The £1 or 5 bob road to reducing emissions
by David Odling, Energy Policy Manager, Oil & Gas UK
July 2011
Over the last few months, Oil & Gas UK has submitted written and oral evidence to the House of Commons Energy & Climate Change Committee’s inquiry into the security of energy supplies. Energy policy manager, David Odling, explains why the UK Government should rethink its energy targets and focus them on low carbon, rather than renewable, energy sources.
The UK government has three over-arching policy objectives: reduced emissions of greenhouse gases (GHGs), security of energy supplies and affordability. Oil & Gas UK fully supports the government’s desire to reduce emissions of GHGs in economically efficient ways and to encourage investment that will achieve this objective, coupled with securing the country’s energy supplies in a manner which is both affordable for consumers and keeps the economy competitive.
Risks of current government energy policy
However, it is clear that current policies which aim to de-carbonise electricity generation by 2030 and electrify the economy are going to be expensive. In fact, the much quoted £200 billion of energy infrastructure investment required between 2010 and 2010 excludes offshore oil and gas where it is expected £50-60 billion will be spent. Also, it must be doubtful if the necessary capital can be raised within the timeframe contemplated, never mind spent to good effect, without straining the supply chain’s resources such that it leads to significant cost inflation, the worst of all outcomes.
Furthermore, current policies assume the simultaneous and successful introduction of a wide range of new technologies and changes in the way we live:
- 12-15GW of new nuclear power plant
- Carbon Capture and Storage (CCS) becoming commercial
- offshore wind power of a scale, complexity and distance from shore never undertaken before
- development of a smart and much expanded electricity grid
- widespread introduction and use of electric vehicles
- electrifying home heating (80 per cent of homes currently use gas)
- introduction of smart metering across the country
- dramatic improvements in energy efficiency and the way society uses energy
There are, therefore, very considerable financial and practical risks with today’s policies. The likelihood of so many new technologies and such profound changes all coming to fruition within the same, comparatively short timeframe and at an affordable cost is extremely small.
Recognising the reality
Given the difficulties of raising the necessary capital and the restraints in the supply chain, particularly of suitably qualified people, the current target for 15 per cent of the UK’s energy needs coming from renewable sources by 2020 is, more realistically, a target for 2030. It would greatly help if government were to recognise this reality and adjust its policies accordingly, even though this will mean having to re-negotiate the UK’s commitments within the EU. This will be less damaging to the economy than attempting to achieve the target in 2020 which the UK is likely to miss by a significant margin.
It would have been more beneficial if the renewable energy target for 2020 had been a target for low carbon energy which would have opened the way for investment in a wider range of technologies.
Instead, the policy represents a commitment to offshore wind power on a large scale that is not only expensive and highly resource intensive, but the effectiveness of this form of energy is of dubious value at times of greatest need, because of its intermittent nature. This was brought sharply into focus by the coldest winter for more than 30 years in 2009-10, followed by the coldest start to any winter on record in late 2010.
Changing the focus of targets
It is our firm belief that the current commitment to renewable sources of energy needs to be rethought. The target should focus on low carbon sources, especially of electricity generation.
In the first instance, this means more gas fired power plants which, even if large amounts of wind generation are built eventually, will still be required, albeit in more of a back-up role. Gas fired power will reduce emissions of carbon dioxide and oxides of nitrogen and sulphur and particle matter substantially (by more than 50 per cent for carbon dioxide), compared with the coal and oil fired plants to be replaced, and at an affordable cost.
Even if they do not deliver the reductions in emissions desired in the much longer term (2040-2050), they will create the time and space in which to develop and introduce some of the new technologies required; one of these, carbon capture and storage (CCS), may well be applicable to those gas fired power plants.
Such a way forward would pose much smaller and more manageable risks than the current path chosen by the Department of Energy and Climate Change (DECC) which is determined by the EU’s renewable energy target for 2020.
As Professor Sir John Baker, the post-war head of the engineering department at Cambridge University, used to tell his undergraduates: “An engineer is a chap who can make for five bob [25p] what anyone can make for a pound.” In those simple words lie a profound truth; unfortunately, current policies are the £1 way forward – the Government needs to listen to the engineers and adopt John Baker’s ‘25p’ way. Otherwise, we will fail to achieve any of the over-arching objectives.
For more information, please contact David Odling.
