Recent research estimates that a publicly owned power generation company could reduce annual residential electricity costs by £252.

Ofgem’s new price limit reduces £1,000 per household to £3,280. This price limitation restricts the amount retail energy suppliers can charge residential customers, limiting their ability to pass on the cost of rising wholesale prices. 

These prices are well beyond the means of households and enterprises. The government has responded by limiting the burden on consumers to £2,500 for an additional three months and paying the difference itself.

It’s extraordinary that such an expensive policy only serves as a bandage. The temporary price cap does nothing to resolve the flawed structure of our energy market, which is the underlying cause of the crisis.

The domestic wholesale energy market is the origin of the present price increase affecting customers, retail suppliers, and the government. Even though 43% of Britain’s electricity is generated from renewable energy sources, prices are determined by the most expensive source required to meet 100% of demand during a given period. 

Consequently, energy derived from predominantly clean sources is subject to a gas tax. 

However, enterprises need more initiative to effect positive change. Centrica could reduce prices for residential customers by utilizing a portion of these surplus profits. Competition regulations prohibit businesses from subsidizing portions of their operations with profits from other divisions.

The current energy market structure entrenches the crisis dynamics. However, this is not unavoidable. It is a symptom of a political consensus that precludes a straightforward and rational solution: public ownership.

Public ownership of the United Kingdom’s clean energy generation, selling at cost without compensation, is the only option that circumvents the tradeoffs that are accepted as a given, such as the urgent need to decouple the cost of clean energy from that of natural gas and to accelerate investment in clean energy.

Recent research by Common Wealth estimates that a publicly owned generating company could reduce electricity costs by £20.8bn or £252 per household per year, significantly more than any other cost-reduction proposal currently on the table.

Public investment is less expensive than private, as bond yields and shareholder payments are significantly lower. 

Common Wealth estimates that for every £1 in capital expenditure, the ten largest renewable energy operators in the United Kingdom return 40p to shareholders through dividends and buybacks. This expenditure could be avoided or recovered under public ownership.

Since its inception in 2016, Contracts for Difference has paid out a total of £7.9 billion to private generators. Those concerned that such a large-scale government intervention might frighten away investors should consider the investment opportunities afforded by industries whose profitability will be bolstered by lower energy costs.

In response, critics may cite the advantages of market competition. 

However, this would not be sacrificed under public ownership. Similarly to how Denmark’s rest, the world’s largest developer of offshore wind energy, contracts General Electric to build its wind turbines, the supply channels for a public energy generator would remain private. This would create an opportunity to develop a domestic supply chain industry for renewables, aiding in support of energy workers during the climate transition as opposed to their sacrifice.

Public ownership is not a sentimental or nostalgic slogan but rather a logical solution to a problem that successive governments have been unable to resolve.