Believe it or not, British Prime Minister Boris Johnson has every right to stand before the nations of the world and lecture them on climate change. Not that Johnson himself has done much to address the crisis (indeed, given that having children is the single biggest cause of climate change at this point, Johnson’s inability to keep his willy in his pants makes him an exemplar of much that is toxic in our culture). But as the current political head of a country which has done more than most to pursue the bright green vision of a world without fossil fuels, he has every right to ask others to follow Britain’s lead.
They won’t do it, of course. US President Biden has already restated American motorists’ God-given right to cheap gasoline. Meanwhile, President Xi Jinping may be promising to cut other people’s access to coal-power, but China still consumes half of the world’s coal and shows no sign of curbing its own coal-fired growth. Germany talks a good Energiewende, but it still depends upon fossil fuels for two-thirds of its electricity, and is not pledged to end coal-fired generation until 2038.
In fact, Britain appears to be the only developed state to swallow the Big Green Lie at face value: The claim that it is entirely possible to operate a fossil fuel-based industrial economy without fossil fuels. Starting with the smallest, and easiest to transform, sector of the economy – electricity generation – we were promised not only that a seamless transition was possible, but that it would be cheap and easy. Indeed, it was precisely the promise that wind turbines and solar panels were getting cheaper which persuaded the Blair government to sign up to a policy to generate 20 percent of the UK’s electricity from renewable sources.
So here’s a question which few establishment media editors have allowed to be asked: If renewable energy is so cheap, how come energy bills are so high? It is a question that has a particular resonance in the UK just now. Because even as Boris Johnson was urging the world to follow Britain’s lead, the British economy was crumbling under the weight of a 400 percent increase in gas prices since the start of the year. A price increase that has resulted in the widespread failure of energy supply companies; leaving more than 1.5 million customers without a supplier.
A German economist, Lion Hirth, answered the question in a 2013 paper. In a nutshell, wind turbines and solar panels generate too much electricity when it is not needed and not enough when it is. And in the absence of a viable storage mechanism, intermittency has to be balanced with fossil fuel generation which becomes increasingly expensive as the proportion of wind and solar in the electricity mix rises.
The reason we do not see this is that we tend to view individual forms of generation in isolation rather than as components within an integrated whole which – if we are to maintain an advanced industrial economy – must provide a continuous supply of electricity 24/7/365. The fact that we can install massive wind capacity – such as the giant, world-leading, arrays at Gwynt y Mor and Hornsea – may be considered a triumph of engineering (and, indeed, of the Chinese ability to use coal to manufacture non-renewable renewable energy-harvesting technologies – NRREHTs) but they are as useful as a chocolate teapot when the wind isn’t blowing – something that happens more often than their proponents care to admit. And adding more capacity to the mix solves nothing, it just means we have even more wind turbines standing idle.
In Europe – where action has generally failed to keep pace with green rhetoric – there is sufficient nuclear baseload and coal back-up to iron out the worst effects of intermittency. But successive British governments made a rod for their own back by failing to invest in replacing Britain’s aging nuclear plants while announcing a ban on coal power from 2025 – an announcement which caused many coal operators to shut down early rather than continue to maintain plants which were being banned anyway.
The consequence for the UK was that we became dangerously exposed to the international gas market, since not only do we depend upon gas for heating and cooking, but it is also an integral component of our increasingly NRREHTs-based electricity system. This did not seem to be a problem at the time the Blair government were discussing the pros and cons of renewable energy. In the late 1990s, Britain’s North Sea gas production was growing. And while a handful of academics were questioning how long it would be before production peaked, few politicians had even thought about the impact of declining supply. Indeed, politicians were more interested in energy prices. And here, the future looked rosy. As a House of Commons briefing paper explains:
“Gas prices fell consistently during the late 1980s and 1990s, with the exception of 1995 when VAT was introduced. By late 2000 prices were one-third below their January 1987 level in real terms. The main reasons for the price falls up to 2000 were price controls set by the regulator, the impact of competition, and relatively easy supply/demand pressures…”
The importance of the year 2000 is clear enough since it is the first year after North Sea gas production peaked. From that date on, the UK would face rapidly declining domestic production – although in the short-term this would mean falling exports rather than a limit on domestic supply. Nevertheless, upward pressure on prices was inevitable, as the briefing paper continues:
“The price rose relatively slowly over the following few years and more rapidly from autumn 2005 to the end of 2006. Prices peaked in January 2007 at a level 82% above the late 2000 low and above the January 1987 (immediately post-privatisation) level. Prices increased again in early 2008 and in summer 2008. There were price cuts in early 2009 and early 2010, but price rises in autumn 2011 and winter 2012/13 meant that spring 2013 prices exceeded the winter 2008/09 peak levels. Gas prices dropped slightly during the middle of 2013, but by December had reached their highest ever price…
“Electricity prices have increased since spring 2003 and, as with gas, price increases have been greater since autumn 2005. The January 2007 price peak was 44% above the 2003 low and 5% above the level immediately after privatisation (January 1991). As with gas, prices increased in early 2008 and summer 2008 and fell back slightly in early 2009. However, unlike gas there have been no major cuts in prices since then.”
The year 2005 is also important, as this was the year that the UK became a net importer of gas. And although initially most of the import came from our relatively stable Norwegian neighbours, the UK has become increasingly dependent upon less secure – and more expensive – imports from North Africa, the Middle East and Russia. It was the realisation that this situation could only get worse which led the Cameron government to pursue the pipe dream of UK fracking. Believing – wrongly – that there were cheap reserves of shale gas below the UK (some of the gas may be there; but cheap it isn’t) the government believed this could be a “transition fuel” as we shifted from fossil fuels to NRREHTs.
