Thoughts on Amber Rudd’s Energy Policy Speech – November 2015

Amber Rudd made a speech today, on a new direction for the energy policy of the UK. While some of it was good news (getting rid of coal power plants for example) we felt most of it seemed pretty short sighted – let me explain!

Apart from gas used in peoples home for central heating systems, a huge amount of natural gas is also used to produce electricity in gas power plants. In fact, within the UK’s energy mix for the year ending March 2015, approximately 29.7% of the electricity produced here came from natural gas.

Now, Amber Rudd’s speech today talked about closing all the coal power stations by 2025. That is definitely good news – coal (even with scrubbing) is a pretty dirty way to produce electricity. The bad news is that she is looking for gas power plants to fill this void in generating capacity.

Why is this bad?

  1. We import over half the gas we use in the UK – the latest figures we have are to the end of 2014 – during that year we imported 477,163 GWh of gas, and we sourced 425,459 GWh from here within the UK.

The current state – the issue is that the North Sea is providing us with less gas each year and the cost of extraction is getting more expensive. This means that going forward, the amount we need to import is going to increase.

If we were to replace coal with gas, then it lowers emissions, but we would need to import even more gas. Importing (even more!) gas means we are the mercy of an incredibly volatile market – and although unlikely – the taps could be switched off at any moment!

  1. The gas power plants need to be built by 2025 to replace the old coal power plants. There are 12 coal plants that are still in operation here in the UK and they supply about 27% of our required electricity. Producing 12 new plants in that time is very possible, but it will be expensive and it is likely that the cost of building them will be recovered through higher energy bills so end customers will be the ones that feel the pain.

The biggest issue is though is that all but one of our nuclear power plants are due to close by 2023. Nuclear accounts for just over 22% of our electricity – this wasn’t mentioned today – so we are going to need to replace these with something as well.

Replacing 50% of our existing electricity generating capacity within 10 years is going to be some feat, especially given that just one large power plant is currently under construction and another, which secured a subsidy last year, is struggling to find investors.

So what does all this mean? Well firstly I think we can all expect to pay a bit more for our energy going forward. As generous as the Government are (!) we can’t expect them to find all the money for these new power plants – the subsidies will undoubtedly be paid for through increased energy bills.

I worry too that if we were to suffer a longer than normal winter period, our gas supplies would not be sufficient to cope and there would be rolling blackouts.

Obviously the Government are desperate to go this way (replace coal with gas) hence their removal of the red tape around shale gas drilling (fracking) to hopefully increase UK gas supplies. The Government are also withdrawing their support from the renewables industry seemingly on a daily basis – Feed-in tariffs all but scrapped, RHI reduced and so forth. Even the Green Deal was scrapped during the Summer of 2015.

What would we do?

For us, the Government have missed a hugely important part of the equation. Reduce demand for energy and you reduce the need to install capacity. This is not only incredibly simple; it has been proven that energy efficiency is much cheaper than putting in new capacity – reducing consumption costs about 1/3 of the price of upping generation.

It is all about lowering energy demand by both carrot and stick.

Carrot includes the real financial savings that people will see by taking actions such as draught proofing, installing LED lighting and laying lots of insulation in the loft – minimal outlay will see huge financial savings going forward. Likewise something like reducing council tax for efficient houses will see more people install this kind of solution in their home.

The stick includes financial penalties for not trying to help lower demand – for example charging more for electricity at peak times (see time of use tariffs), with the role out of smart meters it should be possible to make electricity much more expensive at peak times in an effort to dampen demand. For many people this will mean they change their habits to use electricity when it is cheaper.

While we think it is a huge shame Amber Rudd failed to back renewables in her speech, it is clear in our opinion over time they will show their true value. A ruptured fuel line from Norway is all it would take for every Tom, Dick and Harry to scramble for some independence from the grid!

Think we missed something? Do you have a different opinion?

Comment below to get your voice heard…