The views expressed in this blog are the personal views of Matthew Mellen and not necessarily the views of Trillion Fund
A cartel is broadly defined as an explicit agreement among competing firms to fix prices.
It works best where there are a small number of sellers with homogeneous products.
In the UK the “big six” energy companies have been accused of fixing energy prices, deliberately confusing customers, poor customer service, taking little or no action on climate change and aggressively shutting down competition. But these aren’t the only reasons we might want more choice.
When energy prices were relatively low many people had no need to concern themselves with the goings on at the far end of the wire that runs into their home powering their TV, laptop and frappuccino blender. However, as energy becomes a more significant proportion of our monthly spend, interests are piqued.
What exactly IS happening at the end of that wire that costs so much money?
The unpleasant business tactics of the Big Six are fairly well documented. What is less well known is that at the core of their operations is an enormous dirty secret, which although bigger than a herd of elephants, is still little understood.
The power stations run by The Cartel are so creaky and out-of-date they release 65 per cent of the energy unleashed from burning fossil fuels into the sky as “waste heat.”
Highly efficient countries like Denmark and Sweden do it differently. Here, much smaller power stations are situated near to urban centres and the heat generated from burning fuel is piped to homes via district heating systems. Not only does this reduce and simplify energy bills it replaces the need for every home to have a boiler.
Now, it might not be practical in many instances to install district heating to our homes – but we can do much better than using dirty electricity from old-school power stations that waste nearly 70 per cent of the fuel that is extracted at great expense and hauled (or piped) hundreds of miles to get there.
The efficiency of renewable power stations is increasing all the time but the beauty of them is that any wastage isn’t harmful in the first place.
A wind turbine may only convert 30 per cent of the kinetic energy of wind into electricity but what it doesn’t convert just continues its good work of moving air around.
At a time of economic austerity all of us are looking for ways to make limited resources go further.
This doesn’t seem true for the UK’s major energy companies, which not only resist moving away from fossil fuels, but also insist on systematically wasting more than half of their fuel and then whacking that inefficiency onto our bills.
So in the case of our energy, we do not really get what we pay for.