Past, present and future Tilting at windmills3 April 2002
Sitting on the fence while keeping both ears to the ground is painful, but is the UK government's energy review doing just that? By Hugh Conway
This long-awaited, much-leaked 216-page publication from the Performance and Innovation Unit (PIU) came out in February but left many crucial questions unanswered. What is the future for nuclear and coal? What about transport? There is very little in the report about this important area. And has the UK got a viable policy on renewables?
The government must be clear about what it wants to achieve. It cannot appease every lobby. If it genuinely wants to reduce carbon emissions, it has to publicly acknowledge the role that all energy sources will have in the power mix and take steps to guide public opinion.
Key policy principles are listed as the promotion of competitive and liberalised markets, domestically and internationally; recognition of the importance of bringing climate change objectives to the heart of energy policy, given the importance of the energy system in reducing greenhouse gas emissions; the promotion of technological innovation to create and keep open options to meet future challenges and to maintain flexibility in the face of uncertainty; and the need to avoid locking prematurely into options that may prove costly in future. While "immediate priorities should be on energy efficiency and promoting renewables, the options of new investment in clean coal and nuclear power need to be kept open," says the PIU.
The review invites a debate on the future of energy policy in the UK rather than giving a decisive lead on the way forward. It is a short-term palliative to all interested parties and a nod in the direction of current public green sensitivities. The nuclear industry does not believe enough has been done to help their cause while environmentalists have been critical of it for failing to halt all plans for a nuclear power programme. Currently, the UK produces 26% of its electricity from nuclear, about 40% from gas, 30% from coal and the remainder from oil and renewables.
A welcome move is the proposal by the review recommending that there should be an end to the controversial and much-criticised climate change levy, introduced last year. This tax on energy use needs to be replaced with a more precise levy measured according to the amount of carbon dioxide produced. Trading carbon emissions permits are also to be introduced on a voluntary basis in April this year. This scheme will allow companies with the lowest cost of reducing emissions to trade their surplus pollution permits to those with the highest cost. It will be interesting to see whether the Treasury can accept this one. It is not known for removing taxes once applied.
The situation regarding nuclear is vague, although the way has been left open for some tax breaks and possibly a favourable planning process. Any new plants built should be exempt from carbon tax, giving them an advantage compared with coal or gas-fired plants. The nuclear industry, while largely welcoming this measure, believes that it is nowhere near enough to finance new nuclear plant. The government has basically told the industry to put its hands in its pockets to refurbish or borrow the money itself to fund new plant.
The report was described by Brian Wilson as "a long-term framework until at least 2007 within which the renewables industry will be free to make commercial decisions on how best to meet their obligations." He believes that the Kyoto protocol is the only workable basis for international action. The US policy of making emission controls voluntary and its stance on economic growth being key to environmental improvement he describes as "unfortunate".
However, it is important that whatever is done, it takes place in agreement with the rest of the world, otherwise our target of 10% renewables by 2010 and a fifth by 2020 will prove counter-productive. If the UK becomes uncompetitive and jobs go overseas, then the environmental problem will just be shifted elsewhere. Industry will continue to play its part in contributing to reductions in the UK's greenhouse gases emissions, but environmental taxes in the past couple of years have added significantly to its costs and could result in impacting on its effectiveness in the international marketplace.
Renewable energy sources such as wind, wave and solar power, will have to be greatly boosted to provide 20% of the UK's electricity by 2020. But as the contribution from the UK's ageing nuclear power stations will decline from the current 26% to less than 4% as they are decommissioned, renewables will not provide enough power to make a dent in the country's reliance on fossil fuels. Decommissioning existing nuclear power stations over the next 20 years will leave us at a standstill regarding CO2 emissions. Renewables have an important role to play in the future, but currently have a built-in ceiling to limit the costs as they are still more expensive than conventional energy sources. Further research and development will be needed before 2006 and the next review to bring down the cost of electricity from these sources.
According to the government's own chief scientific adviser, Professor David King, the UK's nuclear power station building programme should be revived to meet international targets to reduce carbon dioxide emissions. He sees it as a politically difficult but environmentally necessary move. Renewable energy sources on their own will fail to meet the UK's targets, he believes.
