Hindsight and foresight are two concepts which will affect Governments
of all colours on energy policy. If a Government has the foresight to
pursue a programme of successful policies it should enjoy favourable
historical reviews but when the hindsight concept is adopted it is
usually a reflection that a policy has failed (often years after it was
adopted) and new policies are urgently needed to correct the mistakes.
This is the position now facing Britain’s shambolic so-called energy
policy. On 19th October 1992 then President of the Board of Trade,
Michael Heseltine, told the Commons that a new wave of gas-fired power
stations would be built which would generate cheaper electricity than
the then coal and nuclear stations and that British gas reserves would
cater for these new stations for another fifty years. At the time Lord
Heseltine was attempting considerable foresight and was inevitably
excited by the information he had to give the House. Cheap electricity
from our own indigenous gas fields for a generation; bravo! Sadly, for
all of us, he was wrong.
Britain is now perilously over-dependent on gas-fired power stations
for the generation of nearly 40% of our electricity. As indigenous
North Sea reserves run down, 80% of the gas needed for these power
stations could be imported by 2020 raising huge implications for price
and security of supply, which in my opinion are effectively the same
thing. A huge problem for Britain is that some of the gas we need is
already going to countries that are prepared to pay more. Imports of
liquefied natural gas (LNG), recently hailed as an answer to Britain’s
energy problems, have fallen by 60% so far this year as more and more
LNG goes to energy hungry China and India where it fetches a higher
price. Our sources for gas imports will include Russia, Algeria and
Gas-fired power stations are relatively cheap and quick to build. But it is the feedstock, gas, which is tied to the spiking oil price and which is consequently driving up the price of the electricity it generates which is causing much anguish and panic in Whitehall. This can only get worse and last week’s initiative on fuel poverty does not address the root problem and is a sticking plaster to cover a looming catastrophe.
Lord Heseltine’s policy, which has become known as the ‘Dash for Gas,’ was cautioned at the time by some authoritative figures including Sir Denis Rooke, the former Chairman of British Gas. Such gas industry figures warned against using our considerable gas reserves on such a huge scale for the generation of electricity. They argued that our gas should primarily be retained and used for home consumption such as heating and cooking, when its efficiency approaches 100%.
When gas is used to generate electricity it is only 50% effective because much heat is lost in the process of energy generation. Rooke’s foresight and fear was that the use of gas in areas which could not be designated as premium markets (i.e. ones which could effectively be shown to be wasteful of a scarce resource such as gas fired power stations) would lead to a swift run-down of British gas reserves thereby increasing the need to import gas from overseas at high cost. It was this fear which prompted Sir Denis, who oversaw the privatisation of British Gas, to attempt to promote the need for a concerted energy policy in the UK, the essence of which ‘should be the correct use of the different fuels in the economy.’ With hindsight Sir Denis has been proved right.
What became known as the Dash for Gas has helped put nearly six million households in fuel poverty (up from 2.5 million in 2002) and will be one of the main reasons for average household energy bills possibly hitting the £1500 mark for the first time by Christmas.
In light of this challenge the Labour Government has categorically failed on energy policy at every corner. Its eleven years in office have produced three energy white papers which have consecutively failed to provide guidance or encouragement for the energy companies to invest in new power stations as an alternative to gas, knowing that an energy gap is looming ever closer.
The energy gap cannot be over-emphasised. Britain has 77 Gigawatts (GW) of installed baseload electricity generating capacity. This will need to increase as the economy and the population grows. By 2020 up to 32GW could be paid off as old coal and nuclear power stations reach the end of their working lives. Therefore, new non-gas fired power stations are crucial if we are to halt our gas over-dependence, develop a balanced energy mix, succeed in stabilizing electricity prices and thereby reducing the numbers trapped in fuel poverty, half of whom are pensioners. New clean coal and nuclear power stations are essential; they will also generate cheaper base-load electricity than gas. To plug this gap with more gas-fired stations would be irresponsible.
The medal for energy foresight has to go to France. Between 1965 and 1985 France took the bold and then unpopular decision to build no less than fifty-eight nuclear plants (of the pressurized water type) and now draws over 70% of its electricity from carbon-free nuclear stations. France is even now involved in a programme of refurbishment and replacement as some of its older plants wear out.
Over the last decade the Government has let our nuclear stations run down without any replacement plants. The questions remain as to how quickly we can go into reverse and mobilize the resources to rapidly increase nuclear power in the UK. The timing does not look good. Instead of ensuring that replacements were ready to come forward UK policy over the last decade has been to let our entire nuclear capacity (22% of total electricity supply at its peak) be gradually phased out.
Changing direction now, as indicated by Gordon Brown’s recent utterances, is not just a question of pressing a button. Teams and expertise have to be built up again. Decades of fashionable and misguided emphasis on expensive green ‘alternatives’ have virtually eliminated nuclear engineering from the university career path, while a great deal of public fear, and little understanding, has been allowed to persist about the nuclear waste handling issue.
With hindsight we got it wrong with the Dash for Gas and we are literally paying the price. As a free marketer I do not propose a moratorium on new gas fired power stations but I do believe that if the Government genuinely believes in a balanced energy policy, without allowing our energy eggs to be found in one basket in around ten years time, with all the social and economic problems this will cause, then it must quickly encourage new clean coal, nuclear and other efficient renewables with possible generation targets set down. On energy policy Government must hold the framework within which the free market can operate. In comparison I believe this is no different to the Treasury stating that banks should maintain a minimum level of reserves.
This Government appears to be nearing its natural end but our quest for cheaper and more abundant energy will go on It is a risible fact that in the last eleven years it has done so little to build and plan for the future and provide leadership in such a crucial area. The Conservative Party now has the opportunity to right these wrongs.