Update on Energy

Readers of these pages will know that for years I have been arguing that the United Kingdom’s energy policy is little more than a collection of words and ideas, rather than a real policy. It has tended to revolve around the generation of electricity, rather than understanding that heat is at least as important as electricity. We tend to worry that the lights will go out, rather than the fire going out. Today there are rumours that energy policy is going to be put on a more rational basis, but I am not too excited about the rumours.

Mindless Renewable Energy Targets

In the almost mindless race to meet the United Kingdom’s emission targets the government has decided to subsidise, at taxpayer’s expense, the generation of electricity in a way which will mean the creation of far more greenhouse gas emissions.

How to Control Fuel Prices Without Increasing Pollution and Global Warming

In the United Kingdom the government has decided that the energy companies (there are six that control 99% of the market) have been giving such poor value for money that they should be forced to write to all their customers offering to put the customers on their cheapest tariff. This of course is a policy, devised by an idiot full of words and nonsense signifying nothing.

Energy Prices Set to Rise as Risk of Power Cuts Increases

Already it has started. First the rumours of an energy price increase have gathered momentum. Although most energy companies have rules out an increase for the rest of this year, unless you have fixed your energy price, expect a swinging increase in gas and electricity bills from January onwards. There are probably several reasons why you should expect a price increase.

1. Natural gas prices remain linked to oil prices and as the world come out of recession demand for natural gas and oil will increase. Most of the UK’s electricity is generated by natural gas. Most of the UK’s heating is provided by natural gas.
2. Natural gas remains a regionally priced commodity whereas oil is an internally price commodity. Most of the UK’s natural gas comes from European sources, as natural gas production in the North Sea declines.
3. As with any regionally priced commodity prices are high when demand is high and low when demand is low. Demand is always higher in winter, and there is still very little natural gas storage in the UK. We and the energy companies therefore los the opportunity to buy and store natural gas in summer when the prices are low.
4. We have been reducing the “spare” electrical generating capacity for many years. If we are to avoid the possibility of power cuts we ought to have a “spare” capacity of around 50%, so as to cover for a very cold long winter. At the moment we have about 14% spare capacity and OFGEM, the regulator, expects this to fall to 4% in 2015.
5. We have closed our coal burning power stations rather quickly, and although OFGEM appears to blame EU legislation for this, the truth is that the UK has been rightly closing coal burning power stations for years. What the government have not done is to build sufficient new power stations. I know that many think that governments in the UK do not build power stations – that is the job of the generating companies – but in truth the generating companies will only build power stations if they receive huge government subsidies. The government has very little tax payers’ money left and therefore no there are no subsidies as one by one the generating companies refuse to take the commercial risks of building new nuclear power plants.
6. There has been insufficient investment in energy saving; the energy we require each year will be significantly less in terms of that required for space heat if we required all buildings to be properly insulated.
7. Investment in renewable energy has been, so far, in the wrong kind of renewable energy. We have wasted much money on wind farms and photovoltaic panels which produces little effective energy saving because electricity cannot be stored but have not spent anything on solar water heating, a simple and effective technology where the energy created can be stored until it is need.

All of these factors will mean that energy – both heat and electrical – will come in increasingly short supply, which creates a perfect situation for the energy companies who can all raise their prices for something that we need and cannot generally buy elsewhere except in the case of solar water heating, where we can but the power plant and install it on our roofs.

The taxpayer will pay in higher energy prices and will risk power cuts in very cold weather, because successive governments’ failure to develop a sensible energy policy.

The Energy Bill

In the United Kingdom legislation about energy has tended to be a mish-mash of silly subsidies and wishful thinking. The present proposed Energy Bill is no different.

What Energy Policy?

I listened to the United Kingdom’s Energy Minister, Mr Ed Davey, speak on the radio about the proposals for nuclear energy. He spoke about the need for investors to see a clear return on their investment within a settled and predictable framework and that by putting a levy on electricity bills investors in the nuclear industry would see a clear guaranteed return (guaranteed by the consumer no less) and would therefore invest in the building of new nuclear electricity generating plants. It is a statement which sounds logical but is full of inaccuracies and has a great measure of hypocrisy.

