Opinion: Give us an energy policy

Our party’s energy policy is totally inadequate, consisting only of motherhood and apple pie statements in favour of efficiency and green policies. We went into the last election on the populist platform of no new nuclear power generation and no new coal power without carbon sequestration. Like the student fee policy, this has also proved predictably unsustainable. It was seriously irresponsible. Hence the familiar u-turn. Knee-jerk reactions like the recent renewed dash for gas, or underwriting private sector nuclear development costs, are less than the strategy we have a right to expect from government.

The objectives of an energy policy need stating and agreeing. Taking electricity strategy, these objectives should include:

  • Assurance of sufficient power
  • Least cost delivered power
  • Efficiency measures to reduce demand
  • Demand reduction by persuasion or pricing?
  • Reduction in emissions
  • Security, that the lights don’t go out
  • Analysing the optimal future fuel mix (coal, gas, nuclear, renewable)
  • Maximising renewable power generation to a point where it becomes uneconomic or imposes unacceptable environmental consequences
  • Reduction of fuel poverty
  • Ensuring the private market is able and likely to implement the preferred solution
  • Devising incentive, licensing, franchising, funding etc schemes to correct any market deficiency
  • Monitoring progress and deploying timely corrective policies when necessary

These objectives conflict. Reducing emissions increases generating cost, as flue gas desulphurisation did (by 25%). Renewable power is more expensive than fossil fuel power, will help the environment but increase fuel poverty, and harm the competitiveness of the economy. Renewable power has other environmental defects, for example windmills on the visual environment, the Severn Barrage on local wildlife. Many objectives are difficult to measure. Future demand for electricity is climate dependent, grows with the use of more electric appliances, and could leap upwards if electric cars became widely used.

Energy security is now urgent. UK was a net energy exporter, but by 2011 imported 36% of its energy. UK is heavily dependent on foreign supply throughout the value chain, in power plant construction, power plant operation, and fuel. We are wholly dependent on France’s EDF/Areva for nuclear power plant construction. EDF operates 8 of the 9 existing UK nuclear power plants. Over 50% of UK’s coal fuelled power plant capacity is owned and operated by EDF and Germany’s RWE and Eon. 63% of the coal consumed in 2011 was imported. 45% of imported steam coal came from Russia, meaning that Russian coal is responsible for 8.6% of UK electricity generation. This supply is vulnerable, whether for political reasons, force majeure, or because Russian coal earns better margins in the Asian market. In 2011, 53% of natural gas was imported.

In March 2012, Germany’s RWE and Eon scrapped their plans to build 2 new nuclear reactors. France’s Areva and China’s Guangdong Nuclear Power Group withdrew. Apart from EDF, only US Westinghouse and Japan’s Hitachi remain in the running. Nugen owned by Spain’s Iberdrola and France’s GDF Suez may submit a bid by 2015.

Our renewables policy needs to be clearer, stronger and more committed. Only 4.3% of UK 2011 energy consumption was from renewables. We trail Europe in renewable power generation : the EU renewable share is 20%, (Sweden 55%, Denmark 32%, Spain 32%, Italy 26%, Germany 17%, France 14%, UK 10%). But in July 2012, the coalition cut the wind power generation subsidy by 10%. We are back to a dash for more gas. Meanwhile, 4.5m households are in fuel poverty.

UK consumes 370 Terawatt Hours of electricity annually. We must decide how far this can be reduced by energy efficiency, setting a target reduction against realistic affordable measures. Currently generation is 40% gas, 30% coal, 20% nuclear and 10% renewable. We should set a target fuel mix for 2017, 2022 etc. Should this rely on renewables, nuclear and whatever clean coal technology is available, with gas as a premium fuel for heating and cooking? Renewable generation should be maximised to the point of an economic or environmental limit. The twin objectives of reduced emissions and energy security make the Severn Barrage indispensable. Policy instruments should set best thermal efficiency for coal power plants, forcing them to deploy ultra-critical boiler technology.

We are promised the Energy Bill soon. We can only wait with bated breath.

* Geoff Crocker is a professional economist whose book A Managerial Philosophy of Technology is published by Palgrave Macmillan.

