The True Cost of a Barrel of Oil

    February 18, 2013

A Few Oil Basics

Today, almost everyone is reliant on oil in some way or another.  Many of us rely on petrol cars and buses to get to work as well as taking flights to go on holiday.

crude oil barrel

However, there are 1000s of other products we use daily that are derived from crude oil including: plastics, synthetic rubbers, cosmetics, perfumes and industrial solvents to name but a few. Petroleum is also key when making fertilizer, so the cost of food is indirectly linked to the cost of the black stuff too!

At today’s prices, if you were to buy one barrel of crude oil it would cost you about $100 dollars. One barrel is equal to 42 US gallons, which is just shy of 159 litres.

Unfortunately you can’t simply take the oil from the ground and use it in a car, plane or bus. First it needs to be refined, this actually produces numerous other products that we use today – below I have split out the main products that you can get from one barrel of oil:

73 litres of petrol
40 litres of diesel / heating fuel
16 litres of Jet fuel
6 litres of Liquid Petroleum Gas
+ small quantities of numerous other products like lubricants, kerosene and asphalt.

If you add up the volume of all the products from refining a barrel of oil, you actually get about 10 litres more than is put in, due to what’s called the ‘processing gain’ which results from processing and chemical changes decreasing the density and hence increasing the volume of the refined components.

Why The Government Love Petrol

People might be struggling to pay for the price of petrol now, but for the Government it is an absolute gold mine.

If you fill your car with £50 of fuel, the Government will get £30.

(1 litre of unleaded petrol in the UK currently costs about £1.37, with the Government getting about 60%, the petrol itself accounts for 34% and the other 6% covering the refining costs and the retailer margin.)

In total the UK Government estimated that it would bring in £592 billion worth of revenue  from various taxation (income tax, corporation tax, VAT etc.) during 2012/13. It calculated spending of £683 billion on social welfare, the NHS, education and defence etc. Now you can see there is an issue here – they are short by just under £100 billion. This deficit is what the Government are trying to bring under control.

They have a challenge trying to balance the books while not increasing fuel duty too much to choke off demand. So, bringing this back on topic, what is the effect of fuel on the tax receipts?

Well via fuel duty, the Government get about £27 billion a year and the VAT element of the fuel gets them a further £10 billion. So fuel makes them about £37 billion of the £592 billion worth of revenue they are expecting (or in percentage terms 6.25%).

Based on the fact the Government are already under enormous pressure to cut the deficit, it seems to TheGreenAge, they are absolutely reliant on the petrochemical industry contributing to tax receipts.

A Bit of History

Back in 2000, fuel cost about 80p per litre from the petrol forecourt, made up of £0.48 of duty and £0.12 VAT. This meant the Government at this point in time were receiving over three quarters of the total cost of fuel back via taxes.

The ridiculously high duty prices led farmers and lorry drivers to block oil facilities leading to massive petrol shortages across the UK.

The cost of a barrel of oil in 2000 was ‘only’ $27 (remember it is now just shy of $100)

In 2007, oil prices had increased to $64, and this saw fuel prices in the UK exceed £1 per litre for the first time. This again led to blockages of oil facilities, but not to the same extent as in 2000.

In the summer of 2008, oil prices reached a record $140 per barrel and this saw fuel prices reach £1.20 per litre of petrol and £1.33 per litre of diesel, but by the end of the year the prices had dropped back to sub £1.00 for both as a barrel of oil dropped to $48.

Since 2008, despite a global recession, the value of oil has been steadily increasing and is now approaching the $100 a barrel mark.

You can see in the table below all the numbers discussed above, and hopefully appreciate why it paints a scary picture. The price of oil is likely to continue to increase.  As the Government is under pressure to increase tax receipts the duty and VAT is unlikely to decrease. These two factors will drive the price of fuel up, which will directly hit the pockets of consumers.

The Price of Petrol in the UK since 2000

The average car in the UK has a 65 litre fuel tank, which to fill up at today’s prices costs about £87. Ten years ago, an equivalent tank would have only cost £47 to fill up.

There are stabilisers in place (enacted the Treasury) to prevent the price of fuel mirroring the erratic changes of crude oil. Unfortunately, if prices of crude continue to increase, no government stabiliser will be big enough to offset the price rises in petrol.

What is Causing the Price of Crude Oil to Increase?

