Tag Archives: Energy Policy

Britain, Economic, Energy, Environment, Government, Society

The looming crisis of an energy shortage

ENERGY RESERVES

NEVER in history have modern societies relied so heavily on secure supplies of electricity. Half a century ago, when the nation was last subjected to major power cuts, the effect was mainly on heating and lighting.

Now, however, the computer revolution has changed that completely.

People shop online, we work online, and much study is also done online. International trade and financial transactions depend entirely on a functioning computer network.

The same is true of everything from the police to the transport system. And a power shutdown or outage of only a few hours, even if scheduled, could do lasting damage.

In the same period, we have grown accustomed to a more or less regular and reliable power supply.

Thanks partly to investments made decades ago, the country still has a significant amount of reliable nuclear-generated electricity, plus a small, dwindling reserve of coal generation.

But both these sources are shrinking, because we have phased out coal for a greener environment and because we have failed to plan effectively to replace ageing nuclear plants. A great deal of our remaining energy now depends on gas, much of it imported.

The revolutionary switch to renewable energy, made in response to global warming and the climate change crisis, has been for some years the main focus of planning and building.

This is excellent when it works, but it is completely dependent on the caprice of weather, or on the simple realities of climate.

Solar power, predictably, is of little use here in winter. Wind power can vanish without warning or can be made unusable because the wind is actually too strong for safe generation. Proud announcements that the country has generated 50 per cent of its power through wind on any given day should be greeted with caution. On a windless day, that figure could be tiny.

Some of these problems are alleviated, but not solved, by connectors from our neighbours.

These can rescue us at awkward moments, but France, for instance, has run into major maintenance problems with its elderly nuclear generators, and winter weather simply increases pressure on scarce resources, everywhere. Up to a point, sudden shortages may be dealt with by paying large consumers to switch off, or by bringing in banks of costly and far-from-green diesel generators.

But the risk of actual power cuts, especially in weather such as we have recently been experiencing, is worryingly high.

We really are not very far away from imposed power cuts in our homes and offices, which – as well as leaving the old and vulnerable in the cold and the dark – will do serious damage to the economy.

So, it is perplexing to find that the Government has been relying on predictions by the Met Office in making its plans and calculations. Not only is the Met Office honest about the difficulty of long-distance forecasting, but winters in the UK can be very severe indeed.

Who knows what we would do if Britain once again faced a relentless long-term freeze such as that of 1962-63, itself the coldest since that of 1895?

Events such as the “Troll of Trondheim” often come with little warning. So do interruptions in supply, hugely important now we are no longer self-sufficient in gas.

The one thing that the Government can do is to be prepared for all eventualities. It has been many months since the poor state of our reserve capacity was revealed.  Let us hope that Ministers and officials have not wasted a single second in getting ready.

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Britain, Energy, Environment, Government, Politics, Society

Why the energy crisis? We’re sitting on a gold mine.

ENERGY

THE crisis in the nation’s energy supplies has reached a level unseen for two generations. Nine firms have been liquidated so far this year amid soaring wholesale gas prices, while companies supplying around six million homes are said to be at risk of imminent collapse.

Millions of pensioners and the most vulnerable households now face untold hardship this winter, while others can expect their bills to soar far higher than anything they are used to.

For years now, successive governments have focused on renewables and other non-polluting energy sources as a means of addressing climate change.

DRILLING

The result is that Britain faces an imminent crisis in its energy security. And the worst part? This chaotic and alarming situation should have been wholly unnecessary.

More than 50 years since the first North Sea oil was struck, the British Isles remain surrounded by unexploited oil and gas reserves; while beneath the country’s surface lie layer upon layer of shale.

With careful and environmentally sensitive modern drilling techniques, these untapped gold mines of natural resources could keep our fleet of mothballed natural-gas generators fired up until long-lasting sources of greener energy have been secured.

In decades to come, Britain may well sustain carbon-free energy solutions at huge scale in solar, water and hydrogen. We could even, as Boris Johnson once colourfully put it, become “the Saudi Arabia of wind power”.

But until those technologies have been properly invested in, many fear we now face the prospect of the lights going out just as they did in the 1970s.

