Ukraine has bulldozed the green energy fantasy
It’s not something that any sane person could wish for, but the horrors in Ukraine have concentrated the European mind as if it were the threat of hanging. Right across the continent, in and out of the European Union, the real cost of trying to squeeze out hydrocarbon fuels is suddenly painfully obvious. Years of dwindling exploration by oil companies bullied into cutting back, a failure to diversify sources of gas, and coal mining painted as the work of the devil, have followed the romantic belief that a combination of green windmills and solar panels will somehow replace fossil fuels.
All realistic projections have been saying this was a fantasy ever since the UK committed to “net zero” by 2050, but it has taken the unfolding disaster in eastern Europe to dramatically accelerate the collision between political wishful thinking and reality. As for British consumers, the shock of the petrol price passing £1.50 a litre is only the down payment. Even the new price cap for domestic gas which comes in next month seems likely to be only a staging post to still dearer fuel.
In the green utopia, none of this would matter. We will be warming our homes with heat pumps and driving our electric cars through cities with air fresh as the countryside. The vast expanses of turbines in that “Saudi Arabia of wind” the North Sea will be running the electricity grid by day and charging battery farms by night. Oil company shareholders will be weeping as their stranded assets are written off, and gas central heating boilers will be on their way to the V&A as quaint symbols of another age. The UK government will have stopped dithering over whether nuclear power is part of the problem or the solution.
This has all changed in little more than a week. The West’s dependence on fossil fuels has been dramatically exposed just as the cutbacks in exploration are starting to translate into lower production. The smug glow from COP 26 has faded, and the true cost of reaching Net Zero is looking ever more politically unfeasible. Chris Bond, a Cambridge engineer with 40 years experience, has done a few sums following the “bad wind” year of 2021. In a repeat year, with net zero emissions, the UK would need 2.7 times today’s offshore windmill fleet plus 13 megawatt hours of battery storage, which in turn would need 27,000 plants the size of Mornington’s in Australia, at around £100m apiece.
There is no technological advance which would bridge that £2.7 trillion gap. It’s around a quarter of a million pounds per head of the UK population, far beyond any sacrifices we might be prepared to make to “save the planet”, and far beyond next winter’s gas bills, themselves set to trigger massive fuel poverty, if not fuel price riots in the streets.
This week the Public Accounts Committee finally punctured the green balloon, exposing John Selwyn Gummer’s Climate Change Committee as a bunch of dreamers. The PAC savaged the CCC’s “heroic assumptions” and concluded that “the Government has no reliable estimate of what the process of implementing the net zero policy is actually likely to cost British consumers, households, businesses and government itself.”
It is not too fanciful to conclude that the government has published no reliable estimate because revealing the cost of net zero by 2050 is just too ghastly to contemplate. There are no quick fixes here, but an admission that it is impossible would be a start. The UK’s offshore oil and gas production should be encouraged rather than demonised. In today’s energy emergency, if we are to wean ourselves off Russian oil, re-opening Britain’s lowest-cost coal mines may be the least worst option.
Meanwhile, a commitment to finding out whether domestic fracking for gas is commercially worthwhile is surely just common sense. Caudrilla, the little fracking business which has been comprehensively abused by absurd regulations, says it is ready to restart as soon as it is allowed to. At present, it is under orders to plug and abandon its only well. Convincing people that nuclear power is essential (and safe) is an obvious objective for the government.
Along with a boycott of oil stocks, shunning companies that manufacture arms has been a terrific marketing tool for fund managers, allowing them to give investors a complacent glow, reassured that their capital is not going to support anything as unpleasant as the makers of guns or bombs. Ukraine’s agony might serve to help these investors understand why the countries of the West need a defence industry.
After years of cheeseparing cuts, the UK’s armed forces are now too small to resist a serious threat. Spending is now going to have to rise significantly to rebuild them, money which will have to come from the welfare budget and, horrors, the plans to pour more money into the sacred NHS.
It is time to put the green rhetoric away. The price for hitting an arbitrary target, one which will make no measurable difference to global CO2 emissions, is too high. No amount of appeasement of this lobby would compensate for the increase in general misery, dramatic fall in living standards and rising poverty for the least fortunate that the target promises. Above all, it is time to understand and admit that the world will not come to an end if Britain fails to meet net zero by 2050.
Tax news
Dear taxman: I’m a Ukrainian citizen who has captured a Russian tank. Do I have to declare it as an acquired asset on my tax form? Dear citizen: “Combat trophies are not subject to reflection in the declaration”. In what appears to be a genuine post on Interfax Ukraine, taxpayers are reassured that war trophies are tax-free because they were not paid for, at least not in the way the taxman might recognise. With bureaucrats like these, it’s no wonder Ukraine is winning the propaganda war.
Jonathan Ford and I have started a podcast, A Long Time In Finance, published on Spotify and Apple apps every Friday. At 20 minutes, it’s not a long time to spend in finance.