The ink isn’t dry on the government’s low carbon transition plan, and already the whingeing has begun. The talkshows are buzzing with complaints about the impact on energy prices. Some punters suggest that this will be the end of life as we know it: the government’s plans will wreck the economy and bankrupt struggling families.
There’s no doubt that fuel poverty remains an important issue in this country. It still accelerates the deaths of elderly people every winter. Being able to maintain your home at a habitable temperature is a basic human right. But the new plans will make no appreciable difference.
According to the government, the impact of all its climate change policies – old and new – will be to add an average of £92 (or 8%) to household bills between now and 2020. Does that sound like the end of life as we know it? If so, you have a short memory.
Between November 2004 and November 2005, the average wholesale price of electricity rose from 2.1 pence to 3.6 pence – by 71%. In the 12 months to February 2006, the wholesale price of natural gas in the United Kingdom rose by 75%. In the three years to that date, it rose from under 20p a therm to 70p – an increase of 350%.
Wholesale prices don’t translate directly into retail prices – the hit for householders wasn’t quite as great as that – but you get the general idea. The rate by which the wholesale price of gas rose between 2003 and 2006 was 160 times greater than the rate of increase in retail fuel prices likely to be caused by the government’s climate change programmes. Compared to the wild fluctuations in energy prices caused by geopolitics and resource constraints, this increase will be scarcely detectable. The signal generating such angst today will be lost in the noise.
Did the price rise of 2003-2006 cause the economy to collapse? No. That was achieved by other means. It made life harder for some people. The government sought to address this with its winter fuel allowance, and today it proposes to create “mandated social price support”, mostly focused on older pensioners on the lowest incomes. I don’t know whether this is sufficient to eliminate fuel poverty. We should keep pressing the government to ensure that it is.
But let’s get this straight: fuel poverty and the climate change programme have very little to do with each other, except inasmuch as government intends to help us insulate our homes, which means we’ll need less fuel to heat them. As the secretary of state Ed Miliband pointed out on the Today programme this morning, failing to replace our energy supplies will also raise prices: fossil fuels will become more expensive as a result of rising demand in China and India.
There is, however, a government policy, or absence of policy, which does threaten both to exacerbate fuel poverty and accelerate economic collapse: its flat refusal to make contingency plans for the possibility that global supplies of oil (and, presumably, gas) will one day peak. Peak oil and gas will wreck more than the government’s plans for eliminating hypothermia: it will make all current economic and environmental planning redundant. Yet, in the 228 pages of today’s white paper about our future energy supplies, you won’t find a word about it.
Source - The Guardian
Showing posts with label economy. Show all posts
Showing posts with label economy. Show all posts
Friday, 17 July 2009
Thursday, 3 July 2008
The UK’s energy future
UK Energy has become the currency of nations. How it’s sourced, bought, traded and used is now at the heart of national political and public debate.
Today, the UK faces an energy crunch from all directions. Securing supplies is at a critical phase - this year we will import around 40pc of our gas supplies, and by 2015 it will be 75pc.
Britain now faces the fastest growth in gas imports of anywhere in the world and the cost of those imports is being driven by the oil price - as on international markets the gas price is set by the oil price - and by the worldwide demand for liquefied natural gas (LNG).
These factors are creating a global gas market in which the UK is currently being outbid by Japan, Korea and China.
We’re also being squeezed by the dysfunctional European energy market, in which the UK acts as a gas bank of last resort: when European gas prices are higher than ours, gas flows to the Continent - however, when our price is higher, there is no certainty gas will flow back. Price volatility drives up costs.
UK users have yet to feel the full impact of these new price pressures. As our evidence to the Commons Business and Enterprise Select Committee last week made clear, energy suppliers are now paying a wholesale cost of more than £1 a therm for gas this coming winter - nearly double last winter’s price - yet it is currently being sold on at 60p a therm to customers.
That position is unsustainable if we are to generate the money needed to invest in secure supplies for Britain’s future.
Electricity production faces similar challenges. Spare capacity that meets spikes in demand is declining and a quarter of UK power stations will be retired by 2015 as older coal and nuclear plants reach the end of their life. And demand continues to rise.
So how can the UK best tackle this looming squeeze on energy? First, on the demand side, energy efficiency has a huge role to play. If we were able to achieve the levels of energy efficiency of Germany, for example, which has 200 times the amount of installed domestic solar capacity, this could potentially reduce our domestic consumption and customers’ bills significantly.
Second, on the supply side, the Government has taken two big steps forward in the past week in grasping the nettle of self-sufficiency with its Commons victory for the Planning Bill, and the publication of its renewable energy strategy.
I fully acknowledge that some elements of the Planning Bill are controversial, but as it moves to the Lords for its first reading there I believe it’s vital to keep in sight what is in the national interest - maintaining a degree of the energy security that Britain has enjoyed for centuries.
Streamlining planning is vital if we are to develop the offshore wind farms, power stations, gas storage facilities and transmission grids this country needs. The UK’s limited gas storage capacity means we are always exposed to price spikes on mid-winter, high-demand days.
Yet there are storage projects held up in the planning process that could double this capacity.
None of us wants a planning regime that steamrollers local democracy and takes ministers out of the decision-making process.
That is why the proposed National Policy Statements are a key tool in strengthening democratic accountability. They will be thoroughly scrutinised by Parliament, ministers will maintain responsibility for setting the Government’s policy via these statements, and they will then go to public consultation.