Quite simply, Britain must look for alternatives. If we do not, the consequences will be grave.

British Steel is warning that prices are “spiralling out of control” amid an unbelievable 50-fold increase in quoted rates for power.

Yet while the industrial fallout from the present crisis is obviously horrendous, the potential damage to households is even greater.

The current energy “price cap” limits the annual energy bill for UK households at £1,277.

As wholesale prices spiral out of control, the pressure on the regulator to raise the cap, or see the industry strewn with failures, is now almost overwhelming.

Without an eye-watering increase in the price cap of perhaps £400 (some 30 per cent or so), even the biggest players such as Centrica, owner of British Gas which has more than 12 million customers, could be under enormous pressure.

Fixated on “net zero” as part of his political legacy, fresh from delivering his address on Climate Change to the United Nations last week and looking forward to strutting the global stage at COP26 in Glasgow, Boris Johnson has clearly failed to understand the risk to the country of relying excessively on energy purchased from abroad.

It ought to be obvious that surrendering our energy needs to the Moscow-controlled Gazprom (a huge gas supplier to Europe) and a ghastly collection of Middle-East potentates has been a grievous error. Making matters worse, a serious fire on a key undersea electricity cable from France has further limited supplies and shown the value of a reliable domestic source.

So, what are the alternative technologies that the Government should now urgently be exploring to prevent this crisis from worsening still further?

Like many in Scotland, I am sympathetic to the green objections to fracking, from despoiling of country roads to potential earth tremors in nearby urban areas, I would prefer we avoid that path if possible.

Nevertheless, we should not overstate its dangers, and we should certainly not fall victim to untruths about “earthquake” risks and other lurid allegations.

In 2017, for example, the advertising watchdog rapped environmental charity Friends of the Earth for a “misleading” leaflet that claimed fracking can cause cancer.

Meanwhile, one only has to look across the Atlantic to witness the vital strategic gains that can be reaped from regaining a measure of energy independence.

Having risen steadily for 30 years, American imports of oil are now negligible thanks to the fracking revolution, as the process releases oil as well as gas.

Washington, therefore, enjoys somewhat greater freedom in its relations with the dictatorships of the Middle East, and is no longer beholden to those who control the rivers of cheap oil that flow from Arabia’s desert sands.

EXPLORATION

When the UK Government halted fracking in November 2019, it made clear that this was a moratorium, not a permanent ban. If ever there was a moment to rethink this pause, it should be now: especially given that the evidence suggests the “earth tremors” from exploration were far less than originally measured and also confined to a much narrower area than was claimed.

But fracking is only one possibility. A less intrusive way of bringing oil and gas to these shores might be for Boris Johnson to license applications for development of the Cambo field situated some 75 miles to the west of Shetland. This contains more than 800 million barrels of oil as well as considerable potential gas deposits.

Labour leader Sir Keir Starmer may come to regret his opposition to the drilling, which would have created a reported 1,000 jobs, on “carbon emission” grounds.

Similarly, a new modern and safer coal mine in Cumbria has been held up despite the willingness of investors to plough more than £150 million into the project. Instead, coal imports to Britain have been soaring – up 45 per cent in the first quarter of 2021 on the same period last year, to a total of 1.5 million tonnes. Some 60 per cent of Britain’s imported coal comes from – where else? – Russia.

ALARMING

One of the best ways of rapidly delivering a greener and more secure energy supply would be for the Government to commit far bigger sums of money – perhaps as much as £1 billion rather than the £215 million already earmarked – to speed up Rolls-Royce’s plans for “miniature nuclear plants”.

The engineering giant has announced plans to build up to 16 of these so-called “small modular reactors”. Rather than spending decades building huge and inordinately expensive plants such as Sizewell and Hinkley Point, the smaller plants are assembled from “modules” in factories, thanks to technology that is already used in the nuclear turbines that power the Royal Navy’s submarines.

Sure, most sensible people want to see Britain and the world’s carbon emissions fall for the sake of generations to come.

But sacrificing our prosperity and the health and comfort of our people on vociferous green arguments alone – when technology exists that renders this entirely unnecessary – would be unforgivable.