There are several interlinked reasons why crude prices are increasing. The first is that while demand continues to grow (as the worldwide economy recovers and China continues its 10% + growth), supply is failing to grow at the same rate. Oil comes from many different places, but much of it is concentrated around the Middle East and Northern Africa, which has seen much political unrest in recent times. This has led to worries about supply interruption, which of course leads to short term spikes in oil prices.

There have been very few significant oil finds in the last few years. The super oil fields in Saudi Arabia are now over 50 years old, and while there is still plenty of oil in them, the oil coming out tends to be polluted with water so is less valuable (the water is used to keep the pressure up in the well). It has been speculated that we have even reached ‘peak oil’, ie reached a maximum global output of oil. No matter what new technologies we develop to get the oil out of the ground, it is highly unlikely to come out at the rate and volumes it once did.

In addition, much of the oil in existence today is not in the easy to use form that you see flying out of oil wells in cartoons, instead it is held within oil sands, or it is much deeper in the ground. Wells will need to be dug significantly deeper, therefore the price of extracting the oil is now significantly higher than previously.

High oil prices can also be driven by a number of external events, for example when things go wrong in the stock markets. In 2008 we saw the housing market in the US burst; this resulted in a large sell off of traditional shares and savings bonds. People then moved a large amount of money from those investments to commodities like oil and gold. This event resulted in a massive spike in the price of oil, driving it up to $140 a barrel.

There is a potential saving grace on the horizon in the form of shale oil, but I am not going to give my two pennies worth on this until more research has been released on the environmental impacts of fracking.

Impact of Oil hitting $200 a Barrel

So taking this into account, what would be the impact of crude oil hitting $200 plus? Petrol could work out somewhere between £2.50 and £2.80 per litre, a pretty harrowing picture for consumers.

I began this blog by saying that in 2013 people are struggling to pay for fuel. I used to have a car, and it cost about £70 to fill up the tank, which lasted about a week and a half. I sold it. It was not worth it; my bike gets me around for free (aside from the food I need to eat to power it!).

I assume the thought of filling up a car for £180 or more fills most of you with dread (£2.80 multiplied by average 65 litre fuel tank). When household budgets are already tight, and with water and other utilities surely going to increase too, this might be too much for many people.

I appreciate that for many people cycling is simply not an option, but there are a growing group of people out there who will not use their car if there is only person in it. Can we change the culture in the UK, working to improve our budgets and health.

The True Cost of Oil

If you calculated the ‘work’ that can be carried out using the energy in one barrel of oil and compared it to the equivalent amount of work that a human could do, it would take a human about 10,000 hours to complete the same amount of work (based on the assumptions here. If you then take an average hourly wage of $6.60, then oil should be worth $66,000 a barrel (if you just took the UK, with an average wage of $20, then it would be worth $200,000 a barrel).

Maybe, if we really appreciated what oil does for us and the bargain price that we pay for it, we perhaps wouldn’t be quite so frivolous and drive 500m to the newsagent to buy a pint of milk.


    2012 Environment and Energy Round-up; What Can We Do Differently in 2013?

    January 15, 2013

2012 Positives in the UK

The year just passed showed some encouraging signs for renewables in the UK; Installed capacity was up almost 25% from 2010 to 2011 topping 12,000MW. In September, early figures for 2012 showed this figure exceeding 14,000MW. Mainstays of the UK renewables mix continued to see considerable upticks in capacity, but microgeneration has also made forward strides, with ever more solar panels and micro wind turbines seen in domestic settings. There was also the promise of the ‘Green Deal’ and the ‘Energy Company Obligation’ to help the average person become more energy efficient, which should make a huge impact in the coming years.

The Larger Political Picture

Taking a look at the bigger picture however, there are plenty of things to be concerned about. The global climate is showing the signs of man-made climate change and the UK has seen this up close and personal in 2012, with an extended drought giving way to the second wettest year on record; flooding affected much of the country, in some places more than once. Politically there were negatives as well, the COP18 in Doha once more struggled to progress global climate talks and on a national level, the Government has signalled its intention to focus on natural gas as a solution to the looming energy gap the country will face by 2015.

For those unaware, the UK is closing several of its coal fired power stations in the coming years, to fall in line with EU emissions regulations. It means that by 2015, energy capacity of the grid will not be sufficient to deal with peak demand. It is a pressing problem, which has prompted the government to look at importing gas to resolve the situation. Unfortunately natural gas only offers a small reduction in carbon emissions compared to coal, and the lack of a local supply means the UK will be relying on imports from other parts of the world like Russia and will be exposed to both volatile prices and political pressures.