The Incompetence of Governments

I have been running a thermal solar energy business in the United Kingdom (Genersys) for more than ten years. This deals in solar water heating panels and is a renewable energy technology, which provides almost emission free  energy. During that time I have been astonished by the incompetence of government when it comes to energy matters. Fossil fuel, or renewable, governments and civil servants do not understand what they are doing and seem incapable of making the very simple and basic decisions which would require common sense and intelligence.

Climate Change Policy – the Curate’s Egg

The UK Treasury does not attach enough importance to climate change issues. Joan Walley, a labour MP has argued that by the Chancellor making statements that emissions will not be cut at the expense of British business the Treasury is undermining investor confidence in low carbon industries. Greg Barker talks about the need to review the system to ensure that we are not simply shipping emissions abroad and Mr Cameron wanted this government to be the greenest ever. These statements show the current muddle of British climate change policy.

The UK’s Energy National Policy Statement

There is some difference I suppose between a National Policy Statement and a National Policy, but the subtlety is beyond me. I should not waste time on semantics and assume that the Energy National Policy Statement is simply national energy policy written down, or in other words, national energy policy.

The government has published its Energy National Policy Statement, abbreviated to ENPS, which is its energy policy. Having a longer title than necessary tends to make things suspiciously pretentious, full of froth and bubble that loquaciousness brings. The Energy National Policy Statement is a poor substitute for a fully thought out energy policy.

It has been quite hard the track down the policy statement; you have to go through a variety of UK government websites, most of which contain statements about the statements and to save you the bother of this tedium I can tell you that the link to the policy is  http://www.decc.gov.uk/en/content/cms/meeting_energy/consents_planning/nps_en_infra/nps_en_infra.aspx

which you will see comprises six policy statements and two government responses and an impact assessment. Who would of thought that energy policy should be so hard to lay out succinctly. Perhaps it is better not to be befuddled by this approach to attempting to communicate policy and settle to down load the “over arching national policy statement for energy” at http://www.decc.gov.uk/assets/decc/11/meeting-energy-demand/consents-planning/nps2011/1938-overarching-nps-for-energy-en1.pdf

From this document we glean that energy is important and needs a significant amount of large scale and small scale infrastructure, that theUKis committed to reducing its greenhouse gas emissions by 80% by 2050 (compared to 1990 levels) and that this is going to be a major challenge. Calling the reduction “a major challenge” is more than the litotes of British reserve; such a reduction, on our present course of energy policy, is simply dreamland.

Energy we are told should be secure, safe, low carbon and affordable. We are not told that energy cannot be both low carbon and affordable or secure and safe. These conflicts have not been addressed in the policy statement, yet they are critical in getting the policy right.

My immediate impression of the revised policy statements is, when you clear away all the froth and bubble

1. The planning laws will be changed to make planning consent for infrastructure projects much quicker and presumably easier to obtain.
2. The UKwill build eight new nuclear power stations to replace those that are going to be closing down; so we are on a nuclear pathway without a real debate about it.
3. There will be a need to invest £100 billion in the electricity infrastructure to enable a lower carbon grid; if a government makes any infrastructure expense estimate it is usually right to treble or quadruple the estimate. HM Revenue and Customs collect £157 billion from income tax and national insurance tax in 2009.
4. There will also be a need to invest in gas pipelines, storage facilities
5. The UK does not have virtually any of the infrastructures needed to achieve its 80% target.
6. The UK will mainly rely on private investment to finance the changes that will be necessary.

The sheer size of the cost of “decarbonising” our energy supply makes it necessary, if private investment is to be used, to provide for quicker planning decisions so that we can get on with much needed greenhouse gas reductions. The sheer size of the project also, in my view, mitigates against using privately raised money and should point towards using taxation as a means to raise the money.

Fighting climate change is like fighting a war; the cost is terrible but the cost of failure is worse. We would not sub contract the fighting of a war to private finance and I wonder of the wisdom of doing so in the case of climate change.

Energy Policy Folly – Wind Turbines

Christopher Booker, writing in the Daily Telegraph on 23^rd April, rightly, in my view, argued that the lights in Britain will go out more sooner than expected because of European Union and UK energy law and policy. He sets out the facts as