Sure Bet or Energy Roulette?

Image: Wayne Beesley/CBE photo competition/FoE – Click for source

Contrasting positions offered by Christopher Booker and Geoffrey Lean in the Telegraph over the last couple of days show how the UK’s energy situation is heading for crisis.  The exact nature of the crisis, however, depend on one’s viewpoint.

Over the next 10 years, one fifth of Britain’s electric power stations are due to close, as nuclear reactors reach the end of their licensed lives and coal-fired plants fall foul of pollution laws, causing, as Energy Secretary Ed Davey puts it, “the biggest overhaul of our energy infrastructure for decades”.

Successive governments have dithered, but things have grown more acute as nuclear new-build plans have slipped seriously and wind power receives only about a fraction of the required resources. Instead, new gas plants are being built.

Lean finds the investment in gas unacceptable, initially putting forward arguments about the Climate Act and low-carbon economy, but he neglects to mention the very real practical issues and concerns that are the focus of Booker’s article:

The more a country depends on such sources of energy [wind, solar], the more there will arise – as Germany is discovering – two massive technical problems. One is that it becomes incredibly difficult to maintain a consistent supply of power to the grid, when that wildly fluctuating renewable output has to be balanced by input from conventional power stations. The other is that, to keep that back-up constantly available can require fossil-fuel power plants to run much of the time very inefficiently and expensively (incidentally chucking out so much more “carbon” than normal that it negates any supposed CO2 savings from the wind).

A new dash for gas (and coal) is on in Germany too, where the penetration of renewables, and energy costs, are already higher than in the UK, creating problems for the grid and energy intensive industries.  Germany, manufacturing power house of Europe, needs to keep its mega-consumers happy lest they vote with their feet.

The Spending Gamble

Lean invokes concerns over energy security and perpetuates the ‘spend on renewables now to save later’ meme.

…fossil fuel is looking less cheap, secure and clean than its supporters say. It has, for example, been its rising price – rather than the widely blamed support for renewables – that has so far been the main drive of soaring energy bills.

Official figures show that gas has caused two thirds of the recent £150 average increase – while between 2004 and 2010 it added nearly 10 times as much as renewables support.

Yes, the cost to date of renewables has been quite small simply because the deployment of renewables in the UK is small, but how about quoting cost per unit delivered to the consumer?  No contest.

Experts expect its cost to go on rising, while wind power becomes cheaper: the crossover point may come this decade, long before new gas plants go offline.

Wind will come down in price, but until effective storage technologies become mainstream also, it is an opportunity resource; it cannot be the mainstay of our policies.  Determined to paint the focus on gas as folly, Lean dismisses the “game-changing potential” of shale gas as “overhyped”:

Even then, it is widely agreed, shale gas will be more expensive to exploit in Europe, and its contribution will be limited.

Actually “experts expect its cost to go on rising” isn’t strictly true. Here’s the thing – the game has changed.

Energy Focus – Flybe’s Business Uncovered Magazine Sept/Oct 2012. (Image Source: Stream Publishing Ltd)

Dan Lewis of Future Energy Strategies examines The Future of Energy in the current Flybe magazine and has as quite a different analysis. Unlike oil, gas is priced locally and the costs vary across the world according to supply and demand.  Since 2009 global gas reserves have doubled and costs in the USA, previously at parity with the UK, are now 3-4 times cheaper. As the cost of oil remained high it has become economic to capture and liquefy gas for shipment rather than flaring it at source.  Oil cost is also now driving infrastructure for gas use – not just to generate electricity, or for direct use in heat, but also for transport; worldwide there are >16 million vehicles driving on compressed natural gas (CNG).  Climate catastrophists and environmentalists may whine at the chancellor’s vision of turning Britain into a “gas hub” but we are already dependent on it as a readily dispatchable source of energy and there are fewer obstacles to construction of new infrastructure than say nuclear or indeed wind power.  Simply – we need to keep the lights on.

Shale gas too may not be overhyped, although it could be expensive. Onshore reserves in the UK may be small, but the latest analysis suggests vast offshore reserves which would be costly to exploit, however in the face of high oil costs this would be feasible and would turn the UK into a top energy producer.