Fuel Poverty and the Rising Cost of Energy

The rising cost of energy was also a big talking point in 2012. Most of the major energy companies hiked their prices well above inflation and the number of people in fuel poverty increased dramatically, with some surveys suggesting as many as a quarter of households have to choose between food and warmth during the winter months.

This is where new Government initiatives like the Green Deal will come into play. Aimed at those who cannot afford to pay for expensive energy efficiency measures up front, the scheme allows consumers to install measures and pay back the initial cost with the savings made. Energy efficiency has a huge role to play in both meeting carbon reduction targets and cutting energy use and hopefully the Green Deal will help deliver these aims on both a residential and commercial perspective. The Energy Company Obligation, designed to work where the Green Deal will not, will replace the Warm Front scheme, helping to provide energy efficiency measures for low income households.

Can Adversity Breed Change?

The flooding experienced during 2012 was unprecedented and many fear that climate change will mean these sorts of years will become more common in the future. Yet perhaps it can help change public opinion as well; it is a well known phenomenon that people tend not to change their lifestyles until it affects them directly. With the flooding affecting so many people across the country, perhaps the threat of climate change will begin to hit home. Microgeneration is a growing industry, and the added incentive of Feed-in Tariffs means independence from the grid is becoming a growing trend for homeowners and businesses alike.

Looking further afield, can the extreme weather events seen around the world in 2012, from the record low Arctic Ice coverage, to the Australian heat wave giving rise to the recent wildfires, to Hurricane Sandy hitting the US East Coast metropolises, create momentum for change at the UN climate negotiations? This year’s COP19 will be held in Warsaw at the end of the year, and the combination of the extreme weather in the world’s biggest economy, and the confirmation of Barack Obama as President, might be enough to change their standpoint to a more favourable position for those hoping for a binding agreement.

2013 and Beyond

So 2013 promises to be an interesting year for both UK and the rest of the world; at home, the focus will be on the ‘Green Deal’ and whether the Government can create momentum behind the scheme and the renewable energy sector, which it is hoped can build on the good progress made in the last few years and further expand renewable energy production in the UK. Globally, climatologists will be watching the extreme weather events around the globe, whilst Poland will draw the focus of the politicians anxious to sign a binding agreement (or not so anxious, as the case may be).

    Prince Charles – our new environmental torchbearer!

    January 7, 2013

It appears our Royal Family is experiencing a real surge in popularity at the moment, gaining favourable coverage across the country. This was compounded by the announcement at the end of last year that the Duchess of Cambridge is expecting a baby. Preceding this we had the Diamond jubilee in early 2012 and the Royal Wedding the year before; it seems that the good news just keeps on coming.

As such, while people seem to be taker a greater interest in the Royal Family, it is nice to know that our next monarch is taking such a keen interest in safeguarding the environmental future of the country he will some day serve.

Prince Charles, in a interview with ITV’s This Morning, said:

“I’ve gone on for years about the importance of thinking about the long term in relation to the environmental damage, climate change and everything else.

We don’t, in a sensible world, want to hand on an increasingly dysfunctional world to our grandchildren, to leave them with the real problem.

I don’t want to be confronted by my future grandchild and [have] them say: ‘Why didn’t you do something?’ So clearly now that we will have a grandchild, it makes it even more obvious to try and make sure we leave them something that isn’t a total poisoned chalice.”

In a country where our Government keeps firing out mixed messages about environmental policy (see John Hayes and Greg Barker’s latest disagreement on wind power in November as the latest in a long running dialogue of inconsistent messages), I think it is great news that we have a future King who believes so strongly in the environmental cause. In his future position as head of state, he should have the ideal platform to make a real difference.

    10 Key Features of the New UK Energy Bill

    December 3, 2012

1. Fairer prices & more power to consumers

OFGEM, which is the regulator for gas and electricity, is set to get sweeping powers to protect consumers from unfair increases in energy prices. It will be able to impose stricter fines and force energy companies to pay compensation to customers if they are ruled to have been charging unfair prices.

2. Investment in Renewable Technology

The bill lays out a plan for continuous investment (£110bn up to 2020) in renewable technologies such as wind power, biomass and nuclear. This investment in renewables is happening at a time where we have had volatile wholesale gas prices, which seem to be increasing every year.