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Britain, Economic, Energy, Government, Politics, Society

The naivety of our leaders on energy policy

ENERGY

WITH Russia playing hardball with natural gas supplies to Europe, and the power links between France and Britain temporarily disabled due to a fire, it should finally be dawning on our politicians that as worthy as Britain’s dash to be the G7’s greenest economy may be, our current system of energy supply is woefully ill-equipped to cope with the transformation.

The UK Business Secretary, Kwasi Kwarteng, is trying to cobble together a temporary rescue plan for the food supply chain and gas supplies.

What is certain is that consumers – both ordinary households and big energy users such as the steel industry – face horrendous price increases which could trigger a catastrophic rise in inflation.

The greatest paradox in the present energy crisis is that it has set off a chain reaction: there is a shortage of cheap gas to fire up fertiliser plants which, in turn, produce the carbon dioxide needed to keep food supplies plentiful.

In other words, the UK’s determination to become carbon neutral has drawn attention to the important role of CO2 – vital for the food and drinks industry – actually plays in our day-to-day lives. What is potentially really humiliating for Boris Johnson’s government is that this debilitating episode comes on the eve of the COP26 climate change conference in Glasgow that starts on October 31.

What the crisis reveals is the shocking geo-political naivety over the years of this country’s leaders when it comes to energy policy. The current policy is still highly dependent on natural gas. And it assumes that natural gas, which globally is in plentiful supply, will always be available as a backup when wind turbines fail to turn, and our aged fleet of nuclear plants are shut down for maintenance.

TWO

BUT it is an energy policy that assumes there is a benign regime in Moscow, open shipping lanes in the Middle East and that interconnectors – or power links – between the UK and France and the UK and Norway are in fine fettle.

Yet if just one these assumptions proves mistaken, gas supplies are reduced and the price of the natural gas that does arrive soars.

Among the reasons that German Chancellor Angela Merkel has been so fawning towards President Putin is that she recognises he holds the whip-hand on gas supplies.

That is because Gazprom, the Russian energy behemoth, controls the flow of gas from deep in the Urals into Germany as well as much of the rest of Europe, including eventually Britain.

The fact is that the UK is at the end of a very long pipeline, with supplies pretty much dependent on what Putin decides. And yet we have an eco-minded government that, because of its determination to meet strict carbon targets, is determined to end our use of coal and reluctant to grant new oil-drilling licences, for instance, to firms wishing to further develop the Cambo oilfield near Shetland.

Other European nations, such as the Netherlands, have dealt with the Moscow threat by building huge storage capacity which can withstand months of disruption. In the UK, our biggest storage site at Rough off the coast of East Yorkshire was shut down in 2017 because of safety and leakage concerns.

The belief was that secure liquid natural gas supplies, arriving from Qatar would ensure constant availability.

That judgment has proved flawed. The surge in gas prices in August and September has been truly alarming and is why the fertiliser processor CF Industries – American owned and quoted on the Nasdaq stock market – closed-down its operations, strangling supplies of carbon dioxide for the food industry.

Carbon dioxide is used in the nation’s abattoirs for stunning livestock before slaughter and has led to protests from the pig producers and turkey specialists. In frozen form carbon dioxide is used to produce the dry ice required to deliver fresh meat and poultry supplies to supermarket shelves safely.

In much smaller quantities, and no less important, dry ice is used to keep the Pfizer Covid jabs fresh on their way to vaccination centres. Even if new supplies of natural gas are secured, there will be the impact on inflation.

THREE

AND the numbers are startling, with the price of wholesale natural gas climbing by a staggering 800 per cent in August. That alone could add up to £400 to energy bills this autumn – particularly for those customers of small energy companies that have collapsed – leaving those least able to pay without heating in their homes.

The great breakthrough of a competitive energy market, where consumers can change suppliers at a click of a mouse on price comparison sites, is vanishing before our eyes.

The new players are falling like ninepins with four going into liquidation in recent weeks and many more on the danger list.

OFGEM, the regulator, will likely have to raise the cap, the highest average price for households, to a much steeper level.

The point is that energy prices do not stand alone.

