NO one wants to contradict Jumpin’ Jack Flash, but it’s not all right now, or in fact a gas. Anticipating Messrs Jagger and Richards by some distance, the concept of gas was first dreamt up in the early 17th century by a Flemish scholar called Jan Baptista van Helmont, and then adopted and investigated by the Anglo-Irish pioneer of chemistry, Robert Boyle. The word itself was just a variant spelling of the Dutch way of saying “chaos”, which currently seems highly appropriate.
Since the beginning of the year, there has been an increase in global gas prices of more than 250 per cent (70 per cent in August alone). Four UK energy companies have gone bust this month already, and several others are expected to join them. There’s a huge shortage of carbon dioxide, much of which is produced as a by-product of gas by fertilizer manufacturers, which affects not just the supply of fizzy drinks and beer, but meat (because it’s used in the slaughtering of animals). Steel plants have suspended work during peak times, because prices per MWh are now 2,900 times higher than the average of the past decade.
One of the UK’s main gas pipelines from the continent (the IFA 1 link to France) is out of commission after a fire in Kent, while our supplies from Norway are down significantly. Some 60 per cent of the UK’s gas is imported, and 50 per cent of our electricity comes from gas-fired power stations.
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The weather has been disobliging, too. Last winter was especially cold in Europe and Asia and, as a result, gas reserves are very low, while energy demand is up as many countries emerging from the pandemic step up economic activity. But we’ve also just had one of the least windy summers on record, so wind (which normally provides about a quarter of the UK’s power) isn’t taking up much of the slack.
Well, that’s all the big picture stuff that the analysts and politicians wheel out to explain why there might be general price rises, shortages of consumer goods and so on, because energy, like shipping, labour and housing costs, or taxation and regulation, has knock-on effects on every single other product or service you pay for.
But the even worse news for you and me, and our energy bills, is that next month happens to be the point at which the price cap on gas prices expires, and the prediction is that most people’s bills will immediately go up by at least 12.5 per cent. And that will be almost everyone. There will be very little point shopping around to see if you can switch to a cheaper supplier; in fact, the price comparison website Compare the Market has already suspended its energy switching facility.
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Like a lot of other problems, such the current disruptions to the supply chain and huge rise in transportation costs, this is not unique to the UK. When the price rises kick in and people can’t afford to heat their homes, there will undoubtedly be complaints about policy failures at Westminster or Holyrood, some of which will probably have some substance.
The most obvious is why the UK, historically self-sufficient in terms on energy, should have become a net importer. That process goes back to the 1980s and accelerated rapidly from 1990, a period that saw our imports of electricity double, though they are now down from the peak of our energy dependency in 2013, when we imported almost 50 per cent. They currently run at around 35 per cent which, though it sounds like a lot, is actually significantly lower than most other European countries.
One reason we import is the almost total shutdown of the coal industry, and another the fact that production from nuclear will have halved by 2025. But another, perversely, is the emphasis that we have put on encouraging renewables. The “stick” aspect of those policies – which almost every political party approves of on environmental grounds – means that the higher carbon prices paid by British power stations make it cheaper to rely on interconnectors, like the two French IFA ones and the Nemo (from Belgium) and BritNed (from the Netherlands).
Environmental activists who spend their time lying down on the M25 and reflexively opposing objectively greener options such as nuclear power would be better off directing their ire at China, and admitting that the UK has done more to encourage renewables than any other country in Europe, except perhaps Denmark. But the “carrot” part of that approach – the subsidies and investment in wind, solar and hydro, also comes with a cost. That has been dependence, as Germany – another country with a fairly good record on the renewables front – has discovered, with its shameless capitulation to Russia in order to protect the Nord Stream 2 pipeline.
Scotland, with enormous natural advantages, has made particularly impressive strides in renewable energy, with 97 per cent of electricity last year (even that was painted in some quarters as a failure, since the target was even more ambitious, at 100 per cent). The initiatives in the north east of England, with the Teeside renewables plant, offshore and hydrogen, are equally dynamic. This general trajectory may suggest that the last two decades of dependence on imports were a blip, and that the colossal investments that have been made in moving to greener production could once again make us self-reliant in energy.
Despite the brouhaha with which they are anticipating the Cop26 summit, neither Westminster or Holyrood has yet come up with coherent, clearly outlined proposals for ensuring that the renewable sector’s capacity and potential leads to that kind of self-sufficiency. There ought to be active programmes, for example, to retrain and transfer those who work in the oil and gas industry, which directly or indirectly employs almost 20 times as many people as the renewables sector. Many of those skills, in engineering, technology and maintenance, ought to be readily transferable.
We should also be encouraging as many small firms as possible to enter the field, because it is completion that provides the best spur to innovation. Encouraging diversity in supply has, until now, been good for consumers, but the natural advantages that we enjoy means that we should be taking the same approach when it comes to production. We should be thinking not in terms of protecting imported supply, but how we can become net exporters of green energy.
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