The gamble on renewables was a sure bet that fossil energy, in all its forms, would keep rising – it hasn’t.  The back up plan of imposing a cost on carbon and requiring the use of carbon capture and storage has fallen victim to market forces and being technically impracticable.  Investing in gas-using infrastructure does give the UK options. It enables us to take advantage of a cleaner energy source; we can import if costs are low and exploit and export if costs based on supply and demand rise. It better anyway than staring down the barrel of a Russian pipeline with Putin spinning the gas tap.

Aside from energy security, an additional argument made for renewables is the import/export balance, otherwise known as “keeping the money at home”, also works for such UK gas.  I believe this is a strong argument with the government, even if we do pay over the odds for the energy. The cynic in me always wants to point out that this only works if your energy supply chains are rooted in home soil. For renewables we may use local ‘renewable resources’ but it seems we use technology designed, developed and owned, if not built, by overseas companies with UK directorships going to those who can be politically useful. Sigh.

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6 Responses to Sure Bet or Energy Roulette?

  1. Doug Proctor says:

    Some good points about energy sources and probable costs. Note: the comment about offshore gas resources is about conventional gas resources, not shale gas. Offshore gas has been identified in many places over the decades, but the facilities required to liquify and transport the gas (after processing it to remove oil, condensate and water liquids) brought in additional costs that made them uneconomic. Offshore gas resources are certainly significant, but again will come at a cost greater than onshore, conventional reserves.

    The eco-greens have understood the problem of cost vs price from the beginning. Yes, the costs of renewables would come down, in theory, with technological improvements, but the need for subsidies would go away only as the expected higher costs of non-renewables rose. That is the part of the concept not generally understood, as it was supposed to disappear: that competiveness of renewables always required significantly higher costs of non-renewables.

    We hear a great deal about different energy sources fueling our future. Everyone of them – even extensions of our conventional ones, including coal – are to come, however, at a cost per unit energy greater than in the past. This is a dire prediction for the developing world. We, the First World, had the advantage of abundant, cheap power. The developing world is looking to develop at a time when each gigajoule is more expensive than the last. Nuclear fission still has, in principle, the capacity to provide all we need at a consistent price, but the impracticality of disposing of its trash (including old plants) makes fission nuclear more than simply difficult. Fusion is in its perpetual 30-years-from-practice state: a good example of faith in continuous technological advance being badly placed. Fossil fuels remain our only large, dependable energy sources. But they exist in an inverse pyramid of cost-effectiveness, with the amount available increasing as the cost does.

    Internal development of resources does work better economically than sourcing them outside the economy, in a simple trade deficit kind of way. But it does redirect the efforts of the economy. The more time and produced stuff goes to energy generation, the less there is for lattes and pensions. It is an Alice in Wonderland problem: you end up running quicker and quicker just to stay in the same place.

  2. Verity Jones says:

    That Alice idiom is rather a good fit for the energy race – or technology. It is familiar from evolutionary genetics – the Red Queen Hypothesis. I’m not sure that everyone gets it – just how limited we are by energy requirements. Sustainability is a nice concept but there’s no return to simplicity as our sophistication increases. Eventually some sort of balance will be struck.

    Thanks for pointing out that it needs to be made clear that the offshore gas reserves mentioned are not shale (another post written late that probably would have benefited from a read with fresh eyes in the morning BEFORE hitting ‘publish’.

  3. mwhite says:

    There’s also coal seam gas.

    I believe they’ve banned this extraction technique in Austrailia

  4. mwhite says:

    “Despite the expansion of wind power, Britain is becoming “increasingly dependent” on cheap coal to generate electricity, said the Renewable Energy Foundation.

    It cited figures showing that coal-fired electricity increased by more than 30 per cent in the first three quarters of this year compared to the same period last year.

    The Renewable Energy Foundation then goew on to say “coal is increasingly being used to generate electricity because gas is becoming much more expensive – and this strengthens the case for using wind power.”

    So an increase in the use of wind power is causing an increase in the use of coal, therefore we need more wind power.

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