Tony Lodge: Cold snap sends shivers through energy policy

AS Britain and Yorkshire shivers in what is looking like the most prolonged freeze for 30 years, the fault lines are starting to appear in a policy area which has been neglected for far too long by both politicians and policy-makers alike.

Three worrying developments have occurred in the last two weeks which should concern all of those who are concerned about energy prices and our ability to maintain secure supplies and keep prices low, thus avoiding more fuel poverty among the elderly and most vulnerable. Fuel poverty occurs when more than 10 per cent of household income is spent on energy bills and has nearly trebled since 2004.

Firstly, Britain imported more gas than it produced for the first time in November, with imports increasingly set to dominate supply as our own output declines. Britain was a net exporter of gas until 2004, but a steady decline in output from the North Sea in recent years has made us more reliant on external suppliers for fuel to heat two-thirds of British homes. Imports met 50.8 per cent of total gas demand in Britain in the two months before Christmas.

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The problem with this import dependence is that it is likely to grow dramatically in the coming years and thus leave us exposed to fluctuations in the gas price and possible future interruptions in supply.

On Monday, demand for gas rose 30 per cent above seasonal norms as the post-Christmas cold spell took hold. While restrictions on household supplies look unlikely, a possible shortage would lead to higher bills. On the same day, National Grid issued a gas balancing alert to warn large users, such as gas-fired power stations, that they would have to

cut consumption if there was a fall in the supply of gas to Britain. As temperatures plummeted, it fuelled a second warning yesterday.

Here lies the crux of the problem. A third of Britain's gas consumption is now used to generate electricity in gas- fired power stations. The rest is used by industry and in domestic heating and cooking. In the past 13 years, the Government has exacerbated the country's thirst for gas by approving no other type of plant to generate electricity other than gas, such as clean coal or nuclear.

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This would have helped to balance and stabilise prices and leave us less exposed. This means that when the gas price rises, it affects both gas and electricity prices, leaving millions of families exposed to such spikes. Britain is now one of the highest per capita gas consuming countries in the world. Twenty-five years ago, about one per cent of our electricity involved the burning of gas. Now the figure averages 45 per cent and is set to rise towards 70 per cent by 2020.

Secondly, Britain's fleet of nearly 2,800 wind turbines are performing miserably during this very cold but energy intensive period. In the past 20 days they have averaged a mere 0.6 per cent of electricity supply to the grid. When Britain needs the electricity they could produce, they are near motionless as there tends to be little or no

wind during a freezing cold high pressure period. The same occurs in the summer when we reach for air conditioners in hot weather.

Thirdly, irrespective of the rhetoric of the Copenhagen summit, Britain has now turned back to its increasingly elderly and dirty coal-fired power stations to provide back up and see us through.

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Many of these plants are in Yorkshire along the Aire Valley and are being ramped up to shoulder demand. In the last few days, they have been meeting nearly 45 per cent of electricity demand. Ironically, many of these plants, which have an average age of 35 years, will be closed within five years under new EU pollution rules which begs the question as to which fuels will we fall back on after 2015 to keep the lights on at affordable prices?

While Yorkshire endures heavy snowfalls and freezing temperatures, there are local companies which can help us out of a future of high prices and help us better utilise valuable energy. Wakefield company Logicor has designed the Green Plug which can be fitted to household appliances such as TVs and other household appliances to restrict stand-by mode and stop appliances being left on. Professor Martin Crowder of London's Imperial College calculates that this plug could save up to 350 from the average annual household bill.

Sheffield firm ITM Power has developed specialist technology which allows us to harness and store the energy produced from intermittent renewables such as wind and solar. It turns the electricity they generate into hydrogen, a zero carbon fuel not geographically constrained.

This technology could rescue the ailing renewables sector and give it a better case to exist and expand on the scale the UK's ambitious renewable targets demand. This technology could genuinely allow for a green energy revolution.

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We can then use this hydrogen in industry, gas-fired plants to lessen natural gas dependency and achieve lower emissions and power zero

carbon cars and homes.

This severe cold period should focus all of our minds on what we use to heat and light our homes and power the nation.

Better solutions exist and we must seize them quickly. The lack of a balanced energy policy in recent years is being exposed just as we are at our most vulnerable.

Tony Lodge is a Research Fellow at the Centre for Policy Studies. He is author of Step off the Gas – Why Overdependence on gas is bad for the UK, published by the CPS.