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Dan Lewis: Our politicians must act on energy before the lights go out in Britain
BRITAIN is at great risk of electricity and gas shortages from the middle of the next decade. Thanks to a toxic combination of technical innocence, political naivety and economic illiteracy, few disagree that this might happen.
And be in no doubt, in today's always-on, connected economy, should those cuts ensue, the impact will be far worse than in the 1970s. The damage to the UK's economy and international reputation would be inestimable.
Yet, from the depths of the worst recession on record, the next government still has time to re-think, cut wasteful programmes and get back to basics – prioritising investment which puts a public good – energy security – first and affordability second and the environment third.
Until the recent past, the UK had been blessed with its own bountiful energy resources in coal, oil and gas. Coupled with the expertise of British engineers in nuclear and grid transmission, these were great national assets, although some of the thinking remained stuck in the 1970s.
Moreover, after the defeat of the miners' strike and the electricity sector reforms of the 1980s and 1990s, the market was successful for some time in delivering energy security and investment through competition because there were no external or internal threats to its supply.
That soon changed and the wake-up call should have come when North Sea gas production peaked in 2001, nuclear power stations were approaching retirement without replacement and when the EU sensed an opportunity to take over yet another area of national policy.
Instead of taking a long-term strategic view and facilitating a large nuclear programme, Tony Blair's government chose instead to experiment. They put their faith in energy efficiency reducing demand, imported gas by LNG tankers and planned to make up the rest by a massive rollout of wind turbines.
Worst of all, Britain naively took the path of unilateral disarmament into the EU's energy market which, years later, has virtually nothing to show for it in return except our continental neighbours' ability
to raid our gas storage when their supplies are low, regardless of our own.
Meanwhile, not a week seems to go by without Ed Miliband, the Climate Change and Energy Secretary, announcing a new multi-billion pound scheme which will do virtually nothing to address our energy woes. Take the 9.5bn in tax that will be raised by 2030 by the carbon capture levy.
This will subsidise four experimental carbon capture plants in a vainglorious attempt to create British technological leadership in carbon capture.
But as long as Britain only consumes just over one per cent of global annual coal demand, while the US and China amount to respectively 17 per cent and 42 per cent, the chances of the big players looking to us for leadership are slim indeed.
And then there's the smart meter rollout, the estimated costs of which just keep on rising. Ernst & Young believe the installation of 47 million meters may cost as much as 13.4bn by 2020, nearly 50 per cent more than stated in the Government's figures. All this for an unproven technology which will at best, shave off some peak demand and probably, like all electronics, require replacement much sooner than their vaunted lifespan of 25 years.
The truth is that the UK still needs big power, big impact solutions like nuclear, hydro, and interconnectors with the European mainland and a massive ramp up in gas storage facilities. The next government is going to have to create the necessary investment climate to attract all of these in a hurry.
They could also ask a series of more vital questions about each type of power stations and the underlying technology. Does it provide baseload or dispatchable power? Can it withstand external fuel supply shocks? Could it lower electricity costs for businesses and consumers?
These questions and more should be the basis for developing a competitive points-based merit order for all the clean and secure technologies and their ability to provide clean and secure power to the UK. To that end, Securing Our Energy Future – How and why it must be done, the launch paper of the Economic Policy Centre, a new think tank, has analysed the UK's energy dilemma, come up with a new much lower cost financing mechanism and developed a ranking system which should be updated annually.
What's interesting is how the present energy policy investment framework shows barely any favour to the winners of this table; large hydropower, tidal lagoons, nuclear, wind with storage and new interconnectors. And what's disturbing is how those at the bottom of the table, gas, and carbon capture and storage seem all set to capture a large share of the UK's electricity market. Lastly, the main thrust of subsidy is to marginal, low impact, intermittent and experimental technologies. UK energy policy really is back to front.
The root cause of Britain's energy insecurity is that no one is responsible. It is divided between various quangos, the EU, the Distribution Network Operators, the National Grid and an assortment of politicians all of whom can blame each other.
It's high time that energy security became a clear political responsibility. The next government will not be forgiven if the lights go out.
Dan Lewis is chief executive of the Economic Policy Centre
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Saturday 26 May 2012
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