With temperatures dropping yet again and a problem with one of the major gas (UK - Belgium) pipelines (it may have been closed for 1.4 days) there may well be a faint whiff of panic in the air. What with former (Climate Change) Ministers claiming (in the Radio 4 Today Programme) that the UK is down to less than 36 hours worth of gas supplies, it should be pretty clear by now that any UK strategic energy reserve leaves a great deal to be desired.
With the privatisation of the UK energy sector in the 1980’s it is pretty clear that any provision for future energy planning and provision was abandoned to the whims of the free market. A healthy gas reserve would not only cushion (domestic and commercial) customers from potential shocks, it would also potentially curb the prospects of fat profits on the members of ‘the big 6’ energy cartel. With little prospect of any effective regulation of excessive profits being ramped up it is clear that we are going to continue to get fleeced for a good few years yet.
As of March 2012 around two thirds of UK primary energy demand was met from domestic production. Coal accounted was barely 4% of final energy consumption by fuel in 2010. Almost all UK oil and gas production came from the seas that surround the UK. Peak oil (for the UK) incidentally happened in 1999, and Peak gas production took place back in 2000 - something which may explain the Unionist panic over the prospect of Scottish independence. Since then the UK has moved from a position of relative self-sufficiency to one of dependency on imported oil and gas.
By 2009, imported gas was around 32% of the total gas used. 58% came from Norway, 25% from liquefied natural gas (LNG) from various different countries, 16% came from the Netherlands, and 2% came via the Belgian interconnector pipeline. The increased reliance on imported oil and gas left the UK far more open to supply risks associated with global supply constraints and price volatility. The UK Government periodically punted 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.
The writing is not so much on the wall as on TV, one Tuesday evening in February saw a TV first, the first airing of a Gazprom advert on UK domestic television advert – they sponsor the European Champions League. Russia has periodically put the squeeze on gas exports to the Ukraine, (currently some 80 per cent of Russian gas exports to the EU flow through the Ukraine) so the real dangers of relying on imported energy from unreliable sources have been clearly highlighted.
As for gas, some states have 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 (2013 figures). Here in the UK the almost entirely market driven approach turned out to be entirely inadequate, the UK has a storage capacity which would last for only up to 20 days (up from 15 days in 2009).
New Labour 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 – and still little has been done to resolve the problem. One consequence of this lack of storage capacity is that UK had to sell gas during the summer and purchase gas again when it is needed in the winter. The Conservative’s headlong dash to gas in the 1980’s was accompanied by a complete if not abject failure when it came to strategic energy planning.
The situation has been made worse by the current Government's decision to somewhat half-heartedly look at developing diverse reliable alternative energy sources whilst pursing yet another dash for gas.
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 domestic energy prices and potential power 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 was 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. Anyway that was the plan, although the wheels seem to be still wobbling on that particular wagon as well.