Privatized energy has failed us - so why is UK 'aid' exporting it?

Crossed wires? Power lines in Miango, Plateau State, Nigeria. Photo: Mike Blyth via Flickr (CC BY-NC-SA 2.0).
Crossed wires? Power lines in Miango, Plateau State, Nigeria. Photo: Mike Blyth via Flickr (CC BY-NC-SA 2.0).
The failure of the UK's privatized electricity oligopoly - expensive, uncompetitive and slow to adopt renewable technologies - is being repeated across the global south, writes Christine Haigh: over £100 million of UK 'aid' is supporting energy privatization in the very countries that can least afford it.
The way in which the British government is wedded to this flawed privatisation model might make one think that there was no other way. But in fact this couldn't be further from the truth.

This week's revelation that the Big Six energy companies are overcharging their most loyal and vulnerable customers by up to £234 a year is just the latest evidence of the failure energy privatisation has been in the UK.

Since 2010, our fuel bills have risen a staggering eight times faster than wages. Combined with falling incomes, the result is that a staggering seven million people in the UK are living in fuel poverty, and each winter an older person dies needlessly of cold every seven minutes.

Until recently, the claim that the big energy companies were simply passing on higher prices that they themselves were paying seemed to wash. But the pathetic price reductions they have offered in response to significant falls in wholesale gas and electricity prices have stretched this argument rather thin.

Neither cheap nor green

Then there's the notion that we can either have cheap energy or go green - but with a pitiful 16% of our electricity being generated from renewable sources and the government desperately having to dangle juicy (and expensive) carrots in front of the energy companies to retain the necessary capacity of any sort, it seems the current system can't deliver either.

Since pioneering privatisation in sectors such as energy and water during the Thatcher era, the UK has stayed firmly wedded to this particular course, with mainstream politicians of all stripes flailing and failing to come up with any plausible policy responses to the current energy crisis.

Their most radical suggestions so far are

  • trying to create more competition - apparently we should be switching suppliers every couple of months, never mind the fact that the bureaucracy involved would actually increase costs; and
  • a short-lived freeze on prices - itself an admission that privatisation has failed to lower prices.

That this is the best our political class can come up with only demonstrates the narrowness of their understanding, and the poverty of their imagination.

UK aid exporting a failed model - to the countries that can least afford it!

The way in which the British government is wedded to this flawed privatisation model might make one think that there was no other way. But in fact this couldn't be further from the truth.

Even more scandalously, the UK is actually supporting further energy privatisation overseas. One of the main ways it does so is via the aid budget, which is currently funding energy privatisation projects in places like India and Sierra Leone.

The most extreme example is Nigeria, where around £100m of UK aid is being used to support a privatisation process the Department for International Development (DfID) itself describes as "far more ambitious than anything ever attempted in Africa", and "seen by many as being so ambitious as to be unrealistic".

The controversial DFID-funded programme, the Nigerian Infrastructure Advisory Facility, is even being implemented by Adam Smith International - the consultancy arm of the neoliberal 'free market' think tank the Adam Smith Institute.

With half of Nigerians lacking access to electricity despite the country's enormous fossil fuel wealth, it was clear that change was needed. But so far privatisation only seems to have made things worse. It has led to major price rises in order to attract outside investors - but by last year the central bank had had to step in and bail out the newly privatised companies after investment flows dried up.

Rather than increasing the amount of electricity available, there has actually been a reduction in power generation due to the failure of the companies to keep their power stations running.

This is perhaps unsurprising when thousands of energy sector employees have been made redundant since the privatisation process started. As a result, blackouts have increased, and the federal government is spending around £2.5m a year on its own generators to keep its offices running.

It doesn't work! So why do we keep on doing it?

It's incredible that this failed approach to privatisation is still being rolled out when evidence from around the world shows that time and again, it fails to improve people's access to energy, and leads to governments taking the risks while the companies pocket the profits.

Nigeria itself has been stung by energy privatisation in the past: since the late 1990s it has allowed power plants to be owned and operated by private companies, causing big losses for the state power company, Power Holding Company of Nigeria (PHCN).

This is because PHCN had agreements to purchase the private power generators' power, giving their electricity a higher priority than lower-cost state-owned power stations. Since then PHCN has been broken up into 17 successor companies and partially privatised.

On top of this, a deal between Enron and the Lagos government to set up a power plant and three diesel units on barges anchored off Lagos formed part of the fraud charges against Enron executives after they made a fake sale of their stake in the barges to Merrill Lynch, later making $12m from a side deal to repurchase them.

There is an alternative

The way in which the British government is wedded to this flawed privatisation model might make one think that there was no other way. But in fact this couldn't be further from the truth.

Around the world, there's an increasing number of examples of energy being managed democratically, and doing a far better job of meeting people's energy needs without trashing the planet.

These include German citizens voting to buy back their energy grids in order to deliver the green transition where private companies have failed, and systems that integrate co-operatives and publicly-owned utilities in places like Costa Rica and Nebraska.

These examples demonstrate that there is no stark choice between centralized state-owned monopolies like Britain's old Central Electricity Generating Board, and for-profit corporate oligopoly. The alternative is smaller, locally accountable energy providers that are cooperatively owned, or publicly owned through local government and municipalities.

In fact, we should be up in arms that this is not happening absolutely everywhere: with one in five people globally still lacking access to electricity and the climate crisis already claiming victims, we can't afford not to ditch these corporate controlled energy systems - and put fairer, more sustainable and democratic alternatives in their place.



Join: Global Justice Now are holding an Energy Justice Assembly at their conference in London tomorrow - Saturday 21st February.

Find out more about the campaign for a democratic rather than corporate-controlled energy system.

Take action: Give corporate-controlled energy the boot!

Christine Haigh is an energy justice campaigner at Global Justice Now (formerly the World Development Movement). She has a degree in philosophy and physics, a master's in food policy and has previously worked for Women's Environmental Network and Sustain: the alliance for better food and farming. She is an activist who has worked on a range of economic justice issues, most recently housing in the UK.

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