Centrica plans to invest £1bn a year to secure future energy, including an interest in participating in new nuclear builds alongside our major investment in offshore wind farms. But we cannot afford a process that took BAA seven years, 37 different planning applications under seven different pieces of legislation and multiple decision points before Terminal 5 became a reality.
On those time scales, it would be 2015 before we could start building any new gas facilities or generation capacity, well after a number of existing plants would have to be retired.
The Government’s renewables strategy heralds an exciting leap forward towards a low-carbon future, with householders empowered to play a significant role alongside large-scale generators. It will open up opportunities for British Gas and other suppliers to install solar panels, heat pumps and other renewable and energy-saving technologies in millions of UK homes, while at the same time increasing the amount of offshore and onshore wind generation 10-fold.
I believe this is both achievable and essential if we are to deliver a low-carbon world, but the investment needed is on an unprecedented scale - £100bn on the Government’s own estimate, which equates to around £1,600 for every man, woman and child in the UK over the next decade.
On top of this comes investment in new nuclear power, replacement gas generation, clean coal generation and, of course, standby generation for when the wind isn’t blowing. We also need to see further investment in energy-saving measures, particularly at the domestic level, to help to reduce continued growth in energy usage.
And we need more targeted support from the Government and suppliers for those households unable to cope with the higher-priced energy environment of the future.
This is almost certainly the largest investment programme in any sector of our economy. Without it, not only will Britain fail to meet its commitments on tackling climate change, but also our customers and our economy will continue to be at the mercy of volatile international commodity markets.
Source - The Telegraph
Today, the UK faces an energy crunch from all directions. Securing supplies is at a critical phase - this year we will import around 40pc of our gas supplies, and by 2015 it will be 75pc.
Britain now faces the fastest growth in gas imports of anywhere in the world and the cost of those imports is being driven by the oil price - as on international markets the gas price is set by the oil price - and by the worldwide demand for liquefied natural gas (LNG).
These factors are creating a global gas market in which the UK is currently being outbid by Japan, Korea and China.
We’re also being squeezed by the dysfunctional European energy market, in which the UK acts as a gas bank of last resort: when European gas prices are higher than ours, gas flows to the Continent - however, when our price is higher, there is no certainty gas will flow back. Price volatility drives up costs.
UK users have yet to feel the full impact of these new price pressures. As our evidence to the Commons Business and Enterprise Select Committee last week made clear, energy suppliers are now paying a wholesale cost of more than £1 a therm for gas this coming winter - nearly double last winter’s price - yet it is currently being sold on at 60p a therm to customers.
That position is unsustainable if we are to generate the money needed to invest in secure supplies for Britain’s future.
Electricity production faces similar challenges. Spare capacity that meets spikes in demand is declining and a quarter of UK power stations will be retired by 2015 as older coal and nuclear plants reach the end of their life. And demand continues to rise.
So how can the UK best tackle this looming squeeze on energy? First, on the demand side, energy efficiency has a huge role to play. If we were able to achieve the levels of energy efficiency of Germany, for example, which has 200 times the amount of installed domestic solar capacity, this could potentially reduce our domestic consumption and customers’ bills significantly.
Second, on the supply side, the Government has taken two big steps forward in the past week in grasping the nettle of self-sufficiency with its Commons victory for the Planning Bill, and the publication of its renewable energy strategy.
I fully acknowledge that some elements of the Planning Bill are controversial, but as it moves to the Lords for its first reading there I believe it’s vital to keep in sight what is in the national interest - maintaining a degree of the energy security that Britain has enjoyed for centuries.
Streamlining planning is vital if we are to develop the offshore wind farms, power stations, gas storage facilities and transmission grids this country needs. The UK’s limited gas storage capacity means we are always exposed to price spikes on mid-winter, high-demand days.
Yet there are storage projects held up in the planning process that could double this capacity.
None of us wants a planning regime that steamrollers local democracy and takes ministers out of the decision-making process.
That is why the proposed National Policy Statements are a key tool in strengthening democratic accountability. They will be thoroughly scrutinised by Parliament, ministers will maintain responsibility for setting the Government’s policy via these statements, and they will then go to public consultation.
Centrica plans to invest £1bn a year to secure future energy, including an interest in participating in new nuclear builds alongside our major investment in offshore wind farms. But we cannot afford a process that took BAA seven years, 37 different planning applications under seven different pieces of legislation and multiple decision points before Terminal 5 became a reality.
On those time scales, it would be 2015 before we could start building any new gas facilities or generation capacity, well after a number of existing plants would have to be retired.
The Government’s renewables strategy heralds an exciting leap forward towards a low-carbon future, with householders empowered to play a significant role alongside large-scale generators. It will open up opportunities for British Gas and other suppliers to install solar panels, heat pumps and other renewable and energy-saving technologies in millions of UK homes, while at the same time increasing the amount of offshore and onshore wind generation 10-fold.
I believe this is both achievable and essential if we are to deliver a low-carbon world, but the investment needed is on an unprecedented scale - £100bn on the Government’s own estimate, which equates to around £1,600 for every man, woman and child in the UK over the next decade.
On top of this comes investment in new nuclear power, replacement gas generation, clean coal generation and, of course, standby generation for when the wind isn’t blowing. We also need to see further investment in energy-saving measures, particularly at the domestic level, to help to reduce continued growth in energy usage.
And we need more targeted support from the Government and suppliers for those households unable to cope with the higher-priced energy environment of the future.
This is almost certainly the largest investment programme in any sector of our economy. Without it, not only will Britain fail to meet its commitments on tackling climate change, but also our customers and our economy will continue to be at the mercy of volatile international commodity markets.
Source - The Telegraph
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