Until now, Professor King has been a sceptic of nuclear fission power, sharing concerns with environmental groups about the disposal and storage of radioactive waste. While more advanced research into treating and disposing of nuclear waste — the legacy of the long Cold War period — is needed, he believes that dependence on fossil fuels will remain unless there is new nuclear build at least to replace existing nuclear power stations. If cutting emissions are the priority, energy must continue to be sourced from nuclear power, at least in the intermediate phase, until renewables come onstream substantially.
British Energy (BE) has been sufficiently encouraged by the ambivalence of the energy review to look to the future. As well as announcing participation in two major wind energy projects - one of which would be Europe's largest windfarm, the company is already in discussions with two companies over possible future UK nuclear power station designs. The Candu NG reactor is a development of the design being operated successfully by BE's Ontario subsidiary Bruce Power.
BE has just signed an agreement with BNFL on work to assess the feasibility of the Westinghouse AP1000 design as a potential option to replace BE's existing UK nuclear power stations when they reach the end of their planned operating lives. This agreement, which will run initially for one year, is the first concrete commitment from the two companies since the publication of the PIU energy review report and represents a significant step forward in the quest to build a replacement nuclear power station in the UK.
In 2002/3 BE plans to spend more than £3 million on Dungeness B, Hinkley Point B, Heysham, Hartlepool, Hunterston B, Sizewell B and Torness. Despite the fact that the company's strategy is largely aimed at increasing unit output to reduce costs, BE aims to reduce costs to 1.7p/kWh in 2002/03 and 1.6p/kWh in 2003/04. This could be achievable if it produces 70TWh in the latter period.
Squaring the circle
Energy expert Professor Ian Fells believes that we cannot "square the circle without nuclear power." If the UK is to remain committed to a reduction in greenhouse gas emissions and maintain its policy for diverse, sustainable and competitive supplies of energy, nuclear energy must be a part of the energy mix, he says.
While the EU target averages out at around 22%, Denmark and Finland both aim to be 30% dependent on renewables by 2010. Electricity prices in Denmark have risen to 13 pence a unit, compared with between 7 and 8 pence in the UK, and there has not been the expected reduction in greenhouse gas emissions. Following the withdrawal of subsidies for Danish wind turbine producers, plans for three sea-based windfarms have been cancelled.
To achieve just half of Denmark's windpower output, the UK would have to create windfarms stretching over more than 3000 square miles of countryside. Roughly two turbines a day would have to be constructed over the next twenty years, the steel pylons presumably manufactured by conventional means - thereby consuming energy - and financed by subsidies sourced from existing energy consumers.
Even the government's own advisors are doubtful about the targets set. Towards the end of last year the government-sponsored think-tank, the Sustainable Development Commission reported that the "2010 target of 10% electricity generation from renewables .....implies unprecedented rates of growth from these technologies."
Security of supply? By 2020, the UK will probably be dependent on imported gas for 70% of its needs. "Diversity and security of supply are no longer only a matter of ensuring a balance of energy sources within the UK. Increased reliance on imports from Europe and elsewhere underlines the need to integrate our energy concerns into our foreign policy," the prime minister said following the review's publication.
"There is no immediate crisis in relation to the security of energy supplies or the move to imported gas. However, we need to keep issues of security of supply under constant review, recognising that in the future this needs to be thought of in global terms, involving for example, the further liberalisation of energy markets within the EU, and diplomatic work to support stability in old and new energy producing areas," the review states. Will enhanced diplomatic activity be enough? And does Putin want to relinquish hold on Gazprom?
The green and cost-effective way forward would be to deal with the alarming rate at which energy is wasted in Britain. Cooling towers use more energy than heating every building in the country.
Greater use of combined heat and power (CHP) would increase energy efficiency. The Carbon Trust, set up last year with £50 million of government funding, forecasts that by 2050, between 50 and 60% of the reduction in CO2 emissions will come from improvements in energy efficiency by an extension of existing technologies.
CHP works best in fairly small generation units, allowing power to be exported to the grid and heat distributed locally. But new CHP installations have almost reduced to nothing after the New Electricity Trading Arrangements penalised the price of exports. The Department of Trade and Industry's aim of increasing CHP from seven to 14% of UK power seems unrealistic.
The report is intended to inform government rather than set policy and there will now be a consultation on the recommendations. After 558 submissions, 20 advisors, 16 team members and seven consultants, the formation of a "cross-cutting sustainable energy policy unit" is one of the recommendations, using up more heat, light, paper and consultants. A White Paper is expected to be published before October this year.