We need to make the North Sea work for Britain

Become an Independent member to bookmark this article Want to bookmark your favourite articles and stories to read or reference later? Start your Independent Membership today. Join today Already a member? Log in B ritain’s energy market doesn’t work – not for Britain, anyway, not for our people, our businesses or our economy. But it could. We pay some of the highest energy prices in the known world. This impoverishes millions of people and makes our businesses less competitive. It fuels inflation and bank lending rates. It holds back our economy. It needs reform, the small-R version. We need to make it work for Britain. It starts in the North Sea, where a decent chunk of the oil and gas we need still gets produced. We allow global markets, driven by sentiment, fear and speculation, to set the price we pay for our own oil and gas, rather than setting it ourselves based on the known cost of production plus a reasonable profit margin. When stuff kicks off in the world, oil and gas prices climb unnecessarily. The cost of getting them out of the ground does not change – all that changes are the profits of producers. Recommended The worst inflation rise in a year is a blow to the chancellor – and mortgages King Charles’s gesture to Aung San Suu Kyi is soft power at its most imaginative Our social care system will not survive the next pandemic unless we act now We’ve seen plenty of headlines this year about oil companies doubling profits because of the war in the Middle East. Windfall profits are the flip side of sky-high energy bills – it is not a victimless crime. When the rollercoaster of global pricing starts to climb again, Britain pays through the nose for its own oil and gas. We can end this by fixing the price of our own oil and gas. The natural reaction of most people to this suggestion is to say, but how can we interfere in markets, in capitalism, in often foreign-owned businesses? The answer is we’ve already done it, all of it. We have price control in Britain’s retail energy market right now. And it’s not a socialist government that did it: five years ago, the Conservatives imposed strict price controls on our retail energy market – for electricity and gas to homes. They changed the game radically, imposing a pretty keen 2 per cent profit margin on energy suppliers. Most of these companies were foreign, private or state-owned. They just got on with it. The same can be done in the North Sea. No problem. The key to doing this in wholesale energy (as opposed to retail) is a mechanism known as the Contract for Difference. At Ecotricity, we’ve used CfDs very successfully to enable the building of new green energy. They remove risk, which enables smaller profit margins and lower energy costs. A CfD for the North Sea would do the same. Our modelling allowed a 10 per cent profit margin and showed a saving of £10bn in an average year – much more during a crisis. ‘You've clearly changed your position’: Dale Vince, the UK’s foremost renewable energy entrepreneur, has called for a new approach to North Sea oil and gas (BBC Newsnight) ( BBC Newsnight ) It would do much more than that, though – it would protect the jobs and investments we have now, by ensuring profitability, come what may. It would also enable us to maximise extraction of what we have, and properly manage the transition. As our oil and gas fields decline in production, they become less economic and increasingly exposed to global price shocks. We can protect them from that if we put an arm around our North Sea industries and workers, and give them the same support we give green energy. Everybody wins. All we lose is windfall profits and sky-high bills. Price control of our own oil and gas would change the outlook for new drilling. It would create an actual economic case, as opposed to the illusory one presented to us now. With that, we could get cheaper oil and gas – which might then allow the government to view Jackdaw and/or Rosebank differently. That’s not to say I support either of these projects or new drilling (which means new licences), as so many media outlets have been saying. I’m saying I can see a path through the current minefield for Labour. Recommended Trump’s lethal indifference has dragged us to the brink of disaster in the Gulf The unforgivable Covid shortcomings that left our care homes defenceless I fear Britain’s politics are about to turn as ugly as Europe’s The benefits of a price cap on oil and gas will vastly outweigh giving the go-ahead for either of these two ‘limbo’ projects – at least economically, maybe politically, too. Dale Vince OBE is a green industrialist and founder of Ecotricity