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.

GAS PRICES, PROFITS OR DIVIDENDS?

Centrica Shareprices

Centrica, which owns British Gas, has warned that customers may face higher energy bills. Centrica says that "end-user prices" do not reflect the price they are paying for gas on the wholesale market. Additionally the company also stated that it was likely to cut investment in the UK after the Government raised taxes on North Sea oil and gas production. Centrica says that the tax hike would erode profit growth in 2011, sending the company's shares down more than 4%. Hmmm gas prices? falling profits or fresh dividends for shareholders? Your new bill coming to a letter box near you...

STAYING WARM THIS WINTER?

Even though many of us will be enjoying the summer, some of us will also be faintly wondering about what our winter fuel bills will be like if we have a bad winter. Some of us may be thinking about making a stark choice between heating or eating this winter. Energy supply wise, we are now in the situation where we are now even more dependent upon imported gas from either unstable regions or dubious suppliers than ever before, and we the customers face unnecessarily expensive bills.

As a matter of urgency the Westminster Government, the Scottish Parliament, the National Assembly and the Northern Ireland Assembly should work with the Irish Government to make these islands entirely self sufficient via renewable non market driven energy resources rather than pursing the dubious and costly (potentially in more ways than one) nuclear alternative that is particularly favoured by Whitehall civil servants.

The renewable energy sector can and should play a major role in creating more sustainable green energy jobs in Wales and elsewhere in the UK. If we can develop a flexible self-sufficient energy development strategy that actually encourages decentralised microgeneration schemes and then actually implement it then we have a fighting chance of creating jobs, useful new skills and will be able to bootstrap the economy out of the recession, as helping consumers and securing a stable safe energy supply.

As part of this process, we need to create a decentralised power generation system, which will create sustainable long-term jobs for local people, not damage the environment and contribute to providing our local communities with a long-term sustainable economic future. We can create more sustainable green jobs with exportable technology e.g. plumbers can install solar water heating and other professionals can install solar panels, micro-generation, biomass systems, green sanitation and water use can all contribute to the sustainable growth of our economy.

However, When it comes to energy supply in these isles, we are subject to the less than tender mercies of the so called 'free market', I say that because what we have is a virtual monopoly on energy supply in the UK. This is a direct result over the last eleven years of so or the departure from the commercial scene of a significant number of the energy supply companies - they fell from twenty two in number to six.

Now we have been told don't worry about it, that's the way the market works, and besides everybody took advantage to buy cheap shares in all the privatised utilities didn't they? Many people might have done so, but, how many people still have them or shares in their successor companies. By way of experiment at one of the Westminster election hustings (in Trelech) I asked that very question - out of well over 100+ people present only one person raised their hand. The only real beneficiary in the medium term was the City. Now the free marketeers will tell us that this was a good thing - I beg to differ the only real end result of the privatisations was that the ever richer minority in the City (and some of their friends in the Palace of Westminster) got richer at our expense.

Anyway, as I said, Free market, I think not, what we have is less than a £30 differential between all of the energy supply companies, which works out to be no more than a few pence a week difference in bills. We are all paying the price, and future generations will continue to pay the price of the economic consequences of an energy cartel which brings minimal benefit to hard pressed energy customers and maximises it's profits and which feeds the UK government impressive amounts of tax.

The Energy companies who have reaped vast profits over (500% between 2003 and 2008) were pretty quick to blame rising oil and gas prices, and even quicker to rake in the profits, as the average annual dual fuel bill rose from £662 a year in 2005 to 1,048 in 2007. The New Labour Government was pretty happy to rake in the extra tax revenues and ignore repeated calls for a windfall tax on excessive profits and the Energy companies were equally slow to pass on any reductions in energy costs to their customers – the only real losers in this pretty picture was us, the unhappy energy customers.

The then New Labour Government ignored repeated warnings that it was setting the UK on a path towards higher prices and blackouts. Over the next six years almost all of our old nuclear reactors, along with nine major coal and oil-fired power stations, will be closed, with nothing ready to replace them - now that is something to think about.

Now it's not all New Labours fault, that would be too easy and too simple. This mess has been along time coming, the real culprits are the Conservatives. Conservative complicity in the headlong dash to gas in the 1980’s was bad enough, but, things were compounded by a real and basic failure in strategic energy planning something that was made worse by the then New Labour Government's perverse decision to half-heartedly look at developing diverse reliable alternative energy sources.