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13 Comments

  • Geoff Crocker 26th Oct '12 - 4:42pm

    Thanks Alisdair. Most of the data in my piece comes from the DECC 2012 Energy Summary at http://www.decc.gov.uk/assets/decc/11/stats/publications/energy-in-brief/5942-uk-energy-in-brief-2012.pdf

  • Andy Dawson 26th Oct '12 - 5:52pm

    “. We are wholly dependent on France’s EDF/Areva for nuclear power plant construction.”

    Masterly timing. You’d obviously missed this:

    http://nuclearstreet.com/nuclear_power_industry_news/b/nuclear_power_news/archive/2012/10/26/report_3a00_-hitachi-to-buy-horizon-nuclear-power-102602.aspx

    “Hitachi is said to have made an offer for Horizon Nuclear Power – the UK joint venture up for sale by EON and RWE.

    The German utilities sought to unload Horizon after Germany’s decision to abandon nuclear power. Quoting two anonymous sources, Bloomberg reported Thursday that Hitachi has offered $967 million for the company in a deal that may be announced formally next week.

    Horizon was formed in 2009 to develop 6,600 megawatts of new nuclear generation in the UK. It had acquired land at Wylfa and Oldbury to that end.”

    That’d be four 1600MW EU-ABWRs. There’ll be some delay for the design to go through the GDA process, but as it’s already got NRC approval and features additional development to comply with EU regulatory requirements (basically an extra shutdown train and an aircraft crash-proof secondary contanment).

    The good thing about the ABWR is there’s already good experience of building them (about 8 to date). If there are no regulatory delays, they take about 39 months from first concrete to first power.

  • jenny barnes 26th Oct '12 - 6:17pm

    The Conservatives, and as I understand it Orange Book Liberal Democrats, including most of the parliamentary party, believe that the market (sometimes the “free market”) is the best decider of these things. Unfortunately, the companies involved can game the system, because they won’t be blamed when the lights go out, but the government will. Hence the alleged policies (contracts for difference, no Miss, they really aren’t subsidies honest) which try to rig the market to get the results the government want. An alternative view is that energy security is too important for both the population and the government, and too expensive to bribe companies to do what’s necessary, so the best answer is to renationalise, and build the appropriate plant.
    Several Coal fired power stations are reaching the end of their lives under the Large Carbon Plant Directive; also several nuclear power stations are near end-of life. But we have a lot of installed gas capacity which is good for quite some time.
    If it were my energy policy, I would set up government contracts to build and run possibly 6- 10 large nuclear power stations – 3Gw or thereabouts, and also continue with the installation of on shore wind. These two technologies are the most economical that don’t emit CO2. Coal and gas fired plant should be left to the market, but new gas and coal plant should face a carbon dioxide emission tax of at least £60 / tonne, and that needs to be regularly adjusted on the basis of the likely impact of each tonne of CO2 being emitted. CCS doesn’t work, and probably never will, but with a suitable tax then private companies might invest in it ( although if so we need something to make sure that if it escapes containment, they pay the tax then!) Severn tidal plant would be roughly equivalent to a 2Gw power station, and can work when wind doesn’t, which is good, but there are environmental objections which need to be considered.
    As well as electric cars the UK may need more electricity to drive heat pump technology, backing out demand for gas for low temp heating. And lots of insulation on the housing stock would do the same.
    Longer term, we should be looking at how to get concentrated solar electricity from the North African desert area via HVDC grids.

    But – you have to go back to the ideology. If markets are the solution, then Osborne’s second dash for gas is clearly the right answer. Although it’s not a no-brainer; he is assuming that gas prices will not rise all that much. If they did, wind might be cheaper in a few years time.

    And if markets are not the solution, which I think they aren’t in this case, then trying to tweak them to get the results we want is not very sensible. Far better to just contract to get it done how we want.

  • Helen Dudden 26th Oct '12 - 8:14pm

    Still nothing on the need to reduce what we use. Surely that is obvious, or does it mean that the energy company does not make so much profit from us, the consumer.

  • Richard Dean 26th Oct '12 - 8:25pm

    Flying over the UK at night shows a huge wastage of electricity as street and other lights shine uselessly upwards into the night sky as well as downwards to illuminate roads, evemts, etc. Few streets seem to be fitted with the type of light that only shines downwards. I imagine such lights could halve the amount of electricity used for night sreet lighting – quite a considerable saving if implemented across the UK, although obviously there would be a capital cost too.