 3. Improving & upgrade existing infrastructure

As well as investment in generation, there will also be increased investment to underpin the new technologies, with money being spent on rolling out smart meters, building back-up power plants and encouraging more efficiency in the transmission system. Total infrastructure investment over the next decade or so could well be in excess of £500bn.

 4. Replacing Aged Coal & Nuclear Power Plants

Our nuclear power plants are aged and will need to be replaced. The UK has also committed itself to following certain EU regulations, one of which stipulates that it must phase out its existing coal fire power plants that don’t meet various emission targets. What this does is remove a fifth of generating capacity, leaving a big gap between supply and demand. So, new power plants need to be built to close this energy gap.

 5. Pass on the Costs of these Investments to Consumers & Businesses

Unfortunately, all that investment has to come from somewhere, and the government are keen for households and business to pay for it. It is estimated that for an average domestic energy bill (which is between £1,200 & £1,300), consumers will need to contribute an additional £80 a year for these investments to happen. Therefore, the total average contribution is set to rise from its current level of £20 to £100.

 6. The Green Deal

While the government realises that consumers may not be too happy having costs passed onto them by the energy companies, to soften these blows, they are continuing with their flagship Green Deal programme. It is a way for homes, district housing and small businesses to make investments of up to £10,000 in energy efficiency measures, thus cutting energy costs but not having to pay anything up front.

 7. Excluding Heavy Industry from the ‘Green’ Levy

Big industrial industries such as cement and steel will largely be exempt from the main increases in energy levies. The government seems to have bowed to pressure from the companies in those sectors, who have threatened to leave Britain, take jobs and set up shop somewhere else, due to a risk in increase of running costs.

8. Encouraging New Technologies

For any new coal fire power plants that are to be built, they will be required to keep their emissions below 450g CO2/kilowatt hour (kWh) or install new carbon and capture and storage (CCS) technology to meet the limit. Previously coal fire power plants were allowed to continue running as long as they tested CCS, but no regulation acted as enforcement if these tests failed.

 9. CfDs to Replace ROs

Contract for Difference (CfD) will replace the existing Renewable Obligation mechanisms. The CfD effectively provides a more level playing field for investors in renewable energies, where generators are incentivised to produce power as well as creating a more stable and guaranteed return over a number of years.

And finally…

10. No Carbon Target Commitments for Now

The most controversial aspect of the bill was that there was no sign of CO2 reduction targets. This decision has been put back till after 2016, which would be after the next general election, expected in 2015. The lack of targets sends a mixed message on how quickly the decarbonisation path is to be achieved and doesn’t fully incentivise emitting companies to cut their emissions or do anything differently.


    Your Guide to the Doha Climate Change Conference – Nov’ 2012

    November 27, 2012

Doha Climate Change

This week, the latest round of UN climate change talks have kicked off in Doha (the capital of Qatar). More than 17,000 participants will gather in the Middle Eastern state over the next two weeks, including our Climate Change secretary Ed Davey.

After the failure to thrash out a new climate treaty during the last few rounds of climate change talks (Copenhagen – 2009, Cancun – 2010 and Durban 2011), the global community is in urgent need of a new treaty to supersede the Kyoto protocol which is due to expire at the end of 2012.

It is likely that the Kyoto protocol will be extended until 2015 acting as a stopgap, when a new, more aggressive climate change roadmap will supersede it.

Issues facing a new climate change protocol

So what kind of issues need to be overcome first before the participating countries agree to extend Kyoto and begin putting in place the framework for a new climate change protocol?

The Global Landscape has changed

One of the major issues facing a new successful protocol is that Kyoto was adopted in 1997, and the world has changed dramatically since then,

Developing countries, which had the option of ratifying the Kyoto Protocol, were not obliged to cut their greenhouse emissions, since they were not seen as the main culprits for the emissions during the period of industrialisation thought to be the cause of global warming today.

Countries like China, India and Brazil all now play a massive part in contributing to climate change, so these countries need to sign up to make it worthwhile for everyone.

The USA needs to play ball

The USA did sign up to the original Kyoto protocol in 1997, but failed to ratify it, meaning they were not obliged to take any proactive steps to prevent climate change. At the time the US was the biggest producer of CO2 in the world therefore their failure to ratify the original agreement was seen as a major kick in the teeth to environmentalists.

