The pits and the energy pendulum: The Government's swing away from secure supplies puts more than the miners at risk, says Tom Wilkie

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The Independent Online
Does anyone remember the word 'coconuke'? It was briefly in vogue in the late Seventies and stood for 'coal, conservation, and nuclear'. It was from these three sources, or so it seemed then, that Britain's energy needs would be met for the foreseeable future. It is a far cry from today, when the disciplines of the marketplace threaten pits with closure and nuclear power is cast in the role of state-subsidised villain.

Energy policy in the Seventies was dominated by fears of shortage. Some readers of the Independent may still have the petrol ration books that were issued in December 1973, when Opec used the oil weapon, before having a second bite at the West's petroleum arteries in 1979. The need to guarantee security of supply has dominated British energy policy for more than six decades, since at least the time of the miners' strike in 1926. Supplies had to be assured, at virtually any price.

Now everything is different. We have come out of the shadows of energy shortage and, for the first time in more than 60 years, have the luxury of indulging in market economics. Energy is just another commodity that has a market price and those who cannot supply at that price must sooner or later go to the wall.

This is the real issue underlying the froth generated by the debate over the Government's pit-closure proposals. It is not irrelevant that the electricity industry's privatisation was botched; that the nuclear industry has a subsidy in the form of the so-called nuclear levy; that Regional Electricity Companies (Recs) are rushing to build cheap combined-cycle gas turbines to generate electricity; and that generating companies want to import coal from world markets. But these factors, which have all worked to British Coal's disadvantage, are manifestations of a historic change of policy on the part of the Government, one that has not been adequately justified.

How could past governments have got it so wrong as to believe for the greater part of this century that energy was something special and could not be left to the marketplace? How long will the present conditions of plenty last? How would the market cope with a dislocation in supplies?

Opec collapsed in the early Eighties, and not even the Gulf war stimulated its resurrection. But the event that truly enabled the Government to let market forces rip was the defeat of Arthur Scargill and the miners in 1985.

At this point it is worth recalling another relic of the Seventies. There is a particularly beautiful stretch of the Clyde estuary disfigured by Inverkip power station. It has been standing idle for most of its life, apart from a brief blaze of glory in 1984-85 during the miners' strike. Inverkip is testimony to a past tentative step towards treating energy as a commodity in the marketplace: it is an oil-fired station, conceived of when oil was cheap and coal expensive. South of the border, the Central Electricity Generating Board (CEGB) pursued a similar policy. The result is a coastline dotted with unused examples of what once seemed like sensible investment.

The Seventies 'dash for oil' resembles the 'dash for gas' of today. For the next few years, the gas will come from the North Sea. But sooner rather than later, prices will rise and supplies will run out. Siberia, north Africa and the Middle East will become the main source. The Government, however, appears not to appreciate one fundamental fact of geography: Britain is at the edge of Europe and would be at the end of a pipeline bringing gas from Siberia. There will be many taps between Siberia and Sussex, and many hands in between capable of turning off the gas.

It is now conventional wisdom that the market will provide a diversity of energy sources that will assure supply. But this is surely questionable.

It has also become fashionable to denigrate the former CEGB, and its Scottish counterparts, as the focus of all alleged malpractices in the old system. Yet they kept the lights burning (apart from a political interruption during Ted Heath's government) throughout the post-war period. The CEGB also kept the coal mines working and provided long-term job security. If the old system wasn't broke, why did the Government have to fix it?

It cannot be because power is cheaper as a result: between the end of 1984 and the end of 1988, the price that the state-owned, monopolistic electricity supply industry charged for a unit of electricity rose by 13.6 per cent - considerably less than the 20.9 per cent overall rise in prices. In the superefficient, competitive world of privatised companies, the price of a unit of electricity rose by 32.3 per cent between the end of 1988 and the end of 1992, considerably more than the 27 per cent rise in general prices.

The supply of electricity (as opposed to its means of generation) is a natural monopoly, and the Recs have been exploiting this to the benefit not of their captive customers but of their shareholders. Notionally, the marketplace will deal even with this. By 1998, the Recs will have lost their 'franchise' (ie, their captive market) of large industrial consumers. With no assured market in five years' time, the Recs are reluctant to sign long-term contracts with the generators. This has contributed to the disadvantage of British Coal, which depends on long-term contracts to supply the generators.

The Government is now preparing a formula to extricate itself from its present difficulties, but at some point the reality that energy cannot be left to the marketplace will intervene. So I have an unconventional suggestion for the Government: find the telephone number of Lord Marshall, the last chairman of the CEGB, and ask him how one organises a state-owned electricity generating and supply system running an energy policy based on coal, conservation and nuclear power.

(Photograph omitted)