  • Tony Dawson 26th Oct '12 - 9:25pm

    “The twin objectives of reduced emissions and energy security make the Severn Barrage indispensable.”

    Not just the Severn, either. There are numerous other crossings where a barrage wit a road (or better still, a railway or tram) on top of it would cut miles off journeys and save lots of energy.

  • Geoff Crocker 26th Oct '12 - 9:27pm

    Thanks Andy. As you say when I wrote this article a few days ago I could not have known about Hitachi’s bid for Horizon which was announced at 528am this morning. Nevertheless this doesn’t alter the sense of my piece which already quotes Hitachi as being in the running, and it doesn’t reduce UK dependency on imported technology in the powergen value chain. You sound as though you think the problem is solved. I hope you’re right.

    I agree with Jenny Barnes on the impact of the LPCD directive forcing coal powerplant closures. I also agree that government contracting to the private sector is the best solution, if the private sector can supply.But what if they can’t? Recent nuclear powerplant builds like Finland 5 by Areva have massively extended timescales and costs. We definitely need a policy which follows some methodology similar to the one I outline.

    Helen Dudden, the 4th objective in my article was the reduction of demand beyond efficiency reductions, by persuading or pricing consumers to consume less. It’s a grand idea but the reality is that consumers are hard to persuade.

  • Geoff Crocker 26th Oct '12 - 9:46pm

    An easy briefing on ABWR nuclear reactor technology cited by Andy Dawson is at http://www.nuclearinnovation.com/pdf/abwr-factsheet-final.pdf. The technology is well established but installations are relatively few.

    So whilst this might solve the problem of nuclear availability, it doesn’t alter the Lib Dem position against new nuclear. It is this and other issues which need resolving in an overall energy policy.

  • Simon McGrath 27th Oct '12 - 1:25am

    @helen”Still nothing on the need to reduce what we use. Surely that is obvious, or does it mean that the energy company does not make so much profit from us, the consumer.”

    There is no evidence at all that people are willing to reduce their consumption. Nothing at all to do with the wicked energy firms, a lot to do with people desire to have lots of gadgets/have warm houses/ drive cars.

  • @Simon
    “There is no evidence at all that people are willing to reduce their consumption.”

    Disagree, there is evidence. However, what the evidence does show is that what is needed is a step change in price and supply rather than incremental change. We saw this with the oil price increase in the summer of 2008, which caused petrol to leap in price, however the effect was short lived as the price quickly dropped and people went back to their old habits. we also saw similar effects when the tanker drivers went on strike.

    There is also evidence that the mass market construction industry has yet to take energy efficiency seriously – we’ve known for over 30 years how to build houses that are significantly more efficient than those being built including those being built now, okay they might cost a little more but nothing like the cost to retrofit the house once built. Yes the building regulations are due to be updated in 2016, but it has only taken that long because of lobbying from the mass market construction companies. Basically, we should put a mandatory planning gain requirement on all new housing (with immediate effect) that the typical energy consumption of a new house can only be have energy that has been saved from existing housing. Hence if we want to build 1000,000 houses a year then we will need to improve the typical energy efficiency of ~1M existing houses by at least 10% every year…

    Yes we need to find a way to give energy companies incentives to get consumers/customers to reduce their energy consumption.

    When the lights start going out, you can be sure people will adapt, even whilst they complain about the rip-off energy prices.

  • David Allen 27th Oct '12 - 3:47pm

    Roland,

    Dead right. A building programme to replace existing energy-wasteful housing with improved designs would stimulate the economy, bring back jobs, and protect our futures as the price of energy skyrockets. Borrowing to invest and save future costs is responsible borrowing and therefore should not spook the markets.

    But sadly, our wonderful coalition is heading in the opposite direction with WEAKER building standards and lower energy efficiency, in the deeply ideological belief that everything can be achieved by deregulating markets. They are taking this so far that the housebuilding industry is actually telling them not to relax standards too much!

    http://www.guardian.co.uk/politics/2012/oct/26/government-building-standards-review-regulation

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