Back in October 2009, the Tory Energy Spokesman, Greg Clark has said that the "cartel" of the big 6 energy firms would be referred to the Competition Commission by an incoming Conservative Government. He also condemned the unacceptable lag between the cost of wholesale gas prices and household energy bills - noting that customers were on average being charged some £74 pound too much for their energy per year.

Many people, at the time, could see the benefits of an 'independent' investigation into the Energy companies refusal to pass on reductions in wholesale energy prices to customers and welcomed the promise of a long overdue 'Energy Revolution' to overhaul the energy sector billing structure and charges. All good stuff, but, and don't get me wrong here, this all sounded great, but, it does seem to have gone awfully quiet over there (in Government).

Also if my memory serves me correctly wasn't it a Conservative Government that was responsible for starting the whole sorry mess in the first place by privatising the energy market in the first place, throwing any rational energy pricing structure upon the questionable whims of the 'market' by allowing the newly privatised energy companies to price gouge customers in the first place? One reason why it may have gone quiet is that the energy cartel helps to feed the fat wallets of their Tory chums in the City?

By the look of it and energy prices are set to rise once again and while no one is disputing that the six main energy suppliers have been ever so slowly (in most cases) reducing their prices since the beginning of this year, energy bills are still too high. Consumer Focus research suggests (in October 2009) that current gas bills should have been at least 7.4% cheaper (some £60.10 annually) and electricity bills should have been at least 3.1% cheaper (£13.80 annually). I suspect that the energy companies will move pretty swiftly to raise our bills if energy prices go up again.

Now the reality is that little has changed, vast profits are still being made by the energy companies. Customer Focus's research showed the reality, that the energy companies are pocketing £1.6bn extra, despite the belated passing on of some energy cost reduction to households, little has changed and if energy prices continue to fluctuate then once again millions of households may yet struggle to make ends meet this winter.

OIL IN THE FALKLANDS - SOME NUMBERS

There is a faint whiff of excitement about the prospects of finding oil near to the Falkland Islands. There may be a significant find, the real problem is how do we define significant. Oil exploration is not cheap, the oil rig that's being used costs some $245,000 per day. It will drill wells in at least four of the offshore exploration areas which are known in the oil business as "prospects".

Back in 1998 six test wells were drilled, which targeted a layer of sandstone - but not enough oil was found and the low price meant further exploration was abandoned. Now that the price of oil (even with the occasional dip) has risen, there is more potential profit to be made by drilling deeper, into untested sandstone into the sides of North Falkland basin.

Buoyed up by the prospect of much higher profits and the geologists who say there is a 17% chance of finding an oil reserve of about 391m barrels, not to mention the nine trillion cubic feet of natural gas. Such a find, even working on the fact that we might get 40% of it out with current technology, sounds a lot, until you realise that it would feed the world's economy, even in a period of recession for some 4 days...

IN THE COLD AND IN THE DARK?

That Ofgen has said that there is "reasonable doubt" about the ability of the UK's energy market to deliver sustainable energy supplies in the coming decade, should come as no surprise to anyone with half an eye on what has been going on within the energy sector over the last twenty years. Neither should it come as much of a surprise when Ofgen goes onto say that the open competitive energy market, such as it is in the UK, may fail to deliver secure, sustainable supplies in the coming decade.

This is the result of a sustained lack of Government interest in the energy sector, particularly when it comes to developing the sustainable energy sector, especially when it comes to the development of realistic storage for gas and when it comes to developing sustainable green energy resources. UK Government interest in the energy sector and this applies equally to whoever has been and is in government at Westminster, has largely been focused on spending the funds received from the energy companies and profiting from higher tax returns when energy prices and energy company profits have risen.

Ofgen has effectively admitted that as a result of the credit crunch, the ongoing problems of maintaining international supplies, and dealing with the consequences of dealing with global warming that the UK needs to look for new solutions to protect security of energy supply. Ofgen, somewhat belatedly has also suggested that the private energy companies be required to deliver more generation capacity and gas storage. Things must be bad, because the suggestion has been made that the industry should revert to a form of centralised market control, which is potentially the most significant shake up of the complacent energy sector since privatisation.

The suggestion that the energy sector needs some £200bn of investment and stronger incentives to deliver sustainable and secure energy supplies for the UK within the next ten years, may prompt many people, who have been paying higher and higher energy bills since privatisation to wonder where all the vast profits that the privatised energy companies have been tucking away have gone?

