In amidst the coverage of the American Presidential election on the 5th November, were comments on a finding from the OECD that gas and electricity bills in Britain had risen twice as quickly as in France and Germany and more than in most developed countries. There was little analysis apart from the fact that Britain has less storage capacity for gas than other countries (only 13 days). There was a quote from the Energy Retailers' Association that pointed out that OECD figures failed to demonstrate that British customers had historically had lower prices than their chums in Europe.
As a former gas demand forecaster and former British Gas worker, I think there are a few facts to be put in the public (albeit not well looked at) domain. Something a little over 15 years ago, the then Conservative Government allowed electricity producers to use gas to fire power stations. Up until that time, natural gas had been considered too precious and strategic a commodity to be used in that way, but with the mines effectively closed, the country needed a power source. At the time, those of us in gas demand forecasting said that it would cause problems and that UK sourced gas, if used in such a way would run out in about 15 to 20 years, unless serious other sources were found.
North Sea UK gas is nearly gone now and there are a lot of power stations using gas to generate electricity. If this wasn't the case, then the Bacton gas pocket plus the gas holders would enable the UK to store gas for rather more than 13 days consumption - it is our use of gas as a way of generating electricity that has in many ways caused that problem - that and trying to develop competition in the gas supply market.
In France, there is estimated to be 122 days storage potential, but then in France 85% of electricity is produced through the nuclear route, so stockpiles are not required for the generators. In addition, natural gas supply networks are much more limited in scope and not everyone has gas central heating. Electricity is cheap enough to be a viable alternative and domestic electricity supplies are limited by how much you are allowed on your tariff to take off the system at any one time. This system limit is applied in France and Germany, but is unknown in the UK. Our personal contract allows us a maximum of 9kW at any one time for example - which at the macro level helps to smooth peaks of electricity demand.
The other slightly mysterious take on this, is that Gaz de France is heavily regulated by government and limited on what it can charge domestic customers, and once you leave GdF, you can never return to the regulated market, making competition for domestic customers something that is much less appealing.
With such disparities in the system, are the OECD really measuring like for like?
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