Yesterday Bank of England policymaker Swati Dhingra wrrote an opinion piece in the Financial Times. This is another example of low standards at the Bank of England because public servants like her have a duty to make sure that policy relevant work is freely available and not behind a paywall. But via TU news we can see that on the subject of energy policy she is not only out of touch but encouraging another policy error. The emphasis is mine.
The piece argues that reacting after a shock hits, whether through tighter monetary policy or targeted fiscal support, is less effective than preventive action. In that context, energy remains the most significant risk, with gas price surges still feeding quickly into electricity bills and headline inflation despite the expansion of lower-cost renewable power.
It was not the best of days to make such a claim as the poster boy/girl for renewable power Spain hit trouble last night.
Well, nothing, just 40 minutes ago, this country had to stop sending power to its industry again to ensure the balance of the electrical system…….Wind power drop. We’re going full throttle on gas and since there’s not enough for everything, we’re cutting 943 MW of industrial power to balance things out. (Carlos Martin)
According to el periodico de la energia this keeps happening. Again the emphasis is mine.
There have already been seven activations of the SRAD (Regional Electricity System) since July 15th (that day it was in two phases), something unheard of in the Spanish electrical system considering that, for example, in 2025, the year of the blackout, it wasn’t activated at all, and since 2022 it has only been activated five times. In 2026, to these seven summer activations (in the last 10 weeks) we must add the one in January that practically shut down all the industry that participated in this service, something that is not usually the case.
As you can see there is obvious trouble ahead if problems like this are happening in summer. This also affected the UK as in the morning National Energy System Operator posted a warning.
NESO has issued an Electricity Margin Notice for today’s evening peak period. This is a routine and precautionary operational tool, there is no risk to customer electricity supplies and Great Britain’s electricity system remains secure.
The UK dodged the rationing bullet by doing this according to Kathryn Porter.
closed met today’s shortfall by busting through the intraday interconnector trading limit again.
At some point the EU will stop us doing that. There was a price though as from 6 to 7 pm the wholesale electricity cost rose to £267.35 per MWh. That cheap renewable electricity is always just around the corner on a straight road and this matters because it seems to be a bedrock for the Swati Dhingra philosophy which is to avoid interest-rate rises at almost any cost to inflation.
That challenge is particularly acute in the UK, where weak domestic productivity growth has compounded the effect of successive geopolitical, financial and public health crises. While the Bank of England’s Monetary Policy Committee remains focused on returning inflation to target, the time required and the cost to domestic activity depend heavily on the resilience of supply conditions. (TU News)
Prime Minister Andy Burnham Intervenes
Overnight there has been this news via PoliticsUK.
“I can announce today our plan for Great British Grid, a publicly owned company that will work with the private sector and network companies. It will increase competition to drive down costs and speed up delivery so businesses can connect faster and grow quicker. This is what more public control can do”
There is an obvious flaw in claiming that public control creates more competition and either he does not understand that or if hoping the UK public will not.In fact it is so bad that any claimed gains are kicked so far into the long grass that he will be long gone.
“Within ten years, I want our energy costs to be in line with other nations in Europe. That means we must reform a broken energy market so it serves the public interest.”
There is also the issue of what happened to “Great British Energy” which was supposed to achieve this? Even the BBC which is a big supporter of this sort of policy seems to have lost faith.
The boss of Great British Energy has defended the state-owned company’s job creation record after claims its impact on Aberdeen has been oversold.
Apart from raising costs via employing bureaucrats what has been achieved? You do not need my word for it as we would not be getting another body if there had been any success.
Also it is based on something that is not true as here is the House of Commons Library.
The price cap will increase by 4% in the fourth quarter of 2026 and is currently forecast to increase by a further 9% in the first quarter of 2027.
Under the current direct debit cap the average price of gas is 7.3 pence per kilowatt hour (p/kWh), the average price of electricity 26.1 p/kWh. Average standing charges are 29.0 p/day for gas and 57.2 p/day for electricity.
If Gas is less than a third of the price of electricity how is it responsible for the high price of UK electricity? In fact the relative position is very different too.
UK domestic gas prices in the second half of 2025 were below those in 16 EU countries. UK electricity prices were higher than in all but three EU states.
As you can see Gas prices are much more competitive than electric ones. There is more detail below.
Gas prices in the UK were 34% below the EU average and electricity prices 18% above the EU average in the second half of 2025. The ratio of electricity to gas unit prices in the UK was higher than in any EU country at the time.
This is why that poor battered can has taken a big kick into the future. The situation is the opposite of what the UK state has claimed. The mess is so large that the Prime Minister feels he can only double-down and make things worse in the hope of a short-term political advantage. So we will get yet more bureaucrats presumably in an effort to drive us towards ever more expensive electricity.
Oh and the bar ten years ahead is a low one as European electricity prices are also uncompetitive in international terms.
Comment
It seems hard to believe that the UK would have a government talking about reindustrialisation one day and then adding more of the energy policies that are creating deindustrialisation, but that is where we are. It leads rather directly to this.
The UK government is set to pay the highest yield since 1999 at an upcoming auction of 10-year debt, as investors demand additional premiums to compensate for persistent inflation and the prospect of spending increases in next month’s budget.
Britain’s Debt Management Office is scheduled to sell up to £4.25 billion ($5.6 billion) of 4.875% coupon bonds maturing in July 2036 on Tuesday. A sale of the same security last month notched an average yield of 5.16%, already the highest in nearly two decades. (Bloomberg)
This is the real world cost of policies like the ones I have looked at today. Our ten-year yield is 5.4% so finally we have arrived at something we will be paying for the next ten-years.
Along the way the flawed beliefs of the likes of Swati Dhingra mean that monetary policy will be wrong too as she waits for lower energy prices that never happen.
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