In reality though, as global demand for gas increases, Britain is going to be increasingly vulnerable to the whims of the few remaining gas suppliers; who are under no obligation to provide the UK with a favourable price. And, as we have discovered recently, when global prices rise, the entire UK economy is undermined.
It is not just that UK energy supply companies are going bust. This is no more than the insanity of the Cameron government in believing that firms with no energy infrastructure could make profits from selling supposedly cheap renewable electricity for less than it actually cost to deliver. The energy companies that are failing are one-trick ponies whose sole income is from domestic customers. The ones which will be left standing – mainly the so-called “big six” – have income streams from generation, energy infrastructure, overseas operations and even insurance sales in addition to the far less profitable sale of electricity and gas to businesses and households.
Overlaying the crisis are several factors that make matters worse than they might otherwise be. Most obviously, the closure of the Rough gas storage facility in 2017 left the UK with little in the way of a strategic reserve of gas. And attempts to develop more storage capacity have foundered because governments wouldn’t underwrite them and the market couldn’t afford them. But storage would have only gone so far. And in a global shortage – as we are currently experiencing – prices would have eventually increased anyway. Brexit is also a factor, since Britain has yet to renegotiate its position within the pan-European energy market. Although in an energy-constrained world, pan-European integration can have as many problems as it has benefits.
These concerns though, only serve to obscure the reality of our situation; which is that global fossil fuel reserves are depleting. And while there is more oil and gas beneath the ground than we have extracted since the dawn of the industrial age, we have burned our way through all of the cheap and easy deposits with unconscionable haste. The deposits which remain are remote, technically difficult and eye-wateringly expensive… and will become increasingly so as we burn our way through them. And this plays into a far less widely understood real-world economic show-stopper. As the energy cost of energy increases, so we must divert an increasing proportion of the energy available to us to produce energy. This means that even if the total energy produced increases, the proportion available to the much wider non-energy sectors of the economy has to shrink.
This is why, for example, the developed states have been caught up in a growing “retail apocalypse” since peak conventional oil occurred in 2005. It is also why central bank currency creation and ever lower interest rates have failed to translate into economic growth, and why productivity gains can no longer be delivered. More perniciously, it is why governments over-estimate the ability of the majority of the population to afford tax increases and benefit cuts. And in the UK, this too exacerbates the current energy crisis.
The UK government assumption is that post-pandemic spending will trigger a new round of economic growth and that, with wages rising once more, cuts in benefits and increases in National Insurance – along with the rising cost of energy – will be affordable. But in an energy-constrained economy, it simply does not work that way. And it is notable that SSE – a subsidiary of the giant multinational Ovo Energy – views affordability and the political response to it as the greatest threat to its survival:
“It should be noted that Energy Affordability is particularly closely linked to – and therefore impacted by – Politics, Regulation and Compliance…”
Couched in terms designed to not scare investors, this is another way of stating the ongoing “energy death spiral.” In its early stages, this involved businesses and wealthy households taking advantage of renewable energy subsidies to deploy NRREHTs in order to avoid rising energy bills. And while these subsidies have largely disappeared, there is still an advantage in using NRREHTs to eliminate or at least curb the increasingly expensive electricity supplied by the energy companies. Meanwhile, at the bottom, people have been forced to cut back on all but essential consumption – and even this is now being strained. The big fear among energy supply companies for the immediate future is that they will be faced with a combination of widespread losses as households and businesses curb consumption, together with large scale defaults as those at the bottom are unable to pay their bills this winter.
It may be that a mild winter and the ironing out of post-pandemic supply issues will cause prices to fall back. Not least because there is more than a suspicion that some of the European shortages are the result of President Putin pressing his jackboot onto the gas pipeline which supplies Russian gas to Europe – a means of encouraging Germany to drop its opposition to the opening of the Nord Stream 2 pipeline. But if relief comes, it will only be temporary. Because global peak gas is expected to occur some time in the 2030s. Indeed, since peak oil occurred in 2018, and since much of the projected remaining gas production assumes access to oil-powered machinery and transport, peak gas may occur much sooner.
And so, while we can expect most countries to demur on following Britain’s example when the COP26 conference comes around, in reality they may have little choice. Neither French nuclear nor German coal is going to back up NRREHTs for much longer. But if we want to run advanced fossil fuel-based economies without fossil fuels we will have to find some alternative back-up energy to iron out the intermittency from NRREHTs. And so far, no such alternative exists. For all of the current fawning over hydrogen, the energy cost of producing, compressing, storing and utilising hydrogen is greater than the energy it delivers in return. The same is true of current nuclear technologies. Uranium may have the theoretical potential to provide us with almost unlimited energy, but even our smartest physicists and engineers have yet to figure out how to harness that potential.
This is the Big Green Lie. Because running an economy entirely on renewable energy is easy. Humans have been doing it for hundreds of thousands of years. Indeed, it is only in the last three centuries that we have done other than operating entirely on renewable energy. And what the current British crisis is giving us a foretaste of is the true future of a renewable energy economy: an economy that will sustain no more than 600,000,000 people worldwide and that will require three or four agricultural workers – including slaves and indentured servants – to maintain each non-agricultural specialist, cleric or overlord. Indeed, the very best our descendants can look forward to is a technological level similar to that of the Roman Empire. And the question before us is no longer whether we are going there, but rather whether we are going to manage a process of de-growth or whether we are going to allow market forces to deliver a free-fall collapse.
As you made it to the end…
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