However, Jonathan Pershing, a senior negotiator for the USA at the Doha said

‘Those who don’t know what the US is doing may not be informed of the scale and extent of the effort, but it’s enormous.

It doesn’t mean enough is being done. It’s clear the global community, and that includes us, has to do more if we are going to succeed at avoiding the damages projected in a warming world’

In fact, US emissions have fallen sharply over the last few years since many of their coal power plants have been replaced with gas power stations, however it is absolutely key that the USA sign up to any new agreements and with Barack Obama in power, that looks far more likely (especially when compared to George Bush!).

Developing Nations need a helping hand

When the UK went through the industrial revolution in the later part of the 18th Century, we moved from a manual     labour and rural based economy towards machine-based manufacturing. This revolution coincided with massive increases in energy demand and with these increases we also saw a rise in greenhouse gas emissions.

In order for developing nations to become developed nations, they need to undergo a similar revolution, which will see an exponential increase in demand for electricity. It is therefore vitally important that the developing nations have the mechanisms in place that allows them to do this in an environmentally friendly way.

To date, developed countries have delivered $30bn of grants and loans to developing countries, but a ‘Green Climate Fund’ designed to channel $100bn to poor countries has yet to begin operating, which is frustrating.

Doha as a venue

Environmentalists may view the choice of Qatar as the host of the climate talks somewhat ironic. According to IMF data, massive oil and gas reserves have made the country not only the richest in the world (GDP / capita – over $88,000), but also the most polluting. A carbon footprint of over 55.4 tonnes per person, makes it the highest globally; ten times the average.

However, the host of the climate talks, former Qatari energy minister, Abdullah bin Hamad al-Attiyah recognises the opportunity that the conference brings.

‘Climate change is a common challenge for humanity. We must work in earnest for a better future for present and for future generations. We have a precious opportunity over the coming days, and we must make full use of it.’

But a pledge by Qatar to dramatically reduce their carbon footprint may give Mr Al-Attiyah’s comments a little more credence. With 10 hours of sun per day Solar would surely be the logical choice to reduce their reliance on oil for their power.

The Doha Climate talks could (in theory) change the world

More and more evidence points to the fact that the world is warming as a result of greenhouse gases being emitted by human activities. If the changes in weather patterns are anything to go by we need to act now.

Therefore it is imperative that the global community signs up to an accelerated ‘all-inclusive’ protocol that targets climate change at the Doha climate change conference  Kyoto has done great things for the climate change cause, helping to raise global awareness, however we need a newer, and more ambitious action plan. Here is hoping that the next two weeks brings in a new dawn for the fight against climate change.

    Zac Goldsmith @ the Guardian & Observer Open Weekend

    April 2, 2012

Last weekend (24th & 25th March), I attended an open discussion between Ian Katz (Deputy Editor of the Guardian) and Zac Goldsmith (Conservative MP for Richmond Park and North Kingston), which was part of the Guardian and Observer open weekend. After a particularly early start, I managed to take my seat in the auditorium, a bit bleary eyed, also still panting after my brisk walk in warm spring sunshine from King’s Cross station. Thank heavens the air-con started to work just in time.

The event began with the introduction of Zac Goldsmith MP – one of a small number of MPs in the House of Commons who is particularly outspoken, therefore doesn’t always tow the line of the Conservative Party ‘three line whip’. As a result, I was excited about hearing him talk more openly about his passions, with particular focus on the environment and green issues.

In the discussion, he focused on three particular areas of Environmental policy, as follows:

Following on from the discussions on policies the conversation between Mr Goldsmith and Mr Katz turned to the current administration, and their role in the green debate, as after all, it was only two years ago that Mr Cameron entered No10 promising to head the ‘Greenest government ever’. This focused on two things in particular, whether the government was ‘green’ enough and the proposed expansion of Heathrow.

Interestingly, on the question from Mr Katz, whether this government has been the ‘greenest ever’, I felt that Mr. Goldsmith sat on the fence a little. He pointed out to the fact that government has been sending out confusing messages on ‘cleantech’ technologies, which hasn’t resounded well with investors. Yet he pointed out to specific measures like the Green Deal, the Green Investment Bank, FITs and electricity market reforms as policies implemented by this government, and that each should be celebrated as a real achievement, however we know FITs, energy market reform debates and deregulation were started by the last government. I suppose as the current administration has only been in power less than 2 years, there is still time for new ideas to come out.

