Tony Lodge is a Research Fellow at the Centre for Policy Studies and was author of Step off the Gas: Why over-dependence on gas is bad for the UK, which was published by the CPS last year.
Criticising Britain’s woeful lack of gas storage is important and right but there remains a deep underlying problem which increasingly represents the ‘elephant in room’ of this long overdue debate on the country’s growing gas dependency.
As Britain shivers in what is looking like the most prolonged freeze for thirty years, the fault lines are starting to appear in a policy area which has been neglected for far too long by both politicians and policymakers alike.
Three worrying developments have occurred in the last two weeks which should concern all of those who are concerned about energy prices and our ability to maintain secure supplies and keep prices low – thus avoiding more fuel poverty amongst the elderly and the most vulnerable. Fuel poverty occurs when more than 10% of household income is spent on energy bills. It has already nearly trebled since 2004.
Firstly, Britain imported more gas than it produced for the first time ever in November 2009, with imports increasingly set to dominate supply as our own output declines. Britain was a net exporter of gas until 2004, but a steady decline in output from the North Sea in recent years has made us more reliant on external suppliers for fuel to heat two thirds of British homes. Imports met 50.8% of total gas demand in Britain in the two months before Christmas 2009.
The problem with this import dependence is that it is likely to grow dramatically in the coming years and thus leave us exposed to fluctuations in the international gas price and possible future interruptions in supply. On Monday, demand for gas rose 30% above seasonal norms as the post-Christmas cold spell took hold. Whilst restrictions on household supplies look unlikely, a possible shortage would lead to higher bills. On the same day National Grid issued a gas balancing alert to warn large users, such as gas-fired power stations, that they would have to cut consumption if there was a fall in the supply of gas to Britain.
Here lies the crux of the problem. A third of Britain’s gas consumption is now used to generate electricity in gas-fired power stations. The rest is used by industry and in domestic heating and cooking. In the past 13 years, the Government has exacerbated the country’s thirst for gas by approving no other type of plant to generate electricity other than gas, such as clean coal or nuclear. All ongoing and proposed baseload power plant in the UK is gas fired, a staggering 23GW, which represents nearly a third of the total grid, on top of the numerous gas fired plants which already exist.
A more balanced generating mix would help stabilise prices and leave us less exposed. This now means that when the gas price rises it affects both gas and electricity prices, leaving millions of families exposed to such spikes. Britain is now one of the highest per capita gas consuming countries in the world. Twenty five years ago around 1% of our electricity involved the burning of gas. Now the figure averages 45% and is set to rise towards 70% by 2020. I first highlighted these issues for ConservativeHome in 2007 and again last year when writing Step Off the Gas for the Centre for Policy Studies.
Secondly, Britain’s fleet of nearly 2,800 wind turbines are performing miserably during this very cold but energy intensive period. In the past 20 days they have averaged a mere 0.6% of electricity supply to the grid. When Britain needs the electricity they could produce they are near motionless as there tends to be little or no wind during a freezing cold high pressure period. The same occurs in the summer when we reach for air conditioners in hot weather.
Thirdly, irrespective of the rhetoric of the Copenhagen summit, Britain has now turned back to its increasingly elderly and dirty coal-fired power stations to provide back up and see us through. These plants are being ramped up to shoulder demand. In the last few days they have been meeting nearly 45% of electricity demand. Ironically, many of these plants, which have an average age of 35 years, will be closed within five years under new EU pollution rules – which begs the question as to which fuels will we fall back on after 2015 to keep the lights on at affordable prices.
This severe cold period should focus all of our minds on what we use to heat and light our homes and power the nation. Better solutions exist and we must seize them quickly if we are to avoid a chronic problem with millions of households paying more and more for their energy in the months and years to come. The lack of a balanced energy policy in recent years is being exposed just as we are at our most vulnerable.