The UK government seems determined to make our energy supply even weaker

Let me start with a couple of pieces of good news. Firstly we have got through the winter season without any blackouts. Next up the world energy situation is improving as highlighted by this.

Fresh low of $1.995 this am……..Nat gas is down -53.85% QTD on pace for the worst qtr since ever back to contract inception in 1990.

That was from Carl Quintanilla of CNBC yesterday. So we not only have a new big figure ( in the 1s) but quite a fall and unlike his perspective I consider this to be a potentially big gain for consumers. That theme has been looked at elsewhere too.

U.S. NATURAL GAS FUTURES EXTEND LOSSES, PRICES FALL TO LOWEST SINCE SEPTEMBER 2020 ( @DeltaOne )

I know these are numbers for the US but some of the discontinuity in world markets is ending and it shows a trend. This is happening in Europe too albeit the French strikes has caused trouble this week.

The front-month futures at the TTF hub, the benchmark for Europe’s gas trading, traded up by 1.3% at $47 (43.30 euros) per megawatt-hour (MWh) at noon in Amsterdam, while the equivalent UK benchmark contract was up by nearly 1% at the same time in London.   ( OilPrice.com)

But even so the same source points out this.

Despite the rise in Europe’s benchmark gas prices, they are now at around a 20-month low. Signs have emerged that industries are switching back to using gas in a tentative sign that European industrial gas demand is rising.

The UK Natural Gas future ( April) is at 106 rather than the 189 of a year ago and the 759 of the peak last August. We have some wind power today ( circa 11 GW) although not a lot of solar power. For those unaware the UK has been very wet in March, following a claim from what the BBC calls science that we were in a drought.

Energy Security Day

Such claims are troubling as we have been told this before and we have in fact become more vulnerable and less secure. For example we have not brought a new nuclear power station online for decades. We seem to be getting more bureaucrats rather than real action if this from the Financial Times is any guide.

Ministers have drawn up plans to fund a new nuclear body called Great British Nuclear;

I am sure calling it “Great” fixes things! Hopefully it fools nobody. Maybe there will be gains from Small Modular Reactors but surely there is also a risk from having reactors dotted around the country. For the forseeable future we have limited nuclear capacity of a bit below 5 GW these days. As I type this tt is producing some 4.11 GW in an example of what has been shocking negligence by the UK political class. I recall people pointing out we needed some replacement nukes when Tony Blair was in power so we have had both Labour and Conservative governments plus a Liberal Democrat coalition looking the other way.

What else is there? In spite of the ongoing issues with electricity supply they seem determined to boost demand via electric vehicles.

UK energy secretary Grant Shapps has vowed to press ahead with plans to ban the sale of new petrol- and diesel-engined cars by 2030…….The UK car industry had also been expecting the government to announce the details of a new “zero emissions mandate” on Thursday, which would compel them to sell a certain proportion of electric vehicles from the start of 2024. ( Financial Times)

There are two details which may improve supply.

ease onshore wind development; and tweak the windfall tax on oil and gas companies, according to officials.

The problem with wind development is that whilst it is useful at times we have no control over it, only a pittance of storage capacity, and it is very variable. I have pointed this out on social media in the past and one theme of the response was that we could use car batteries to smooth the flow. It never seemed to bother them what this would do to the car batteries nor how they would start the car in the morning? But anyway when it came to it last winter and we might have needed to do this they all seemed to be doing the online equivalent of washing their hair. This highlights a serious problem where this area has become very emotive and facts get replaced by what is better described as Hopium.

The issue of a windfall tax has political considerations which never helps. The UK government thought it could gain a political advantage via a windfall tax last autumn and via a succession of cancelled oil and gas projects it has actually reduced our future energy security. So I am expecting something of a reverse ferret here. But it illustrates a fundamental problem where decisions on things which affect us for years if not decades get affected by political whim. Also if we return to my opening points, if prices are now falling what exactly is the “windfall”

The Guardian has a slightly different perspective.

Among the 1,000 pages of proposals to be published on Thursday will be boosts for offshore wind, hydrogen, heat pumps and electric vehicles.

If we start with wind it appears to be a lot more expensive than claimed.

 Including system costs, the price to consumers of UK offshore wind is likely in excess of £200/MWh, whilst onshore is likely over £160 — respectively 400 per cent and 320 per cent higher than pre-crisis norms ( The Critic)

Perhaps that is why we are seeing some manipulation of the bills.

Grant Shapps, energy secretary, has signalled his intention to remove green levies from customers’ electricity bills and include them in general taxation, and to change the way that electricity prices are set. ( FT)

As to heat pumps the rhetoric supporting them has rather collided with reports from people who have actually installed them. Rather amusingly Kay Burley of Sky News who appears to be a fan had to read out a reply pointing out that they did not have £16,000 to install one. Also there is the issue of really cold days before we get too where the electricity is going to come from?

Next up is another price rise.

Aviation contributes around 8 per cent of the UK’s greenhouse gas emissions, and the industry’s net zero targets are heavily reliant on using sustainable aviation fuels to decarbonise flying……..New is expected to back the aviation industry argument that financial subsidies are needed for producing SAF because cleaner fuels are currently about three times the price of normal jet fuel. ( FT)

Followed by enormous expense on something which will cost energy not produce it.

Shapps pointed to the £20bn the government is planning to spend over 20 years on developing CCS, which he said would generate new jobs and make the UK a world leader in the technology. ( CCS is Carbon Capture Storage )

Comment

The problem here is analogous to the one I noted yesterday, but worse. There the Bank of England was making knee-jerk responses when it needed to look two years ahead. Here we see a political establishment which is making knee-jerk responses when many of the issues require a decade and in some cases decades of planning. The claimed solutions just tie us into the same trap of relying on unreliable sources of power. Wind and solar can help but only to a certain degree unless we discover an ability to store energy that is way beyond present and likely technology. Actually I am no great nuclear fan but we have little choice and have missed an opportunity to update the technology in another fail. Those who have followed the Astute submarine programme will know it cost a lot of money and many years to reinstate what our politicians had let wither on the vine in a claimed economy measure.

In fact that is a standalone theme where we end up spending vast sums of money on things which they then claim are “cheaper”

There one clear positive has been the interconnectors which can export or import around 7 GW of electricity these days.Although they would help little if a cold still day affected all of Europe. Also once we got a grip on nuclear submarine production it did have the benefit of the deal with Australia, but it will be a long time before we get like that with energy supply. Today mostly seems to be about raising electricity demand when we have clear struggles with supply.