When Chris Huhne was forced to remove himself from the Department of Energy, to fight criminal charges over an alleged speeding transgression, Britain’s green lobby took a body blow. Huhne was the most important advocate in government of the need to speed up wind power. His Lib Dem successor Ed Davey, with the support of the Chancellor, George Osborne, looks to have radically changed course.
This was needed to help meet the energy gap as coal fired stations go off line midway through this decade before new nuclear and other facilities come on stream.
His Lib Dem successor Ed Davey, with the support of the Chancellor, George Osborne, looks to have radically changed course.
In a little noticed announcement – slipped out on March 17 in the weekend before the Budget – Davey made it clear he has a different view.
With coal-fired stations operating at full tilt, oil-fired stations to be eased out of production because of CO2 targets and the ageing advanced gas-cooled reactors (AGRs) coming off-line because of their age, the UK faces a potential energy shortfall in 2015-2016, if not before. All it would need is a cold winter and factories would be closing their doors and the elderly swaddling themselves in blankets.
Davey let it be known that he intends to deal with the potential for power shortages, brown-outs and cuts by advancing a new gas generation strategy which will be legislated for in the Queen’s speech.
It is terrific that Davey and his department has seen good sense and has managed to bring the Chancellor along with him.
Osborne thinks that the gas option will ‘provide long-term certainty to investors’, increase competition and provide a better deal for consumers.
Among the reasons that the government is so hot on gas is the belief that the world is about to have a glut.
Unfortunately, the glut is unlikely to reach Britain anytime soon despite the optimism of Lord Browne, Lancashire’s fracking champion.
The natural gas price in Asia, due to Chinese demand, has soared to $18. In Europe it is $11 and in the United States it has tumbled to just $2.5 because of the boom in fracking – forcing gas out of rock formations using super-powered water. But the US gas is staying in America, where it is keeping energy prices low.
Whether Britain is better placed than in the past to increase its dependence on gas is moot point.
The UK remains the last port of call for the Russian and Norwegian gas pipelines, it is highly dependent on Qatar – where the liquefied natural gas must pass through the Strait of Hormuz – and is way behind the rest of Europe in its gas storage facilities.
The likely dash back to gas has not escaped the notice of the big players who believe they hold a strong bargaining card. Centrica, the British Gas owner, has mothballed three gas-fired power stations and other producers are doing the same in the hope of strengthening bargaining power with government.
But it is not gas generation capacity which is the issue but security of supply. A new gas strategy is going to require heavy investment in storage capacity. If it is to achieve that, the government may need to ease rules put in place at the time of privatisation which requires British Gas to share with its rivals.
Otherwise we can look forward to an era of intense energy insecurity.