Who Turned Out All the Lights – Part 2

Energy Crisis in the UK

It has been just 4 months since I wrote my first ‘who turned all the lights off’ article. In it, I explained about our impending energy crisis, but if you missed it, the headline figures are as follows:

    • In 2015, nine of our coal power plants would have shut down as a result of an EU directive on carbon emissions.
    • By 2019, our nuclear power stations will have come to the end of their useful life and will be forced to shut or turn down operations.

As of this morning (26th March 2013), our electricity demand is currently 48.09GW, of which coal is meeting 17.32GW and Nuclear is providing 6.36GW. Obviously the closure of these plants will make a significant dent on our energy capacity, as the two fuels combined account just under a half of all electricity production.

Now, unfortunately this issue gets a little bit worse, since a nuclear power plant (i.e. the once recently announced in Hinkley, Somerset) will not actually begin producing power for the best part of 10 years. It seems the Government must have all but abandoned its long-standing ambition to have 16GW of new reactors running by 2015.

Capacity is going to drop.

I presume most of you can see the issue here, but as energy capacity drops over the coming years, our demand for power will not. We live in a digital age, where 76% of the UK population have access to the Internet, and 92% of adults have a mobile phone. We use electricity on a daily basis to watch TV, read the newspaper, communicate with friends and even shop for goods & services.

Demand is not going to drop – simple as that.

That creates a problem, as at the moment we have the luxury of a bit of headroom between peak capacity and peak demand, but for how long?

Only a week ago, the boss of Energy Company, Scottish and Southern Energy (SSE), Mr Ian Merchant, warned that the lights may go out in the near 3 years. This is the boss of one of the 6 largest energy providers in the UK. He should know!

This view was supported by Alistair Buchanan, the CEO of OFGEM, the guy that oversees our energy regulatory body. One would also hope that he has his finger on the pulse too.

Now I can only hope that they came to this conclusion from reading my initial blog, but I suspect their army of clever analysts deduced this all by themselves.

The UK is Full of Gas

I have painted a pretty bleak picture so far and unfortunately I think the problem could be even worse. Currently the UK imports much of the gas that we use for power generation and for our domestic use, heating and producing hot water. In 2011, for the first time since 1967, UK gas imports exceeded our production. This is the result of our production capacity dropping off a cliff since 2000 with North Sea gas running out. In 2005, the UK paid less than £10m to import gas from Qatar since the amount we need was very little, but in just 7 years the accumulative payments to Qatar have totalled over £4bn. £10,000,000 to £4,000,000,000 is a lot of extra noughts.

In a recent memorandum, submitted by Centrica to Government, it was predicted that the UK would import 70-80% of our gas by 2020. Now in theory this is not a problem, as many countries import all their gas, however the UK is already particularly dependent on the stuff, with 40% of our energy requirements coming from it and the fact we are going to become ever more dependent on an imported energy source to power our country should set alarm bells ringing amongst us all. If they turn off the taps, we are in deep trouble so they have us over an (oil) barrel – we will be forced to pay whatever it costs!

The Weather

You may have also noticed that it is bloody freezing outside. I biked into work this morning and I arrived like a little icicle. This ‘freak’ cold snap has taken us all by surprise, this time last year it was 200C warmer, but it appears that this freak weather maybe a new feature of the world we live in. I am not going to use this blog to preach about climate change, but simply point out that if we get lots of this ‘freak’ cold snaps, then we are going to use more gas.

The UK Government have recently come out and settled everyone’s nerves by reassuring them that gas will not run out. Whether or not you can take much comfort in Government promising anything these days is up for debate, but if they are right then, it means they are simply going to need to import even more gas.

Now the BBC reported on 25th March 2013, that a giant gas tanker has been diverted to Pembrokeshire to top up dwindling gas supplies depleted by unseasonable cold weather. This ship, the Zarga, carries about 266,000 cubic metres of LNG (which would power the UK for 6 hours).

Zarga sets out from Qatar and essentially delivers to whoever will pay the highest rate. Currently the highest bidder is the UK. Bear in mind we are going to be importing 80% of our gas. I am slightly worried.

Back to the issue of capacity / demand

John Hayes (when he was Energy Minister), gleefully announced the UK would be relying on new gas power plants to get us out of our current pickle, to help increase capacity (he really really hated renewables as far as I can tell). The problem is, unless shale gas and fracking become our saviours, we are going to have to import all the gas in order to run these power plants.

Unfortunately David Kennedy, CEO of the Committee on Climate Change, has quickly come out to quash reports that shale gas will drive prices down dramatically since it only has the potential to increase our domestic supply by about 10%, which will make little difference to our overall import issue.

So that leaves us with only 2 economically viable options.

  1. Put in capacity quickly.
  2. Reduce our demand.

Wind farms, solar PV, converting coal plants to run on biomass (so they can continue to operate). All of these are easy and quick implemented solutions, which would help reduce our reliance on importing price volatile fuels (such as gas that goes to the highest bidder). Also once they are built, they will operate over 20 years plus and produce free environmentally clean energy.

Increase energy efficiency throughout the UK and use energy smarter (through the smart grid). The Green Deal is a great scheme, although the 7% finance charge is turning off a lot of people, but energy efficiency is key to keeping our lights on and has an additional benefit of creating a huge raft of jobs to stimulate our faltering economy.

We need to change path

HM Opposition continually talk of the Coalition changing path on its plan for the economy. Surely, much more importantly is changing our path on energy policy. It needs to be made transparent to encourage investment from overseas and we need to cut the red tape quickly otherwise we genuinely are going to be serious trouble in just a few years.

It can be done; I just wonder whether it will take a couple of blackouts to give the Government a suitable kick up the arse.

Author: James Alcock