They form a large part of the costs of every domestic manufacturing process including steel, cars and food. The UK’s consumer price index soared to 3.1 per cent in August, in a development which the Bank of England describes as transitory (temporary).

That increasingly looks far too optimistic. The inflation genie has been released and getting it back in the bottle could be hugely disruptive.

INSIGHT

. How has this energy crisis come about?

The reawakening of the global economy following the Covid pandemic has driven the demand for gas, both to heat homes and fuel power stations producing electricity. This has caused prices to surge. The UK is reliant on expensive gas imports in the winter via connector pipes from the continent, Norway and Russia, which has capped supplies. Wind levels have also been below expectations, making us more reliant on gas, nuclear and coal.

. What about energy bills?

Wholesale gas prices for winter are up 68 per cent in the past five weeks, and the price cap for household utilities from watchdog OFGEM is rising too. Some 15 million will see annual increases of £139, with more pain expected from next April.

. Why are small suppliers failing?

They offered cheap long-term tariffs to millions of households when wholesale prices were low, but then faced huge losses. Larger suppliers protected themselves – to an extent – by purchasing energy long in advance.

. What about their customers?

OFGEM transfers customers of collapsed firms to a new supplier. There is no risk people will lose power – but they will find themselves on much higher tariffs, likely to cost at least £400 a year more.

. What is the Government doing?

Ministers have held talks with their Norwegian counterparts in the hope of securing strong gas supplies through the winter. They insist there is no risk the lights will go out.

. What’s the link to food supplies?

A US company running fertiliser plants in Teesside and Cheshire shut down as the high cost of energy meant they were no longer economically viable. The sites produced CO2 gas which is vital to the entire food industry.

Business Secretary Kwasi Kwarteng has held talks with the US firm, CF Industries, in the hope production will restart. The Department for Food and Rural Affairs is also holding meetings with industry chiefs. It is likely that a taxpayer-funded solution will be found to minimise food shortages.

Thursday, 23 September

FEARS that Russia will starve Europe of vital supplies have been heightened following concerns from financial markets that British wholesale gas prices for October have shot up 16 per cent at the start of this week. The compounding effect on restricting supplies is starting to hit hard.

Moscow is restricting the amount of gas supplied to the Continent via Ukraine next month, according to market results of a key gas auction.

The decision will exasperate fears that Russia is rigging prices to undermine the UK and the EU’s economic recovery from Covid-19.

There are also signs that Moscow could send less gas in through another pipeline, the Yamal-Europe. Russia is thought to be withholding gas to pile pressure on European leaders to switch on a controversial pipeline, Nord Stream 2, which is built but still needs final approvals.

The squeeze on Europe next month will compound a mounting energy crisis in Britain that threatens to bankrupt dozens of small suppliers, bringing the meat industry to a halt and leave beer taps running dry.

At the same time, the National Grid is turning to “dirty coal” to help keep the lights on.

The UK’s three remaining coalfired power stations are on standby – or already being used – to fill gaps in the energy supply system. In September last year, coal was responsible for 0.5 per cent of UK electricity supply, but at the beginning of this week it was running six times higher at 3 per cent.

UK gas prices for October surged by 16 per cent to reach 188.1p a therm, while benchmark European gas prices rose by 16 per cent to 75.33 euros per megawatt hour.

The energy crisis has been brewing for several months, with low European supplies being a key part of this.

A long winter last year meant there was less stored gas going into summer, but Russia providing less also means countries have not built-up critical stores ahead of this winter.

Russia’s decision to cap additional supplies to Europe next month means time is running out. Storage facilities are around 72 per cent full – a level not seen at this time of year for around a decade.

The UK does not have any of its own gas storage sites, and a cold winter could force EU nations to send less power to the country.

Britain’s three coal-fired power stations are West Burton A in Lincolnshire, run by EDF, Ratcliffe-on-Soar, Nottinghamshire, owned by Uniper, and the Drax power station near Selby, North Yorkshire.

West Burton A has been fired up on several occasions in recent days in response to requests from the National Grid. And it now seems likely the country will be more reliant on coal-fired electricity this winter.

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