Have politicians had a mental blackout?

There’s a real risk of energy shortages in Britain, yet still the political class is obsessed with cutting fossil fuel use

by Rob Lyons 

‘Britain faces gas supply crisis as storage runs dry’, warned Reuters last week. Unseasonably cold weather has meant that demand for gas has shot up just as it should be going down with the arrival of spring. Just to add a little spice to the warnings, tens of thousands of homes were left without power as blizzards knocked out power lines in Northern Ireland and Scotland. A taste of things to come?

As it goes, the claim that gas supplies could run out by 8 April is very much a worst-case scenario. There is normally plenty of supply, from a combination of the North Sea, Europe and shipments of liquefied gas coming from countries further afield, particularly Qatar. Nonetheless, it is daft that a modern, highly developed economy like the UK should even be discussing such things. That we are is the product of years of inertia in central government and an obsession with self-imposed greenhouse-gas emissions targets.

So perversely, just as a set of circumstances was emerging that showed how close to the wind the UK is sailing on energy security, Britain has been closing power stations. For example, on Friday, Didcot A power station in Oxfordshire was disconnected from the National Grid after 43 years. The 2,000-megawatt plant got the chop because it burns coal. Older coal plants are being phased out under EU regulations. Indeed, according to Alistair Buchanan, the boss of energy regulator Ofgem, 10 per cent of the UK’s electricity generating capacity is due to be switched off this month.

Buchanan notes the speed at which plant closures will now kick in: ‘If you can imagine a ride on a rollercoaster at a fairground, then this winter, we are at the top of the circuit and we head downhill – fast. Within three years, we will see the reserve margin of generation fall from about 14 per cent to less than five per cent. That is uncomfortably tight.’ In fact, some of those coal plants are closing ahead of schedule because their remaining operating hours have been used up quickly to take advantage of low coal prices. At a time when complaints about domestic energy costs are getting louder and louder, we are turning our back on the cheapest form of power available.

We’ve known for quite some time that there was the potential for a major shortfall in energy supplies. Coal and nuclear stations have been shutting but alternatives have fallen short. Wind is expensive to build and intermittent in operation. At some of the coldest periods of the year, wind supply can fall to nearly zero. Renewable UK celebrated the fact that wind produced a record proportion of UK electricity in 2012 - but it was still just 5.5 per cent of the total. New nuclear stations should be being built now, but years of political indecision mean that not a single new plant has actually got agreement yet. Even now, suppliers are haggling with government over guaranteed prices, though planning permission for Hinkley Point C - a new station on the site of two older nuclear reactors - has at least been approved. Nonetheless, it will still take eight to 10 years to build the plant.

Producing new domestic supplies of fuel is also being stymied by the government’s overly cautious approach to shale gas. There are certainly substantial supplies under Lancashire, but overreaction to any safety issue is delaying exploitation. The latest hold-up is the need for an environmental assessment and concerns about the effect on wintering birds. (The latter hold-up is odd, since wind turbines are known to kill a lot of birds, with a disproportionate effect on raptors like eagles and vultures.) Even if shale gas finally gets the green light, significant supplies are still years away.

Another worry has been storage. While France, Germany and Italy hold around three months’ worth of gas in reserve, the UK holds just 19 days. Given that the Lib-Con government’s energy policy relies on burning a lot more gas in the next few years - cleaner than coal, much more reliable than renewables and cheaper than nuclear - storing gas will become much more important in the future. That’s not so much because the UK might actually run out, but because in the future, as the FT‘s Nick Butler points out, we’re more likely to buy gas on the open market as and when we need it. If we don’t have reserves, we’ll be forced to pay whatever the price is at any particular moment rather than being able to wait for short-term fluctuations to pass.

The underlying problem is that the successive governments have been caught between a rock and a hard place. In normal circumstances, energy policy would be easy: pick the cheapest and most reliable sources of energy. On that basis, coal wins hands down. It’s cheap and it’s very flexible to use. No wonder King Coal is back with a vengence worldwide - not just in fast-developing countries like China and India, but also in Germany, which is burning more coal to make up for its decision to close its nuclear power stations. In the UK, gas would come second and we might add in hydro and nuclear to ensure diversity of supply.

However, the tunnel vision in the UK about climate change has massively complicated the issue. The UK parliament has committed itself - in what may well be the most expensive and boneheaded act of all time - to cutting emissions by 80 per cent by 2050. So now the aim is to wind down coal use, while boosting wind power, with gas and nuclear as awkward compromises. But there has been such regulatory indecision that every option has been made more expensive. Big energy companies are now unwilling to invest in any particular energy source for fear that a new set of ministers will change the rules all over again. In future, UK consumers are not only paying extra for green energy but are forking out for an effective governments-can’t-make-a-decision surcharge, too.

To put the tin lid on this ironyfest, this morning we had Sir John Beddington, the government’s soon-to-retire chief scientific adviser, complaining that the problem of climate change was not being taken seriously enough. In a country experiencing its coldest March weather for decades, with power stations closing, energy prices rising and serious questions being asked about future security of supply - and all in the context of the fact that global temperatures have plateaued for the past 16 years - it is more the case that climate change has been taken too seriously.

That is not to let the political class off the hook. From the economy to energy production, the inability of governments to act decisively has become a material force in its own right, which holds back society. The real problem with UK politics today is that there’s somebody home but the lights are off - and if the situation continues, that won’t just be metaphorically.