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.