Gas companies are announcing price increases of up to 9%, but it looks as though gas will actually be providing cheaper electricity - in the short term at least!
Ed Davey, Energy Secretary, has announced a programme of new gas-fired power stations, and at first sight gas is a dream solution to our energy problems.
Unlike wind, wave or solar, a gas-fired power station can run 24/7. Unlike a coal or nuclear station, it can rapidly run up or run down to meet fluctuations in demand. Gas stations are quick and relatively cheap to build. At the end of their lives there’s no dangerous waste to deal with. CO2 emissions are far lower than from coal, there’s much less of other greenhouse gases like sulphur dioxide and hardly any particulates. The gas comes along a pipe. It doesn’t need railways or roads for transport, so is unlikely to be disrupted by industrial disputes. A perfect solution all round?
We will always need some gas-fired capacity because of its flexibility in load-balancing, but there are many questions about the present policy of major expansion. Britain’s energy policy needs to deliver security, keeping the lights on 24/7, and affordability, minimising fuel poverty and keeping our industry competitive. We also have national emissions targets, and although gas stations are far cleaner than coal they still emit CO2.
The Committee on Climate Change, an independent panel of advisors to the Government, said last month that investment in more gas-fired power stations was “incompatible” with the UK’s targets for reducing carbon dioxide emissions, which are legally binding under the Climate Change Act.
At the same time the Aldersgate Group, representing M&S, EDF, Aviva and other major companies, has called upon George Osborne for a clear policy on decarbonising electricity production by 2030. They say “It is essential for Government to provide investors with the long-term confidence they need to transform our electricity market and make investments capable of driving wider economic growth.”
This leaves security and affordability. British North Sea gas has been in decline for a number of years. We now import more gas than we produce. About half of imports comes from Norway and just under half comes from Qatar by ship. Norway is a friendly, stable nation but there are strong suggestions that Norway’s reserves will start to run out and production will decline rapidly after 2020. The next big supplier is Russia. There’s plenty of gas there, but we would be at the very far end of the pipeline. In the past Russia has cut off supplies to whole countries, and other countries further down the line have suffered as a result.
Gas from Qatar comes by tanker. Tankers can go anywhere, and as demand and gas prices rise it would be easy to divert the ships to the highest bidder. And then there’s the Straits of Hormuz problem. This is the pinch-point at the mouth of the Persian Gulf. If Iran or anyone else decides to blockade the straits, the LNG tankers will be unable to get out. (And the oil tankers will be boxed in as well!)
Is fracking the answer? Fracking, the release of gas from deep rock layers, could give us a new source of UK gas. The Institute of Directors believes fracking could create 35,000 jobs and there’s strong support from the CBI. Fracking still remains controversial. People are mainly concerned that their groundwater will be polluted. More seriously, fracking can destabilise the geology and test drilling in the northwest has already triggered earth tremors. At the end of the day the product is still gas, and burning gas still releases CO2.
Affordability? There is no doubt that energy, along with many other resources, is becoming scarce and expensive. Switching suppliers and setting up buying groups may have some effect on prices, but the underlying commodity prices will always determine what must be paid in the end. In the medium to long term prices will go up dramatically. In the short term a fleet of new gas power stations may seem attractive and cheap, but it’s likely to turn out to be insecure, expensive and polluting.
So what do we do?
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