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The land of make believe

Among many other essential reforms, if the UK is to meet its 2050 climate targets it needs to install 4,000 electric vehicle charging points every day.  That’s according to Keith Anderson, CEO of Scottish Power.  Anderson also called for an equally fantastic effort to replace domestic gas central heating systems with electric heat exchange pumps:

“We need to start moving towards heat pumps. Let’s start making the investment, let’s start encouraging people to make the switch. We need to make it easy for them.”

To some extent, of course, Anderson would say that, wouldn’t he?  As the CEO of one of the UK’s “Big Six” energy companies, he stands to profit greatly from any transition from fossil fuels to electric power.  Nevertheless, his criticism of government and Ofgem – the energy regulator – is well-founded.  As he explained to Jillian Ambrose at the Guardian:

“There is a colossal disconnect between government policy and the regulator’s policy… We have a government willing to invest money in electric vehicles ahead of time, and an industry regulator sitting back and saying, ‘No, we don’t think so.’ But the government has set a 2050 climate target, and a ban on combustion engine vehicles by 2040 which could come forward to 2035…”

In reality, Anderson is coming up against structural constraints that make the energy transition he envisages impossible to achieve in the real world.  Government – which has a lot more to worry about than just energy infrastructure – has given the regulator the increasingly unachievable goal of providing:

  • Carbon-neutral energy
  • Security of supply
  • Affordable prices.

Until recently, any two of these three might have been possible.  But in the decade since the financial crash, achieving even one is difficult; and will be impossible a decade from now.  Energy prices are already a politically explosive problem for governments across the developed world.  The UK government will be painfully aware of the protests across the Channel which followed the introduction of a relatively small tax increase on diesel.  In a country divided from top to bottom by Brexit, the very last thing the government will want to do is to provoke similar unrest over energy.

Carbon neutral, too, is reaching its limits.  Britain is a world leader in harvesting the low-hanging fruit of low-carbon energy.  Rapidly deploying wind and solar farms so that on some days they provide two-thirds of the country’s electricity was relatively easy because of the availability of abundant fossil fuel back-up capacity.  As recent power outages and near misses have shown, though, at this degree of penetration, non-renewable renewable energy-harvesting technologies threaten to undermine the grid infrastructure itself.  At this stage, it makes no sense to continue adding these technologies to the mix until and unless sufficient storage capacity can be installed to facilitate them – something that cannot be done without massive increases in the price of electricity to the end user.

Security of supply, it turns out, is another pipe dream.  As last year’s Parliamentary Research Briefing showed:

“After spending most of the previous 25 years as a net exporter of energy the UK became a net importer in 2004. The gap between imports and exports has increased since 2004 and this looks set to continue to increase in the future. This, alongside higher fuel prices and increased concern over the security of energy supply has increased the attention on energy imports and exports.”

For a brief moment at the beginning of the decade – when global energy prices spiked – the solution to our mounting energy woes was to be delivered by hydraulically fracturing shale gas formations beneath Great Britain.  For now, however, UK fracking is a non-starter; as the last of three completed wells has been shut down.  As a new report from the National Audit Office (NAO) explains:

“The Department for Business, Energy and Industrial Strategy (the Department) does not know how much shale gas can be commercially extracted in the UK. In 2016, Cabinet Office expected up to 20 fracked wells by mid-2020. Three wells have been fracked to date…”

The NAO report blames earthquakes, lack of public support, the cost to local government and police, and an absence of carbon capture and storage technologies for the failure of fracking to take off in the UK.  Francis Egan, the CEO of fracking company Cuadrilla is more upbeat.  He told Simon Jack at the BBC:

“We are going to be using gas for decades into the future surely it would be better to use our own gas rather than rely on foreign imports…  We were asked to find out if there is gas there, is it good quality, is it produceable. The answer to that is yes, yes and yes. It is up to the government to decide how it wants to exploit that. If people don’t want it, they don’t want it.”

The most damning section of the NAO report, however, states that:

The Department believes shale gas can support economic benefits, but it has not analysed the benefits or costs of shale gas development. Ministers have cited reports that indicate investments of up to £33 billion and the creation of 64,500 jobs. The Department believes an analysis of the costs and benefits of supporting the industry would not be meaningful in the absence of more evidence about how much shale gas can be extracted.” (emphasis in the original)

Once global energy prices fell back in 2014, UK fracking on any scale was over.  In this, UK frackers are merely repeating the experience of UK coal mining in the twentieth century.  Even before the outbreak of the First World War, for example, it was becoming cheaper to import coal from Poland to fuel the metal works on the south coast of Wales than it was to deliver coal from deep mines just 25-30 miles along the valleys.  Today, Russian, Norwegian and Qatari gas is far cheaper than anything Francis Egan can produce from the shale plays of Lancashire.

There may, of course, come a time when shortages of supply drive prices up once more and fracking may look viable again.  But even this ignores the fact that in the modern world energy prices are ultimately the product of demand (in the economic sense of the term) rather than supply.  The reason energy prices slumped in 2014 was that western businesses and domestic consumers could not afford them.  The feedback process, though, is not immediately obvious since energy is a non-discretionary cost.

When prices spiked in 2011-13, businesses and domestic consumers had little choice but to take the hit.  Instead, they sought to lower their spending elsewhere.  Discretionary spending on things like consumer goods, holidays, meals out and fashion items resulted in a slump in demand in those areas.  One result is that the price of items such as smartphones and TV sets has dropped to the floor.  Another is that the non-food retail sector is being annihilated in a retail apocalypse that shows no sign of abating.  As demand has dropped in these sectors of the economy, so their demand for energy has also fallen – empty shops don’t need heat, light or stock deliveries.

While this slow motion economic collapse is occurring across the developed states, the UK is something of a world leader; having built its modern (post-1980) economy around volumes of North Sea oil and gas deposits that were burned long ago.  Without the massive revenue that the UK once enjoyed from fossil fuel exports, things – like schools, hospitals and pensions – that were affordable just a decade ago are increasingly unaffordable within the constraints of the current system.  It is the slow recognition of this in the political sphere that has given rise to the equally impossible proposed routes back to prosperity from right (Brexit) and left (Green New Deal); both of which require the financial security that used to be, but no longer can be, underwritten by the North Sea.

Keith Anderson is absolutely correct to point to the Herculean feats that are required to operate our current economy without fossil fuels.  His lack of awareness of the wider picture, however, blinds him to obvious impossibilities in the scheme.  Installing 4,000 car charging points a day (12,000 if we wanted to meet the Extinction Rebellion demands) must also involve installing the additional electricity generation to power them.  This, in turn, would require an unaffordable upgrading of the grid – particularly for the storage capacity needed to iron out intermittency (including seasonal – summer to winter – power transfers) from renewable energy.  In any case, electric cars are a rich person’s toy that will become ever more difficult to justify as millions of ordinary people are compelled to pay for the infrastructure required to support them; despite having little chance of owning one themselves.

The obvious conclusion to be drawn from Anderson’s announcement, from the collapse of UK fracking and the UK’s growing reliance on imported energy, is not that we need to switch to electric vehicles, but that we need to transition to a re-localised economy in which people do not need cars.  To admit to this would, of course, puncture the denial that is about the only thing that keeps the UK functioning today.  And so we will continue to be encouraged to believe that running an oil-based economy without oil is not only possible, but that – like a prosperous Brexit or a resource-free Green New Deal – if we all wish very hard it is bound to come true.

As you made it to the end…

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