I’ve been pretty up front about the fact that the precarious energy situation we find ourselves in today is mostly of our own making.
Even so, it still hasn’t been stressed enough that so much of it is due to the UK’s and Europe’s specific insistence that removing natural gas from the energy mix to achieve net zero sooner rather than later would somehow be manageable. All this encouraged, however, was a chronic under investment in politically neutral supplies and a growing dependency on supplies from the one country that we really couldn’t rely on. At least not without inviting an even greater environmental risk to the world in the shape of actual nuclear war.
None of this was unforeseeable. That’s the tragedy. Sadly, the trendy bandwagon forces of ESG investing proved too powerful for common sense to prevail. Peak stupidity came in the closure of the UK’s gas storage facilities. Yes they needed major investment to keep going – but this investment should have been seen as worthwhile.
Instead, advisors told the government the UK didn’t need storage because – in the style of emergency overnight lending in money markets to plug unexpected liquidity shortages – unexpected imbalances could always be plugged by supplies sourced from wholesale international markets at cost.
The advice was based on the expectation that this wholesale market would always be open to us. Except it wasn’t. And now, just like in 2008, we discover that it probably would have been prudent to operate with far more reserves.
But the most important question at this point is what is the government going to do about the sad predicament we find ourselves in?
A glance at the new British energy security strategy released by the prime minister on Thursday is telling. Yes, all the usual guff to appease eco warriors is still in there. But there’s also been a noteworthy u-turn (my emphasis):
Currently around half of our demand for gas is met through domestic supplies. In meeting net zero by 2050 we may still use a quarter of the gas that we use now. So to reduce our reliance on imported fossil fuels, we must fully utilise our great North Sea reserve, use the empty caverns for CO2 Storage, bring through hydrogen to use as an alternative to natural gas and use our offshore expertise to support our offshore wind sector. As a result of our plans, the North Sea will still be a foundation of our energy security but we will have reduced our gas consumption by over 40% by 2030.
The North Sea emerged as an important oil-producing area in the 1970s and 1980s, with the UK continental shelf currently home to around 290 offshore installations, over 10,000 km of pipelines, 15 onshore terminals and over 2,500 wells.
Gas is currently the glue that holds our electricity system together and it will be an important transition fuel. We are taking a balanced approach to this unique subterranean asset. There is no contradiction between our commitment to net zero and our commitment to a strong and evolving North Sea industry. Indeed, one depends on the other.
Except that denying this is a contradiction is absurd! The statement is a clear admission that we need to keep investing in oil and gas irrespective of what climate goals we have.
It’s also a clear reversion to the old UK energy policy that was in place and working well at reducing the country’s carbon footprint before net zero was even a thing. A time when every grown up in the energy world was able to confidently point out that natural gas was an essential transition fuel and that we couldn’t create a decarbonised world without it. A time before ESG eco warriors (probably funded by Russia) had the power to intimidate the world’s most powerful energy executive by threatening to out them as climate deniers or some such on Twitter.
The government should admit as much so that this scale of self sabotage can’t happen again.
The government should also be upfront with people that none of this is going to happen in time for next winter – which means, those who can should begin planning to make contingencies for energy shortages now. That includes temporarily unwinding urban policies about wood burning. That includes having those who can move to warmer climates for the winter to plan to do so. That involves critical sectors investing in generators just in case. And that involves schools, public buildings and offices offering extended “warm” hours to pupils, employees and residents so that as much of the cost can be transferred from private household balance sheets to corporate and public ones as possible.
I’m sure there are other forward planning possibilities I haven’t thought of that can also be introduced. Now is the time to think about them. Not November.