Finally the debate moved on to the proposed airport expansion in the South-east (with focus on Heathrow in particular). This has been a bit of a hot topic recently in the media. Mr. Goldsmith was asked about his view in this area – so strong was his view against a 3rd runway expansion at Heathrow, that he is prepared to resign over this issue area and trigger a by-election if the government goes back on its promise and supports it.

You may have heard in the news last week that the Chancellor of the Exchequer, George Osborne (Conservative MP) is in favour of this idea of a 3rd runway at Heathrow. It would be tough for this administration to contemplate legislating in this area, no matter what the final, engineered solution is.  Also the Conservative Party MPs that have constituencies bordering on the Heathrow flight path (including the current Sec. of State for Transport) would find it very hard to sell this expansion to their constituents at the next general election, given their current view, which has been to oppose it.

I think in the end, I managed to get a good perspective of how our legislators approach debates to green and environmental issues. Further insight was also offered on some really important tricks missed by the current administration in its legislative programme for planning reform for example. What I think was lacking was an actual point-of-view by Mr. Goldsmith, on what he though the solutions were. I enjoyed his views on farming, but I think overall there was a lack of time to go into this in too much detail, as after all, this debate was only penciled in for an hour.

    Impending Oil Tanker Strikes in UK, Further highlighting reliance on Petrol & Diesel

    March 28, 2012

With oil tanker strikes looming on the horizon which could have a detrimental impact on the UK, we take a look at what it means to the UK and a potential longer term preventative cure….

Earlier this month (March 2012), the UK’s largest trade union, called Unite, balloted 2,000 tanker drivers in relation to ‘fixing a broken operation of an industry which is fragmented, unstable and too important to the nation to leave to pure market forces’.

The 2,000 balloted members supply 90% of the UK fuel to the nation’s garages via seven haulage companies. Of the 7 haulage companies, 5 voted in favour of the strike, and of those 5 the vote in favour averaged 69%. So what does this mean for the country in the short term and the longer term?

The strike is planned over Easter weekend, to maximise disruption to commuters as they usually try to travel the length and breadth of the country over the extended weekend. The strike action by the tanker drivers will stop any fuel being delivered to petrol forecourts, so drivers will need to either take preventative measures and fill up prior to the Easter break (hoping their travel plans don’t stretch beyond the range of their fuel tanks!!) or look to use other methods of transport to get to their preferred destination.

In the year 2000, a similar incident happened when trucks blocked the tanker drivers leaving the depots to deliver the fuel in a protest over fuel duties. The disruption of the energy sector bought the country to a virtual standstill, with businesses bought to their knees and panic buying seen amongst consumers. Estimates put the financial implication of the week-long disruption at £1bn.

So, can we expect similar disruption this time? Well we hope not and Ed Davey (the Energy Secretary) has asked ACAS to open up negotiations between Unite and the oil companies in an attempt to bring into place some sort of agreement to prevent the strikes actually going ahead. The Government are also putting in place contingency plans such as training the RAF to deliver the fuel to the forecourts, although there is not the capacity to cover the entire fuel distribution network. They have also suggested that the general public and business have contingency plans in operation to allow them to avoid the impacts if the talks fail and strike action does go ahead.

What are the longer term implications for the UK? Well, shortly we are hosting the Olympic Games here, and this would be a disaster if we found ourselves in a similar situation then.

The fuel network operates on a just-in-time basis (i.e. large reserves aren’t kept in forecourts, supply matches demand but on a very short term basis), and I think this vastly increases the impact of such action. However in the UK and everywhere in developed countries we are addicted to petrochemical fuel and we can’t seem to get away from using it.

We need fuel for everything, to do business, to see friends, to go out and buy our food (which requires fuel itself for delivery to supermarkets). This is an internal UK based issue at the moment. But what would happen if oil imports into the UK were restricted or stopped all together? Well the country would face the exact same problems but it would probably be magnified. And this wouldn’t just be the case for the UK, this would affect most countries across the world who are net oil importers (barring the Middle East and Venezuela).  Our reliance is like an addiction, and we do not currently have the substitutes in place to go cold turkey.

So how do we go about putting in place this support? It is certainly not going to happen overnight, but on the plus side we have some of the technologies already in play today. We have new fuel systems, hydrogen cells, electric cars (even hybrids make us less reliant) and also biofuels that are already blended with petrol and diesel. These substitutes at the moment are currently expensive and some of the technologies are unproven so we need to make further investments to bring the cost down.

