Thursday, 22 March 2012

Energy Independence

As most of us will have noticed by now when it comes to fuel (energy) prices they can go up and down a little in the short-term, but the longer term trend is always (at least for hydro-carbons) upwards. This is unavoidable due to increasing demands for more energy (particularly from energy hungry India and China), a growing planetary population and the short term nature of our planet's hydro carbon fuel reserves. This trend is easy to plot (even in the short term) and the medium and long-term consequences of being dependent upon energy resources that you don't actually control is pretty self evident.

Primary energy is energy supplied without being transformed e.g. crude oil, natural gas, and coal. Around two thirds of UK primary energy demand is met from domestic production. Coal accounted for barely 4% of final energy consumption by fuel in 2010. Virtually all UK oil and gas production occurs under the seas surrounding the UK. UK oil production peaked in 1999, and gas production peaked in 2000. Since then the UK has moved from a position of self-sufficiency to one of increasing dependence on imported oil and gas.

By 2009, imported gas accounted for around 32% of the total gas used. 58% comes from Norway, 25% from liquefied natural gas (LNG) from various different countries, some 16% came from the Netherlands, and 2% came via the Belgian inter-connector pipeline. The increased reliance on imported oil and gas leaves the UK more open to supply risks associated with global supply constraints and price volatility. The UK Government plans to reduce the need for oil and gas imports, by pushing primary energy production, and by developing low-carbon alternatives such as electric vehicles, biofuels and fuel efficiency.

Sadly this is a case of better late than never, as the previous New Labour Westminster Government and the current Con Dem government should have been working with the devolved administrations in Wales, Scotland and Northern Ireland to develop an energy strategy to end these isles dependency on unstable overseas energy sources and dubious suppliers and lead to energy independence. In recent years, Vladimir Putin's periodic squeeze on gas exports to the Ukraine, through which 80 per cent of Russian gas exports to the EU flows, should have highlighted the real dangers of relying on imported energy from unreliable sources.

President Putin's Russia with full coffers and rode out the consequences of fluctuating oil prices and appears to have managed to avoid any real consequences of declining cash reserves and having its economy is heavily reliant on oil and gas exports. Some countries subsidise their fuel prices (how sustainable that is over the medium to longer term is open to debate), in the UK this does not happen, everybody wins, Government gets vastly more tax revenue, the oil companies get more profit, and us the ordinary punters get regularly fleeced.

When it comes to gas, some countries made efforts to protect themselves against external shocks to their energy needs; France was able to store 122 days of gas and Germany able to store 99 days worth (2009 figures). Here in the UK the almost entirely market driven approach turned out to be entirely inadequate, in the UK had a storage capacity which would have lasted for only 15 days (2009 figures). Some countries discuss the issue of energy independence at the highest level here I get the impression that here in the UK it is best avoided, with the occasional exception.

The New Labour Government took the best part of a decade to recognise the need to increase storage capacity and the UK has been playing catch up ever since. One consequence of the lack of storage capacity was that UK had to sell gas during the summer and purchase gas again when it is needed in the winter. The Conservatives headlong dash to gas in the 1980’s was compounded by an abject failure in strategic energy planning. The situation has been made worse by the current Government's perverse decision to half-heartedly look at developing diverse reliable alternative energy sources.

The last New Labour Government and the current Con Dem Government largely ignored repeated warnings that the lack of sustainable energy has set the UK on a path towards higher prices and blackouts. Over the next four to six years almost all of our old nuclear reactors, along with nine major coal and oil-fired power stations, will be run down and closed, with nothing ready to replace them. We are now in the situation where we will become even more dependent upon imported gas from either unstable regions or dubious suppliers.

The Con Dem’s solution to this is to rush to go Nuclear and to effectively hand the Nuclear industry lock stock and barrel over to French energy companies who are busy paying off large loans to the French government. Since 1997, what successive Westminster Governments should have done was to work with the devolved governments and the Irish Government to make these islands entirely self sufficient via renewable non market driven energy resources run by not for profit companies. They should have developed a flexible self-sufficient energy development strategy that encourages decentralised micro-generation. This could create jobs, useful skills and bootstrap the economy out of the recession as well as helping consumers by delivering community beneficial energy schemes.

Wales needs real direction not Carwyn's platitudes when it comes to the development of safe and secure energy resources and full control of energy planning. The renewable energy sector can play an immensely important role in creating more green energy jobs. We need to create sustainable long-term jobs for local people, not damage the environment and to provide our communities with a long-term viable economic energy future, that's the real future dividend for our communities rather than the shareholders in the City.

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