|
The reason why energy is so expensive to the consumer (householder) is that all forms of energy sold are linked to the price of oil, regardless of whether oil was used to generate the energy. Even the price of coal is linked to the price of oil, as they are substitutable for each other in the energy chain to some degree.
For example, the price of electricity generated by a coal-fired power station has a linked opportunity cost to the price of electricity generated by a natural gas fuelled power station, which in turn has a linked opportunity cost to the price of a hydro power stations output - because each is substitutable for the other when electricity is fed into a national grid system.
In reality, the cost of production isn't really the main factor in the price charged to the consumer - the price is set at what the market will bear, rather than a cost plus profit level. The excuse that energy companies use for raising prices is usually that the cost of production has risen, whether it be the market price of their inputs (raw materials) or their operating costs (labour, legislation). The fact that many energy companies are integrated (obtain their raw materials from themselves) seems to be conveniently forgotten - in other words what it costs them to obtain a barrel of oil doesn't matter as they are receiving that much from themselves (or a subsidiary), plus factoring in a margin to be passed on to the consumer at every stage.
I used to work for a multinational vertically integrated "energy" company - we did exploration, production, refining, marketing, trading, power stations, and refined product sales to both industry and the individual consumer. At all stages of the process, most business unit made huge profits every year for the 15 years that I worked there. (No, it wasn't ENRON, but they were a customer / partner of ours...)
The company even had an alternative energy division back in the 80's which was sold off for being not profitable enough...... because it wan't funded correctly, and there was a perception that it would take market share away from the fossil fuel parts of the company......
Going back to green energy, it's essentially the same model. If you are an energy company, your raw material is essentially free - sun, water, wind - what you charge is what you can get away with on top of covering your operating costs, which are often subsidised by the taxpayer already. True, there are enormous set-up costs, but if you have been in the energy business for decades already, they will be literally a drop in the ocean...... |
|