Business | Oil & Gas
Turning the spotlight on energy needs
Questions tend to frame answers. So by stressing the questions of gas dependence and new nuclear build, it is pretty obvious what the UK government really wants out of the three-month public consultation period it has launched on its forthcoming energy review.
- Financial Times
- Published: 00:00 January 31, 2006
Questions tend to frame answers. So by stressing the questions of gas dependence and new nuclear build, it is pretty obvious what the UK government really wants out of the three-month public consultation period it has launched on its forthcoming energy review.
It hopes that the British will take a cold-eyed look at the risks of relying too much on such gas suppliers as Russia, swallow hard and conclude that for the sake of energy security and reducing greenhouse gases, they are now ready to contemplate the building of a new generation of nuclear reactors to at least maintain atomic power's place in the UK energy equation.
Hopefully, this will be the outcome. For the government has correctly framed its energy requirements to meet three tests: to provide security of supply, be environmentally sustainable and maintain economic competitiveness.
Options
No one fuel meets all three tests for Britain: coal is relatively cheap and available but pollutes too much; gas is relatively clean and (until recently) cheap but requires increasing imports; and nuclear uses relatively little imported fuel and emits no greenhouse gases but its economics are, or have been, very unattractive.
So the best way of meeting the three tests is to have a mix of fuels in making electricity, and to achieve a diversity (in fuels and of sources of fuel) that itself further bolsters security of supply.
The government failed to use such arguments in its 2002 energy review and 2003 energy white paper to justify restraining the growth of gas in favour of maintaining nuclear's share.
But subsequent events are pushing it harder in that direction. The change in climate, the rise in energy prices and Britain's switch to a net importer of gas have all happened faster than most people anticipated.
The country does not (yet) directly depend on Russia for gas, but its European Union neighbours do. And the latest interruption in gas supplies to Georgia, after Moscow's row with Ukraine, reinforce doubts about its reliability as a supplier.
Meanwhile, rising fossil fuel prices make nuclear power more appealing, as shown by the surprisingly high price bid by Toshiba for Westinghouse, British Nuclear Fuel's US reactor-building subsidiary.
An underlying issue is greater government involvement in energy in Britain, which was a pioneer in abolishing its energy ministry and deregulating its energy market.
The UK partly blames its energy supply problems on its EU partners failing to liberalise as fast as it did, an issue that is being addressed in a forthcoming European Commission energy green paper requested by Britain during its presidency of the EU.
But the UK consultation exercise will undoubtedly produce more subsidy requests by renewable and nuclear energy producers.
The indications are that the government agrees that energy is too important to be left entirely to the free market.
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