And over the longer term who has really benefited from the privatisation of the energy market, save for the Tories and their money men and banker friends in the City of London, as we face in the short term yet another cold spell and in the medium term higher energy bills and in the longer term potential energy blackouts over the next few year, I suspect that the answer may turn out to be the few at the expense of the many.

SILENCE IS GORDON

During the Troubles in Northern Ireland, Libya supplied guns and explosives to the IRA, and the families of their victims want the country to face up to its responsibilities. Now Relatives of IRA terrorist victims have once again renewed their calls for compensation from Libya following the release of the Lockerbie bomber.

The relatives are calling on the Libyan leader to demonstrate the same compassion shown to Abdelbaset Ali Al Megrahi; the terminally-ill bomber was released from a Scottish prison last week. Families of victims killed by Libyan weapons believe their hand has been strengthened by Megrahi's release, which has caused a political and diplomatic row on both sides of the Atlantic.

Relatives have called on Prime Minister Gordon Brown to support the families in their quest. Libya was once a sponsor of worldwide terrorism, including support for the IRA, but its leaders and the country and has come in from the cold. Back in 2003, Libya took responsibility for the 1988 Lockerbie bombing, which claimed 270 lives, mostly American. It also abandoned efforts to develop weapons of mass destruction. Five years later, Col Gaddafi reached a final compensation agreement with the US over Lockerbie and other bombings.

What was that Gordon? The sound of silence perhaps…would not want to upset the lucrative trade and energy deals would we…

HOPING FOR A MILD WINTER...

News that Gazprom (the Kremlin controlled Gas company and an effective arm of the Russian State) has signed a big new natural gas deal with Azerbaijan, may seem of little importance as we in the UK temporarily swelter in hot weather. What it does though is strike a severe blow to European efforts to reduce energy dependence on Russia (and Russian controlled Gas supplies).

The news that Moscow will buy 500 million cubic metres of gas annually from next year is not good news from a Western European perspective and should be a spur to developing alternative sustainable energy supplies. At the moment Europe gets around 20% of its gas supplies from Russia via pipelines that cross the Ukraine, through last winter a series of increasingly bitter rows between Kiev and Moscow saw supplies being cut or reduced.

The fact that Gazprom chief executive Alexei Miller was more than happy to say that that the firm had also been promised priority in buying gas from the second phase of the Shakh Deniz Caspian Sea field, is not good news for the rest of Europe. The Shakh Deniz Caspian Sea field has been seen as a potential key source of gas for the EU-backed Nabucco pipeline, which is free from Russian control.

Back in the spring, Vladimir Putin's decision to reduce further gas exported into 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. While Russia has declining cash reserves and its economy is heavily reliant on its trade in gas – the risk of shortages as a consequence of Mr Putin's geopolitical games is something we can truly all do without.

While other countries have insured themselves against external shocks to their energy needs; the UK’s market driven approach has been entirely inadequate. France can store 122 days of gas and Germany 99. Yet the UK has storage capacity to last only 15 days (there is a quiet but frantic effort to change this); the New Labour Government took almost a decade to recognise the need to increase storage capacity. The consequence is that UK sells gas during the summer because we cannot store it but UK energy suppliers struggle to purchase gas again when it is needed in the winter.

The complicit greed driven insanity of the Conservatives headlong dash to gas in the 1980’s has been compounded by a real failure in basic strategic energy planning and made worse by the Government's perverse decision to half-hearted look at developing diverse reliable alternative energy sources. This New Labour Government has ignored repeated warnings that it was setting the UK on a path towards higher prices and blackouts.

Over the next six years almost all of our old nuclear reactors, along with nine major coal and oil-fired power stations, will be closed, with nothing ready to replace them. We are now in the situation where we are now even more dependent upon imported gas from either unstable regions or dubious suppliers and we the customers face unnecessarily expensive bills.

As a matter of urgency the Westminster Government, the Scottish Parliament, the National Assembly and the Northern Ireland Assembly should work with the Irish Government to make these islands entirely self sufficient via renewable non market driven energy resources. By developing a flexible self-sufficient energy development strategy that encourages decentralised microgeneration schemes and by actually implementing it this could create jobs, useful skills and help to bootstrap the economy out of the developing recession as well as helping consumers.

In the meantime, lets all hope we have a mild winter...