Thatcher’s privatisation of the energy sector has failed. It’s time to re-nationalise

Let’s set aside the crushing irony that COP26 President Alok Sharma is defending the UK’s dependency on imported gas, just weeks before he hosts an emergency summit to cut fossil fuel use.

Because this is more than a temporary supply problem – the gas price rise actually signals the final disintegration of Margaret Thatcher’s catastrophic energy privatisation. Selling the family silver back in the 1990s certainly created billionaires but failed to deliver basic public policy goals such as security of energy supply, de-carbonised heating or a modern grid that connects with remotely located renewables.

As Simon Forrest of pioneering Scottish tidal company Nova Innovation observes: “Energy requires long-term, strategic planning, but the power sector is plagued by short-term, quick-buck, ‘outsource-it’ thinking – like the UK Government’s decision not to ring-fence tidal energy in the latest auction round. Having lost our lead in wind energy during the 1980s to the Danes, we now seem destined to lose our world lead in tidal energy as the sector moves to Canada and Asia.”

He adds: “History may not repeat itself exactly, but the echoes of peak-Thatcher resound in the energy sector – privatise, outsource and buy back at an inflated price.”

Yet big bucks may also be a thing of the past. Ofgem has finally tightened up on suppliers after mis-selling scandals and scandalously large profits leaving relatively little room for manoeuvre and less cash in the system. It’s not just small companies that are giving up the ghost – after a 40% slump in profits, SSE recently sold its energy supply business to OVO.

So, why doesn’t Prime Minister Boris Johnson just grasp the nettle, nationalise energy supply and be done with the middle men, uncertainty, and glacially slow moves towards quitting gas? Of course, nationalisation runs counter to traditional Tory thinking, but then so does “National Rail”.

And there’s an added incentive. Scottish renewable energy helps keep the lights on in England. If Boris bolts the Scots into a UK-wide nationalised industry, a new system would face disruption in the event of a Yes vote.

If he fails to act though, a Scottish nationalised energy system will be another powerful argument for independence.

So which side will be first to end this failed energy free-for-all?

According to Dr Craig Dalzell, head of policy at Common Weal: “Someone has to renationalise energy. If Scotland doesn’t, one of Boris’s more sensible successors will. It’s a use-it-or-lose-it situation for the Scottish Government. Use the powers they have to create a national energy company – focusing first on heat, where powers are fully devolved, or those powers will be used elsewhere.”

Ironically though, the SNP seems to be heading in the opposite direction. Just before last weekend’s conference, Environment Secretary Michael Matheson said the party had scrapped its commitment to establish a national energy company (NEC), pledging an advisory agency instead – you know, the kind of worthy helpline that asks if you have tried insulating your loft.

Scotland needs so much more – as SNP delegates recognised, with near unanimous support for reinstating a national energy company.

It seems the Scottish Government only intended to buy out a small supplier when the pledge was first made in 2017 and offer discounts to those on low incomes. But then the prospective company collapsed and so did the SNP’s commitment.

According to Dr Dalzell: “The Scottish Government should be building our equivalent of Norway’s Statoil/Equinor – owning, managing and maintaining infrastructure – not just aiming to supply a small number of customers. Essentially, we have just wasted the last five years.”

And that matters. Because progress on energy security for Scotland needs planning and signalling.

The Scottish Government could use its complete control over heating to drive district heating – a system of pipes that delivers heat to homes and offices. Such networks currently supply 1% of total heat demand in Scotland, against 50% in Finland.

According to Dr Keith Baker, of Glasgow Caledonian University: “There is enough private cash to invest in the pipes and hardware while a national energy company finances and undertakes the connection of homes and businesses. But district heating may be a loss leader for years. So private capital needs government signals to invest – a long-term plan of 30 years plus, not the ‘on-off’ signals the Scottish Government is currently giving.”

There will also have to be subsidy. According to Dave Pearson, of Star Renewable Energy, says:

“As policy stands, it’s a practical impossibility that clean, green, renewable heat will be cheaper than dirty gas-generated heat.

Costs will need to be managed to avoid an undue burden on the fuel poor. But the biggest upside for society will be less fuel imports and a massive construction programme, like the old Hoover Dam, with cleaner air, a more reliable grid and thousands of new jobs.”

But none of this can happen without government ownership, subsidy, planning and direction. So where is it?

Of course, there are lots of bits of energy strategy that can’t be done without independence – especially long-overdue reforms to the National Grid so that it’s cheaper to harvest renewable energy where the wind and tidal power actually is occurring. But the Scottish Government already controls enough levers to ensure a national energy company could start now in the vital business of switching Scotland away from gas heating. If there is indeed another Indyref by 2023, the company will be up, running and ready to move into reserved areas of energy management when the political situation permits.

The alternative is an endless Groundhog Day where Boris Johnson keeps insisting there’s no need to panic about Britain’s energy security crisis and the Scottish Government refuses to think as big as both its devolved powers and the climate crisis both demand. Scotland can do so much better than this.