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Sunlight tax just around the corner

Apparently we're using a whole lot less power (electricity) than we used to.

Thanks to the combination of better home insulation, more efficient lighting and lower powered appliances, the demand for electricity has been falling in recent years and this winter, consumption was back to 2005 levels.

Right now, we have more generation capacity than we need so you'd expect that a falling demand and an excess of supply would see prices falling -- but they're not.

Despite the reduced demand, retail power prices continue to rise at a rate which far exceeds inflation

What is going on here?

Clearly the power industry is operating as a price-fixing cartel, perhaps largely driven by government's desire to ensure a high capital value for the assets it intends to sell off.

Pricing aside however, where to from here for our power demands?

Well main factors that have produced a decline in power consumption in recent years are unlikely to be repeated in the immediate future.

Many people have already replaced inefficient incandescent bulbs with CFLs or LED lighting so we're not likely to see a great deal of further gain in this area.

The vast majority of households have replaced their old power-hungry CRT-based TV sets with much more efficient LCD units so this "one-off" effect won't be repeated any time soon.

Around this town, every second or third house now sports a heat-pump rather than resistive heating but I suspect this wave of change has also crested.

The extension of daylight savings in recent years has also meant another one-off reduced lighting costs during the summer months.

Another key factor that can't be overlooked is the massive increases in price that all power consumers have had to deal with over the past decade or so. Increased price invariably leads to reduced demand.

Finally, the "housing crisis" and difficulties associated with building new homes has probably kept a lid on the new demand that new homes creates.

All of this probably means that despite the gradual decline in demand, we will eventually start to see a slow rise again -- which can't bode well for prices.

Fortunately, solar panels have fallen significantly in cost so if the current trends continue, it won't be too long at all before more people simply decide to go "off grid" and become energy self-sufficient. In fact, I'd say that this will be the next factor that further depresses the demand for electricity.

Will that produce a price drop?

Of course not. The beauty of a government-sanctioned cartel is that when sales drop, you just raise the prices even higher to make up the losses. And, if too many people drop off the grid, they'll just introduce a "sunlight tax". No, I am *not* joking.

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