Saturday, 26 September 2015

Conservatives and Their Lack of Energy

If one looks at the government website on low carbon technologies, from July one will find a flurry of activity.  All of this can be summed up in the government claim of controlling the cost of renewable energy.

You have probably heard that the power supplier Drax has announced yesterday morning they are pulling out of the carbon capture scheme, only one of two large-scale experiments (the other being in Peterhead), as a response to government cuts on renewable energy - in this case biomass fuel.

Likewise, support for small scale (less than 5MW) solar electrical generation are being withdrawn, and feed-in tariff support (that is the payments made for solar-generated electricity by small-scale suppliers) are being slashed and ended early.  Hundreds of small firms, importers and thousands of households that have already installed solar PV, and who were relying upon the goodwill and constancy of government policy have been ruthlessly betrayed.

Add to this also the Conservative's decision to block all onshore development of wind turbine technology and cut support for offshore wind farms, one can only conclude that it is all-out war on renewable energy itself.  Pretty much every green policy introduced by the Liberal Democrats during the last parliament is under attack.

That being the case, let's instead see what the Conservative's favoured technologies are.  Fracking and nuclear.

Now, I am not against fracking per se, as long as high standards and correct oversight are put in place.  In that, as I have blogged before, the Collation record was not bad at all.  That has changed since the Conservatives has returned to single-party rule; reversing decisions to protect national parks for instance.  No matter: Unfortunately, especially for those of us who work in the oil energy, the bottom has fallen out of the market.   The oil price has literally halved since last year.  This is good news for energy consumers (aren't we all) but at these times it means that the industries invest nothing into exploration.  Last week the Telegraph reported that in the North Sea - and I am taking this to mean for the entire basin (UK + Europe), 65,000 jobs have gone.  This would be about right.  For example: yesterday it was leaked that major oil service company Halliburton will be announcing a second round of cuts within the next two weeks; this being in addition to the 14,000 jobs they have already shed.  I am still in the industry but hanging on by the fingernails: my employer are cutting staff by thirty percent and there is no guarantee this is going to be the end of it.   OPEC is predicting the oil price will return to eighty dollars a barrel but not before 2020, while the great vampyre squid, Goldman Sachs, is now in bear mode, predicting that the oil price will remain low for the next fifteen years.  Frankly I don't believe that though.  Goldman have always played their own game.

One should also note that the fall in the fossil fuel price means lower consumer prices, therefore the burden of the renewable fuels levy is lessened as prices fall overall.  Since the Conservative cuts were announced in July after the price has fallen, it rather goes to show that the claim of reducing the burden upon the consumer is a red herring: the markets are making it happen anyway.

The last bit of the jigsaw is nuclear.  On this the Conservatives have sought to buck the market by guaranteeing the £2billion investment by the Chinese, This is only part of the total £24billion that the new Hinkley Point C power station, led by French company EDF.  All this is done with guaranteed (and high) prices for the electricity due to be generated.  Hinkley Point is just one of the  sixteen new nuclear power stations planned, all open to foreign investment.  One must assume that the government is also willing to underwrite other shortfalls in investment, plus allow for artificially high prices once the electricity is being produced.  Remember that a government underwriting  an investment means that any profits remain private, while losses are addressed from the public purse.

Both nuclear and renewables address needs just for electricity. Although it remains to be seen whether the Volkswagen diesel scandal will result in a profound change in direction, I cannot see electric cars dominating within the next fifteen years.  Some form of hybrid fuel use is more likely.  This is just for personal transport: long distance vehicles and marine transport will still be reliant on the sticky black stuff.

So what have we got?  Any form of local, small scale, renewable energy will soon no longer have support from the government.  Onshore wind turbines farms are out, and this effects the offshore market as well.  If their policies are allowed to continue, the Conservatives will kill the renewable industries in Britain.  Scotland has the political power to continue but is pretty well on course to be self-sufficient in renewable electrical generation anyhow.  In order for the process to effectively continue, England really has to be committed to it.

Similarly in oil and gas, fracking is not going to happen, at least for now, because of the low energy prices.  One might think that with the cutbacks and the low cost of exploration at this time, that now would be an excellent time explore.  It does not seem to work that way.  During downturns, energy companies just concentrate on the basics: cashflow and dividends first, maintenance after.  The cost of exploration and expansion comes out the surplus generated during high oil prices.

The low oil prices will also accelerate the decommission of the North Sea fields.  If the cost of maintaining the fields outweigh what they are earning, they will simply be shut down.  At this time, 140 (yes, one hundred and forty) fields are up for decommission.  This reflects the running down of the North Sea.  For both oil and gas, production levels are now under thirty percent of their peak levels in the late 1990s.

All this could be explained by the Conservatives perverse and short-term addiction to free-market economics.  It certainly does not add up to any dedication to the much-vaunted term "energy security".  Britain is already a net importer of oil and gas and under current policies that is only set to increase.

Why is it that nuclear is different?  What is so special about Hinkley Point C that those arch free-marketeers that are Cameron's Conservatives, feel the need to set aside up to £2billion of our money to ensure it goes ahead?  One cannot help but wonder if it has nothing to do with energy security,  for which the government seems not to care two jots about, and more to do with defence.

In 2010, David Cameron and President Sarkozy signed the Lancaster House Treaty, which provides for cooperation and close integration, not only between the two nation's military forces, but also joint supply and manufacturing.  The treaty is in force for fifty years so effectively by its end, UK and French military will be totally interchangeable.  Part of this process is nuclear forces.  Everything has a shelf life and nuclear weapons are no different.

Perhaps Hinckley Point C is to be part of this nuclear supply chain.  Who knows? We might even get some electricity out of it as well.

What is clear though, is that as far as energy supply and climate change, the Conservatives are content to leave all that to the free markets.  They simply could not care less.

No more pictures of Dave with huskies.  Given recent revelations with his interactions with other species, perhaps that is not a bad thing.

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