What remarkable power climate change has to turn the usual rules of fairness on their head. The poor pay the taxes and the wealthy get subsidised. It has happened with electric cars, where well-off early adopters were handed grants of £4,000 to buy a new vehicle – as well as being excused fuel duty and road tax, essentially freeing them from having to make any contribution to the upkeep of roads. It has happened with heat pumps – whose owners have enjoyed years of subsidies, the latest manifestation of which is £7,500 in upfront grants.
Surge pricing is a desperate solution to manage demand rather than maintain supply
The next phase will be even more painful for the poor and even more rewarding for the wealthy. The Department for Energy Security and Net Zero has put forward proposals to equip smart meters and electric appliances with technology to allow Uber-style surge pricing for electricity, where the price of power will vary on a half-hourly basis. Under the new system, there would be little warning of when prices would change, unlike the Economy 7 tariff, which has been around for decades and offers consumers cheaper electricity at night.
The reason for the new system is the intermittency of wind and solar, which the government and the green energy industry in general have failed to solve. Technologies for storing energy remain horribly expensive, or they have not yet even been proven on a commercial scale. Surge pricing is a desperate solution to manage demand rather than maintain supply. How much will prices have to vary in order to persuade people to turn off appliances when little wind and solar energy is being produced? It would require hugely punitive tariffs. This is the scale of the problem: Britain already has enough wind and solar capacity – theoretically – to meet Britain average power demand of 37 gigawatts. But in some weather conditions – namely calm winter evenings – that can fall away to less than one gigawatt.
The trouble with this solution is that if you are going to hike prices to anything like the level which would be required to trim demand to fit in with the pattern of wind and solar output, the poor are going to get hammered. Avoiding high electricity charges is going to require some pretty impressive technology – technology which is going to be far more easily available to wealthy consumers than to poor ones. It won’t be enough, for example, simply to look at your smart meter to decide whether or not to put on the washing machine. A washing machine cycle might last two hours, by the end of which the price of electricity could have changed three times. It will require predictive powers, no doubt with the input of AI. If you have access to the right technology you will save money; if you don’t you will be paying dearly. Families will be especially hard hit by Uber-style electricity pricing. Adults will be able to adjust their lifestyles around wildly swinging electricity prices – but families with young children? Children need to be fed and bathed at certain hours whatever the price of power.
Alternatively, Uber-style electricity pricing may just turn out to be the straw which broke the camel’s back and pitches the public very much against net zero targets. There is only so much redistribution of wealth from poor to rich that the population is prepared to take.
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