Britain is heading towards a deep energy crisis, while policymakers are in total dark about finding solution to it. But of course, politicians as usual are coming up with easy answers to the media stating the energy crisis is “not that deep” and they can be easily solved. As all of us know, politicians mostly resort to easy answers during the years of plenty, when the political weather was being made by environmental pressure groups, is one of the reasons we’re in the mess we’re in now. Commenting the current energy crisis in Britain, British journalists said: “Our leaders, cheered on by large sections of the media, encouraged and subsidized renewable energy generation – good for the planet, but an unreliable source of supply – while discouraging hydrocarbons exploration and failing to revive the shrinking nuclear power sector.
“One of the most dishonest aspects of British energy policy is the reluctance to understand and acknowledge the continuing reliance on natural gas in power generation and domestic heating. In 2021, gas supplied 42 percent of total national energy demand, and generated 40 percent of electric power production, more than all renewable sources combined.
“But the UK’s own gas production is declining. In 2021 output from British gas fields was equivalent to 42.5 percent of national demand, the lowest proportion since 1970. From 1995 to 2003, the UK was a net gas exporter, but the real decline set in around 2008, the year that Ed Miliband’s Energy Act was passed, setting the scene for the rise of renewables and the turn against hydrocarbons. But Miliband was merely the trailblazer for the Coalition and Tory governments to come.
“A key aspect of energy, especially in the northern hemisphere, is seasonal demand. Gas and electricity supply need to respond to wide swings in consumption as the temperature drops. In winter, gas demand averages three times the summer requirement. But that’s just an average: peak winter daily demand can be five or even six times the summer trough. Historically, the UK benefited from highly flexible offshore production, but these “swing” fields are nearly all worked out. Most UK gas is now produced at a fairly steady year-round rate, which means flexibility has to be found elsewhere”.
The obvious source then becomes storage. European countries have large storage capacities because historically they depended on long distance suppliers in Russia, Norway and Algeria, and gas that travels thousands of kilometers can’t be delivered flexibly. But Britain had its swing fields, and as these declined it was able to depend on the international market. As a result, we have minimal underground gas storage. Britain pioneered gas trading across Europe, and also built a very large LNG import capacity, which has stood the country in good stead over the past 10 to 15 years.
But everything changes when there is an overall shortage of gas on the international market, as has now been caused by Russia’s invasion of Ukraine. Then it becomes a question of rationing by price. So if the UK market needs short-term gas – by pipeline or as LNG – it will have to outbid other players with recourse to significant quantities of stored gas.
Britain’s single largest storage site was Centrica’s Rough, a depleted offshore gas field. Centrica closed it a few years ago because its facilities were old and run down, and gas prices at the time would not support its overhaul without government assistance, which was refused. Now the Government is scrambling to help Centrica reopen the site, but even if Rough is brought back online, it is unlikely to be much help before the winter of 2023/4.
In the short term whoever occupies 10 Downing Street will have to subsidize household and probably also business energy bills. That is a real political, economic and moral imperative which will cost the country dearly for years to come and throw out many calculations.
