Have you ever considered why gas boilers are so prevalent in homes across the UK? Rather than pondering the obstacles to adopting heat pumps, it’s worth examining how gas boilers became the standard in the first place.
Arthur Downing, author of the recently published book “Power and the People: A History of British Energy,” offers a detailed explanation. He states, “The reason we have boilers in our homes is due to a state-owned enterprise that installed natural gas-compatible appliances in households at no direct cost.” The nationalised gas industry, which operated from the 1940s to the 1980s, undertook this extensive initiative and was considered one of the “most dynamic, innovative, efficient industries in Britain” during its time, according to Downing. However, this characterization is seldom applied to the industry today.
In contrast, Downing describes the current state of Britain’s electricity and gas industries as “fragile, fragmented, comically complicated, and heavily reliant on imported fossil fuels.” Furthermore, consumers are grappling with escalating energy costs amid a broader cost of living crisis.
Downing’s book delves into the historical evolution of Britain’s energy sector and aims to shed light on how the present situation came about. As the director of strategy at Octopus Energy, the UK’s largest energy supplier, Downing is well-versed in the nuances of the industry, though he writes the book from a personal perspective.
He emphasizes that the history of energy in Britain is a topic that many, including current industry professionals, are not well-acquainted with. Understanding this history is crucial for contextualizing the existing energy system and exploring potential improvements.
The urgency of Downing’s message is underscored by this summer’s series of heatwaves, exacerbated by the climate crisis. While the UK has achieved a 50% reduction in greenhouse gas emissions since 1990, he cautions that “the second half of the journey will be much harder than the first,” as the more accessible solutions, like transitioning from coal to gas, have already been implemented.
Downing notes that discussions regarding the energy system often occur behind closed doors, and he aims to make these topics more accessible. With his background in economic history and deep understanding of energy issues, he provides a comprehensive overview of the crisis’s origins.
His central thesis is clear: ownership matters. “The entities that owned and controlled the production, distribution, and sale of energy influenced which technologies were advanced, what infrastructure was developed, and how much benefit citizens and consumers received,” he explains. Between 1926 and 1979, state-owned enterprises constructed significant infrastructure—such as hydroelectric plants and mountain power stations—more efficiently and cost-effectively than today’s private sector can achieve. Since the privatization wave of the early 1980s, the energy system has become entangled in a complicated mess, yet the prevailing belief remains that private ownership is inherently superior to public ownership. Downing challenges this notion.
From his perspective on political economy, Downing argues that the institutions, ownership structures, organizations, and personnel shape the energy system. “To think of the energy system as merely a collection of inanimate objects is misguided; these systems exist because of human decisions,” he asserts with evident passion and expertise.
The book outlines four distinct phases in Britain’s energy history over the past 200 years, with each phase receiving its own chapter. The first phase, spanning from the late 1880s to the 1920s, was predominantly characterized by public and municipal ownership. Even when private companies were involved, they operated locally within regional networks, with municipal authorities responsible for planning and coordinating the gas and electricity systems. The second phase, from 1920 to 1945, saw the government take on a significant role as an owner and operator of certain energy infrastructures. The third phase, lasting from 1945 to 1979, witnessed nearly complete nationalization of the energy sector. The final phase, characterized by extensive privatization from 1979 to 2010, has led to the disordered system we see today.
While 1,500 energy companies were consolidated into two state-owned entities after World War II, nationalization did not begin in the 1940s; rather, it started during the second phase. Notably, in 1926, Conservative Prime Minister Stanley Baldwin established the Central Electricity Board (CEB), a state-owned public corporation that successfully constructed the first National Grid on schedule and within budget.
According to Downing, the current energy system resembles a “zombie”—a “dysfunctional hybrid” of public and private ownership. While it remains privately owned, it relies heavily on state subsidies, resulting in minimal advantages from either model while incurring significant costs in terms of inefficiency and expense.
In February, Engie, a French electric utility company, acquired UK Power Networks (UKPN), which manages electricity cables in southern and eastern England, from a conglomerate. Downing points out that on the same day, the French state’s 10-year bond borrowing rates decreased, and Engie’s stock value increased, enriching all French citizens. This scenario diverges from the narrative often portrayed in British media, as the bond markets remained stable and the government did not face collapse.
Downing applauds Andy Burnham’s initial proposal for a VAT reduction on energy bills but suggests that a shift in focus is necessary. If he could advise Burnham, he would recommend, “Redirect the emphasis from producers to consumers, from investors to citizens.” This would involve lowering bills by eliminating levies that fund environmental and social initiatives, as well as addressing ownership issues.