Imagine though having a solar PV charging station for your electric car? You wouldn’t even need to give next’s weeks planned strikes a second thought. We are certainly not there yet, but now is the time to start reducing our reliance on fuels. Companies are recognising this, investing billions of pounds trying to find the best ways to do it, so let’s hope the transformation happens sooner rather than later and then the only thing we need worry about over Easter is the number of chocolate eggs I have in my basket…

    Budget 2012 – a green budget?

    March 23, 2012

The roadmap for the UK Budget for 2012/13 was set out Wednesday by the Chancellor, George Osborne, but what does it mean for our Green Sector and Cleantech in the UK?

In 2010, PM David Cameron, pledged that this government would be the ‘greenest ever’. This year’s budget seemed concerned (rightly so) with measures to stabilise the deficit and shore up general industrial growth (green or not) for the UK economy. How then did Mr Osborne and Mr Cameron seek to power this growth?

It seems that the Chancellor has opted to go for tried and tested hydrocarbon technologies as opposed to newer industrial renewables.

Over the next few years, and certainly by the end of this decade, several of UK’s nuclear power stations are going to be decommissioned, and therefore, other sources of electricity need to be introduced to take up the slack in energy production (just ask Sir David King – who is predicting blackouts within a few years). The lead time to bring nuclear power stations online, to bridge the gap, is just not viable on these time scales, and the operational risk with nuclear power at present is simply too high.

Surely then, this would be the perfect time to fulfill those election promises and give equal weighting to solar, wind and other Green technologies, along with fossil fuels.  However, the Chancellor appears to have ignored this, throwing his full weight behind (tried and trusted) gas and oil to plug the gap.

Going for ‘tried and trusted’ solutions not only increases our dependency on finite resources, but also does not seem to be aligned to a strategy of making the UK a world leader in Cleantech. The Chancellor promised to introduce a package of oil and gas measures to secure billions of pounds of additional investment in UK Continental Shelf, including new deepwater drilling West of Shetland. Further credence to this was the news that approval was given for 6.7GW of new gas plant capacity in 2011.

You can be sympathetic with the Chancellor on this decision, gas plants are relatively easy to build, they have good existing infrastructure, and for now, gas prices are relatively low in comparison to other fuels. I think we can all agree though, there is only one direction in which gas prices are ultimately headed and that is upward.

Over the last few years, electricity prices from solar PV have continued to drop as key bits of Government legislation, like the Feed-in-Tariff, have made solar PV an attractive investment in the UK. The production of these technologies has ramped up, making economies of scale possible.

A recent report carried out by Ernst & Young powerfully states, that ‘large scale solar energy prices will be no higher than retail by 2016-19, provided continued support of this technology in the short term’. So surely this would have been a good bet for the economy, not just decreasing our dependence on oil and gas, but also creating new high tech jobs within the sector.

Furthermore, in yesterday’s budget, it was confirmed that Enhanced Capital Allowanceswill no longer apply to recipients of FITs and RHI payments. Also regular Capital Allowances for expenditure on solar PV will be reduced from the standard rate (18%) to a rate of 8%.

Now some more positive news – it was confirmed the government is going to launch a consultation into simplifying existing legislation and administrative burden around the Carbon Reduction Commitment (CRC) energy efficiency plan. Mr Osborne went on to say, that if the administrative savings for businesses were not deemed sufficient, then the CRC would be replaced with a simpler environmental tax.

The news was welcomed by Liz Peace, chief executive of the British Property Federation, who commented: “Today’s announcement of a review to reduce the burden of the CRCEES for business is to be welcomed. We would urge Government to rationalise the fiscal element of the CRCEES and the Climate Change Levy into a simple retrospective tax on the carbon associated with building energy consumption. The price of carbon under this tax could be set in consultation with the Committee on Climate Change.

The implications of this proposal would be that much of the administrative burden associated with the scheme would be reduced. This approach would also ensure that participants are not required to make crude estimates of the number of allowances required in advance.”

Other points of interest raised in the Budget were:

So, on reflection, it appears to be a mixed bag for the Green Industry. In various areas investment and support is still forthcoming, however with a real opportunity for the Government to propel solar PV and offshore wind farms into the public psyche to help share the burden of the energy gap, it appears Mr Osborne prefers to play it safe by cosying up to gas.

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