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Remind me again, what was Plan B?

Image: Ervins Strauhmanis

Plan A, you will remember, was that the UK was going to use its massive reserves of gas as a transition fuel to fill the gap between phasing out coal and bringing in a new generation of renewables and nuclear power.  Hydraulic fracturing was going to be the game changer; making Britain energy secure for decades.

But hydraulic fracturing didn’t happen.  It turned out to be too expensive and, like the fracking companies in the US, the UK frackers hit financial difficulties and were obliged to go cap in hand to the government in the hope of getting their grubby paws on some public funds.  This, it seems, is what turned the Government away from fracking; which was surprisingly absent from last year’s energy review conducted by an energy economist known to be pro-fracking.

Nuclear power isn’t working out too well either.  Spiralling costs, delays and problems with the technology prompted the government to review the deal to build the massive reactor at Hinkley Point.  Their decision to continue with the project appears to be as much to do with the need to placate Chinese investors and to avoid penalty charges than with the need to fill a growing future energy gap.  Nor was Hinkley Point the only proposed nuclear power station to run into trouble.  Hitachi and Toshiba – who are to build several smaller plants in the near future – also ran into financial difficulties; raising questions over the financial future of nuclear power as currently configured.

Renewables look good on paper – so long as we don’t delve too deeply into the statistical data.  In the third quarter of 2016, “renewables” accounted for 25 percent of UK electricity generation.  In the third quarter of 2017, they had jumped to 30 percent.  While modern renewables (wind, wave, tide and solar) account for a large part of this (13.42 TWh out of a UK total of 74.42 TWh) a large part comes from “biomass” (7.63 TWh); largely from unsustainable wood burning that is only hypothetically renewable and cannot be scaled up without destroying more trees than are replaced.  In short, it will require a Herculean effort to push modern renewables up to even 50 percent of our electricity mix; even assuming the technical and storage issues can be overcome.

Which brings us back to the rather large pachyderm sat on the sofa – the UK’s dirty secret is that gas never was intended as a transition fuel.  Gas was always where we were going to end up.  Yes, we could pretty it up with some pseudo-green modern renewables to replace an aging coal infrastructure that nobody wanted to invest in replacing anyway.  Moreover, renewables would generate the additional energy required for economic growth.  But gas was always going to be the primary means by which we fuelled our industry, heated our homes and generated the vast bulk of our electricity.

So here’s a thought: what would happen if the world supply of gas started to behave in the same way oil supplies have behaved in recent years?  That is, what happens to the UK in the event that gas supplies lurch from periods of glut to periods of shortage?

This, of course, was where fracking was supposed to come in.  Because of the speed with which fracking can be done – months rather than the years required to develop a conventional field – a thriving UK fracking industry would act as a counterweight to global supply fluctuations.  If the world experienced shortages, the frackers could quickly fill the gap; keeping us warm and keeping the lights on.

However, the economics of this have proved ghastly.  Fracking is only profitable at the kind of energy prices seen in periods of shortage.  Unfortunately, western economies cannot afford energy prices that high.  The result is a three-sided squeeze on the profitability of fracking.  On the one hand, demand falls as prices rise.  This, in turn, results in a market glut that forces prices down.  To add to the problem, as the supply of skilled workers, equipment and materials needed for fracking dries up, the cost of fracking also increases.  Fracking does just enough harm to prevent investment in conventional production without ever providing enough of a return to be profitable: frackers can service their debts, but not repay them.

This is what we have seen in the US oil fracking industry over the last decade.  However, gas has yet to be impacted in the same way.  This is because conventional gas is more abundant than conventional oil; which means that prices have tended to be less volatile.  This, however, may be about to change.  According to Phil Flynn, senior energy analyst at The PRICE Futures Group, the same volatility that has infected the oil industry may be about to cause ructions in the global gas market:

“In the U.S., we fear a market collapse on Henry Hub natural gas in the spring, as record production should refill storage and cause a U.S. glut. In the big picture, we are sowing the seed of a future shortage…

“Royal Dutch Shell says the world could face a shortage of liquefied natural gas within a decade because of underinvestment in new projects and because of what should be a major demand surge during that time as users will increase their usage of natural gas because of the current cheap prices and the environmental benefits of natural gas.”

“Within a decade” means any time between now and 2028, but it could be as early as next year.  So we need to ask UK government ministers exactly what is our Plan B?

Last year, as part of a consultation exercise, I did some broad costings – based on the DUKES data – for replacing the UK’s fossil fuel electricity generation with a combination of renewables and nuclear (which are our only realistic alternatives to an economic collapse).  These are inevitably rough calculations, as they have to use commercial prices for deploying solar panels and wind turbines.  Nevertheless, they provide some idea of the task facing the UK if we cannot rely on gas as our primary fuel in future:

“Current UK installed generating capacity from both major and minor suppliers is 78,279MW.  Just over a quarter of this is ‘renewables’ of all kinds.  A further 9,497MW comes from nuclear (which some carbon-free scenarios include).  Assuming the aim is to replace existing fossil fuel capacity with wind and solar, we have to replace 50,208MW.  If the aim is to replace fossil fuels and nuclear, then we must find 59,705MW of capacity (I am not factoring in economic growth, so, again, I am being generous to wind and solar).  For what it is worth, a new bog standard (1 GW) pressurised water nuke comes in at £1,300,000 per MW.

“The average cost per megawatt of capacity for solar pv, offshore and onshore wind is £2,201,852. So, if the aim is to replace fossil fuels with a mix of these three renewables (tidal and wave are unlikely to alter the average cost per MW by much) we are looking at £110.5bn (£110,550,577,778).  Get rid of nuclear too, and we are looking at £131.5bn (£131,461,564,815).  Just for comparison, this is the same as the combined defence and education budget or just £15bn less than the NHS.

“For obvious reasons, the Tories are not going to spend anything like this (although they will load some of the cost onto other people’s bills).  Nor is the private sector going to have access to anything like the amount of credit that would be required to make this happen.  Even if the aim was to spread the cost between now and 2040, we are still looking at £6bn per year (£5,975,525,673) – almost double what we spend on policing.”

Insofar as the UK government has begun to think about energy security at all, Plan B would appear to consist of importing gas and electricity from a European Union that it is actively seeking to sever ties with.  Writing this on a morning when polar air has brought heavy snowfall to Britain, it is perhaps worth considering that – given that the UK’s coldest weather invariable arrives from the east – in future, the times when we are most likely to depend upon imported energy will be precisely the times when our European neighbours are going to be using it themselves.  Which is merely a more down to earth way of saying that “Plan B is no plan at all.”

As you made it to the end…

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