, taking a cut from reducing customers’ home heating bills achieved by improved energy insulation. They can even – as has already happened – work with credit unions to finance home improvements to reduce energy consumption. Similarly, the employee-owned social enterprise Eaga Partnership manages the Home Energy Efficiency Scheme/Warm Front on behalf of the Government.

 

My personal conviction is that the sustainable future of electricity generation involves far more micro-generation schemes, backed by government grants – using small wind turbines and solar panels, for example, that meet households’ own needs. The supply, installation and user advice for such schemes present attractive opportunites for co-ops and social enterprises.

 

Despite the success of energy co-ops in the US as mega-businesses, it is difficult to see any challenging Exxon – the world’s largest company by share value and the most profitable US business ever. But reaching those heights is not the point for a co-op or a social enterprise. Much more significantly, they could help millions of people to keep themselves warm – affordably.