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The Madness of Amber Rudd

UK Energy Secretary Amber Rudd’s decision to gamble Britain’s future on gas has shocked energy experts and climate campaigners alike.  The decision to replace the UK’s coal-fired power stations with 25 new gas-fired power stations is the latest in a string of environmentally-destructive policies rolled out by the Conservatives since they were elected in May.

Renewable subsidies were pulled just at the point when wind and solar were becoming profitable.  In addition, NIMBY opposition to renewables was given force in new regulations that allow local people to effectively veto plans for new wind and solar farms.  The cynicism of these decisions can be seen when contrasted to the huge additional subsidies and tax breaks given to the North Sea oil and gas corporations together with new regulations that allow the state to trample over any local opposition to fracking.

As one commentator has noted:

“This is an absolute disgrace. This government have shamelessly demonstrated that they have zero regard for climate change targets, renewable energy or energy efficiency and are now even starting to break the precious few actual pledges they made in their manifesto. We are just one step away from George Osborne personally going to the polar ice caps with a f**king blowtorch..”

On renewables v gas, however, Amber Rudd may have a point.  With careful management to protect against leakage at the well, fracked gas is considerably better than coal and may actually be less harmful than some modern renewables.  At face value, this sounds counter-intuitive because wind and sunlight cause no pollution.  But the environmental damage is embodied in the manufacture and transportation of solar panels and wind turbines.  This is because the way in which renewable energy companies have brought costs down has been to export manufacture to China.  In environmental terms this is the very worst thing to do because it guarantees that manufacture will involve a high input of coal-fired electricity, while transportation from one side of the globe to the other will burn vast volumes of diesel oil.  In addition, deploying solar panels at the UK’s latitude means that the time taken to generate sufficient carbon-free energy is much longer than if the panels were deployed in a desert region of southern Europe or North Africa.  As Kris De Decker has pointed out, we would do better to manufacture solar panels in a country like Germany that uses a large amount of renewable energy and then deploy them in China as a replacement for coal.

For the time being, then, there may be an environmental case for switching to gas.  Indeed, Amber Rudd and others have tried to make this case, although it would be more plausible if the government was also investing in the development of renewables – using gas solely as a stop-gap on the way to a future zero-carbon energy mix.

In fact, the fig leaf of being environmentally friendly is disingenuous since most of the UK’s coal power stations would need to close within a decade anyway.  It is also far from clear who is going to build the new gas power stations.  The energy market in the UK is set up to hold prices down, making investment in new infrastructure unprofitable without state subsidies.  However, EU law prevents government for using subsidies to favour any one type of energy generation.  The most likely answer is that the government will attempt the same deal as was offered to the Chinese over Hinckley Point C – to fix prices to consumers at far higher prices than those in a competitive market.  This said, Luxembourg and Austria have taken the UK government to the European Court over this issue precisely because it appears to be a subsidy in all but name.

There is, though, an even more worrying issue with the switch to gas… we don’t have any!  Well, not quite any.  But the UK’s own production has been falling sharply since 1999 together with our main source of imported gas, Norway.

Graph of UK gas production v consumption

As these supplies – which no longer meet our current demand for gas (primarily for heating) – dwindle, we are becoming increasingly dependent upon imports from hostile (Russia, Libya) and insecure (Qatar, Nigeria) countries for our imports.  The prospect for an increasingly gas-dependent UK being held to economic ransom by one or other hostile country looms large.

So Rudd’s approach only makes sense if the UK has access to some other source of gas not currently available to us.  This may involve some additional drilling around the UK coast.  However, we should bear in mind that all of the large and easy fields have already been drilled.  Hence it appears that the government is putting all of its (i.e. our) eggs in the fracking basket.

US strategists have already raised the need to use the large volumes of shale gas now building up in the USA to help underwrite the US’ NATO allies in Europe.  However, it appears that US shale gas is already in decline, and much of the export infrastructure has yet to be built, making it much less likely that the USA will be exporting large volumes of gas.  So rather than banking on additional imports from friendly gas-producing states, it appears that Rudd is gambling all on as yet unproven UK shale gas:

“We currently import around half of our gas needs, but by 2030 that could be as high as 75%. That’s why we’re encouraging investment in our shale gas exploration so we can add new sources of home-grown supply to our real diversity of imports.”

But:

“Most fundamentally, we have little to no idea of the size of the UK’s shale gas reserves. There may be a lot of gas deep underground, or there may not. And even if there is a lot of gas there, it does not mean that it’s easy to get at or commercially viable to do so.”

In this sense, Rudd is like a starving man staring through the supermarket window, looking at all that food, and assuming that he need never be hungry again.  The trick, of course, is not to discover the food but to find a way of obtaining it.  Although it is true that there might be a large volume of gas trapped in shale rock beneath the UK, we need to ask why nobody thought to access it until now.  After all, the shale deposits have been known about for several decades.  Nor is there anything new about fracking – a technology that has been used for several decades.  In the USA, modern fracking became economically viable only because of the vast sums of quantitative easing money looking for an above inflation return on investment coupled to the (at the time) high price of oil and gas.  Neither of these conditions applies to the UK in 2015.

There are other problems in the UK too.  The poor (in extraction terms) geology of myriad minor faults that made the UK coal industry unprofitable by the beginning of the twentieth century are likely to make shale gas extraction unprofitable too.  Britain may yet find itself in the same position as Poland, where test drilling revealed that less than ten percent of the shale gas could be profitably recovered.  Nor does the UK enjoy the wide open spaces found in Texas and North Dakota that allow multiple wells to be drilled in close proximity.  It seems highly unlikely that anyone is going to get away with drilling 10-20 wells per square mile in leafy Surrey or the affluent areas of Cheshire.  Not least because whereas in the USA property owners were paid for the drilling rights beneath their homes, no such reimbursement will be available in the UK – making Poll Tax-like protests inevitable as the middle classes realise it is the ground beneath their homes that is to be fracked.

The madness of Amber Rudd is less to do with environmental concerns as with the very real possibility that the lights will soon go out, and that a decade from now the UK will be left with a shiny new fleet of gas power stations without any gas to run them, supplemented by a handful of Franco-Chinese nuclear power stations whose energy nobody will be able to afford to buy.  Only then will UK citizens wake up to the real vandalism being carried out by the current government.

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