The decade 1995-2005 was a boom time for Britain. Memories of the recession of the early Thatcher years had faded. The Cold War was over. We were a nation more at ease with itself. We were “Cool Britannia” – the world leader in soft power. A good deal of it was illusory, of course; founded on borrowed money and cheap imports. But just for a while, ordinary people felt like things were getting better.
Less obvious was the cause of this apparent prosperity. Yes, it was founded on debt… as we found to our cost in 2008. But debt doesn’t spring from a vacuum. Without the belief that the debt would be paid back, it would never have been loaned into existence in the first place. Why, then, would investors believe that 1990s Britain would be able to pay back its debts. In a word, oil!
The 1973-4 oil shock had opened the way for profitable investment in the North Sea. While the investment had been made by the Labour government, it was Thatcher’s Tories who reaped the benefit, and who embarked on a debt-fuelled binge that was underwritten by oil and natural gas. As Wales’ former First Minister Rhodri Morgan, reminiscing about his career, explained:
“The other huge change since 1983 is that the North Sea Oil bonanza is over. Back then, whoever was running the Government had this amazing ability to spend oil revenues. Governments could afford things. They didn’t have to worry about where the next few quid was coming from. The Falklands War was eminently affordable. Paying the cost of the rocketing unemployment benefit bill, as dole queues doubled, then trebled, wasn’t a problem. [But] North Sea oil and gas are now in the end-game phase.”
A British government without the gift of gas and oil could never have defeated a militant miners’ union. A British government without oil and gas could never have played its part in the USA’s only genuine post-world war two military success in 1991. At the same time, a British banking system without the foundation of oil and gas could never have created billions of pounds of private debt to fuel an economic boom. Without North Sea oil and gas, the British people would not have felt so good about all of that unpayable debt we were running up. After all, house prices were rising… what could possibly go wrong?
What went wrong, of course, was that the North Sea peaked in 1999. Britain was obliged to import increasing quantities of oil just at the moment when China, Brazil and India were taking a bigger slice of the oil pie, and the USA was pumping increasing amounts of money into securing its own supply. And so the oil price spiked in 2006. Fearing inflation, the central bankers increased interest rates. Sub-prime mortgage holders were unable to pay, so they defaulted. Banks began to go bust. Only an injection of trillions of dollars, pounds, euros and yen kept the global banking and financial industry alive.
In the USA, the primary response to oil shortage was to use the high prices to unlock the so-called “unconventional” (in practice, simply a euphemism for “expensive”) oil and gas in US shale plays, Canadian tar sands, the Arctic, and deep water. In China, the primary policy was to deploy a surplus of coal to create as diverse an energy mix as possible – China is now the largest user of renewable energy, is engaged in a dash for nuclear, and continues to use around 40 percent of the world’s coal. In Britain, by contrast, energy policy has been to put our fingers firmly in our ears and shout “la la la not listening” as loudly as we can, while hoping that the free market fairy will somehow deliver enough energy to fill the vacuum.
There is much to be criticised in the US and Chinese energy policies. The US approach is largely responsible for the current oil glut that has so lowered prices that very few new oil and gas fields can turn a profit. Moreover, the financialisation of US oil and gas that helped generate the surplus has also pumped up a bubble that looks more dangerous than all of those sub-prime mortgages back in 2008. China may not fare much better, since the Chinese economy depends upon growing consumer demand for its goods in Western countries whose economies are teetering on the brink of recession. Both the USA and China have energy policies that threaten to devastate Earth’s life support systems. This said, at least China and the USA have energy policies.
Britain’s energy policy is to close the remaining coal mines and power stations and to remove the carbon capture and storage development grants that might have allowed coal a place in our future energy mix. Moreover, by announcing the closure of the coal power stations, the government have removed any incentive for energy companies to maintain the infrastructure. Renewables could have provided Britain with a massive energy boost, especially from wind, hydro and tide in a country that gets more than our fair share of each. However, government has chosen to cut these industries off at the knees, just as they were getting onto their feet.
So what is Britain left with? Heavily subsidised and highly toxic nuclear; what relatively small quantities of fracked oil and gas can be recovered from Britain’s notoriously naturally fractured geology; and, for the most part, imports from elsewhere (elsewhere often being such friendly and stable places as Russia, Nigeria, Libya and the Middle East).
With coal still providing a large proportion of Britain’s energy mix, the companies that operate Britain’s strategic industries are complaining about high prices and security of supply. Only a drooling imbecile would imagine that things are going to get better as Britain becomes increasingly dependent upon Libyan oil, Russian gas and Chinese nuclear for our power supply.
It might have been so very different of course. An ambitious government that understood that no energy equals no economy, would have a policy that aimed to make Britain not just energy self-sufficient, but able to supply energy to our European neighbours. Indeed, it is a measure of the bankruptcy of the British government (and the official opposition) that they have acquiesced in Britain’s slide into energy dependency.
Some of what we might have done can be found in the latest briefing paper from Scottish Renewables. Rather than chasing the will o’ the wisp that is UK shale gas, or the environmental nightmare of Franco-Chinese nuclear, Scottish Renewables take the approach taught to every first year entrepreneurship student – play to you strengths! Britain has huge tidal ranges – the Severn estuary is the second largest in the world – so build tidal barrages. In case you haven’t been paying attention, Britain experiences more than our fair share of wind – so build wind turbines. We have a lot of rain too – so build hydro and micro-hydro.
Some of what we could do is endorsed by the Greens – cut our energy consumption by insulating our buildings. But why stop there? If we are serious, we should be deploying rooftop solar pv and solar thermal to provide household and neighbourhood electricity and heat rather than wasting this energy trying to push it into the National Grid. We could fit every building in the land with a heat exchange pump in order to curb the amount of electricity and gas needed for heating in winter and cooling in summer.
We could also borrow a bit of entrepreneurial thinking from Sweden too. Sweden has been investing in hydroelectric storage – hollowing out the inside of mountains in order to use surplus electricity to pump water into a storage chamber. When more power is needed, the water is released to run down through turbines to generate electricity. In this way, Sweden intends charging its rather flat European neighbours (Denmark, Germany and Holland) to store their excess renewable energy. Britain already has this form of energy storage. We also have lots of mountains that are high enough to massively expand storage capacity. The only thing lacking is political will.
Importantly, the investment in this kind of energy and storage mix would be paid off by our being able to sell surplus energy into a Europe facing the same energy security issues that we are currently facing.
In practice, for the best results the last Labour government would have had to have made the change in the late 1990s. Even if the current government had a change of heart, it is doubtful that we now have the lines of credit, resources, energy or skilled labour necessary to make it happen. And, of course, now Amber Rudd has committed us to the insane dash for (fracked) gas, there is absolutely no possibility of Britain being in a position to secure our own energy needs; still less be in a position to supply energy to our neighbours.
By opting for a second-rate energy policy, our government has chosen to make ours a third-rate country.