The wind has barely blown in the UK over the past 10 days and lots of people are waking up to what this means. It means that the savings we made in the autumn when the wind blew almost perpetually can be frittered away by having to pay sky-high prices for electricity at the margins.
If the UK is used to paying £63 / KwH, which it was until mid-2021, then this country should get used to more days like Tuesday when, for a brief moment, National Grid was paying Vitol £6,000 / KwH to keep their gas power station in Kent in operation. Don’t blame Vitol – no matter how tempting that might be – you should blame a European energy market, of which the UK is a fully paid-up and crucial member. Ed Conway at Sky News, describes the situation perfectly but the basics are very simple. If electricity and gas are in tight supply in Europe, and right now it’s cold and windless right across Europe, electricity and gas goes to the highest bidder.
But this is not a new situation – it’s not news that early morning and early evening power demand in winter in Europe can get very high indeed but it’s revealing that National Grid has not, as yet, had to resort to its well-publicised contingencies to ensure power supply despite a couple of close shaves. It is very surprising – bordering on negligent – that we still are not seeing a government-led energy saving campaign to reduce demand.
However, right now – and it may not seem like it – the system, in terms of provision meeting demand, is working. What is not working, as Vitol has shown us, is the cost of electricity and this down first, to the cost of gas which is running today at around 350p / therm – around seven times the long-term average – second, the fact that demand is right up against the edge of what the European grid can provide when the wind doesn’t blow. If you’re a European government then you should be very nervous about January and February, especially if the Beast from the East starts to get going and drives temperatures down.
That said, the UK should still make it through without blackouts: the country really is one of the best places in the world for wind power and it doesn’t take an enormous amount of wind to add enough GigaWatts into the system. National Grid has not, as yet, fully fired up its coal-fired power stations and has not yet triggered its scheme whereby customers are paid to reduce power at certain points in the day. The danger comes when we have week after week of dull, windless days – not just the 10 days as we have had this December. As it happens, by the end of the week and looking at forecasts for places like Padstow and Milford Haven, the system should be operating more normally with wind providing around 10 GWs of power which will make National Grid feel a lot happier. French nuclear generation is back past 40 GWs which is very good news for all of us.
Whatever happens, though, this is not a comfortable place to be: so how did we get here and does all this demonstrate a galactic failure in energy policy over the past 20 years?
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Until very recently, the UK had a good plan that was working well: by building offshore wind farms in some of the most consistently windy places in the world, the UK had access to cheap, renewable energy in perpetuity. And we still do. We had a reasonable energy mix with a healthy contribution from nuclear of around 18 per cent and we had a pivotal position within the European energy market whereby we helped out our friends and neighbours for most of the year and got some help back in the winter as our demand increased. Best of all, when the wind didn’t blow, we had ample back-up through gas-fired stations and ample access to cheap gas through our own production and three major LNG terminals.
It wasn’t a perfect plan: that 5 per cent or so of lack of supply in winter meant that our electricity prices were higher than our neighbours’ but, on the whole, it worked well enough. If you think this plan was an epic failure of policy, then you need to have predicted the actions of Vladimir Putin. The fact that the UK wasn’t and isn’t reliant on Russian gas is precisely because British politicians could see the danger that Angela Merkel did not. It also wasn’t unreasonable either to think that the natural gas price would stay low, or, at least, below 100p / therm, not least because of our long-term gas and electricity partnership with Norway, a useful reminder of how the UK is really, in many ways, a Scandinavian country. Furthermore, while plenty of people thought Putin was an unreliable partner, they didn’t think it would be to the extent of blowing up his own economy by restricting gas sales into Europe. It’s not hard to see why the UK chose gas to be its back-up when renewables weren’t working.
This choice around gas also explains why the UK never pursued nuclear power with any enthusiasm: it didn’t need to because it had a credible plan based on wind, gas and transfers from Europe (when needed). The pain of planning enquiries and public opinion and the expense and time involved in construction are only a part of why we haven’t built any new nuclear power stations. The UK’s situation contrasts with France, for example, which doesn’t have sheltered waters for wind turbines or any natural gas of its own. France’s decision to build nuclear power stations was, in the same way that Germany decided to rely on Russia, a direct consequence of having limited access to natural resources. After all, France produces no natural gas and Germany produces around six times less than the UK.
The nuclear debate was also impacted by attitudes towards nuclear waste which will have to be dealt with for generations to come and a decade of terrorism following 9/11 where nuclear infrastructure seemed all too vulnerable to attack. Perhaps those perceptions were unfounded and the UK has particular expertise in handling both waste and terrorism but why would the public support the building of expensive nuclear power stations if there is an obvious alternative? It doesn’t make any sense for nuclear power in, say, 2010 to have been a popular political option which is probably why it wasn’t.
However, having decided that gas would be the back up fuel of choice and having abandoned coal, various UK governments made a serious error in not seeing natural gas as a strategic asset that needed to be protected and prioritised. This website and its contributors are not, on the whole, fans of state intervention. But if the UK government is now intervening on the manufacture of semiconductors on the grounds of national security then it should surely have intervened on natural gas from British fields given how much we rely on it. Similarly, the absurd taxation regime in the North Sea is spectacularly short-sighted and will only lead in one direction – towards less investment and, as night follows day, less gas production just when we need it most.
Lots of people will be happy about that decline in gas production because it means fewer carbon emissions. That’s a fair point, although those same people seem clueless about what to do when the wind isn’t blowing or the sun isn’t shining, especially as they have ruled out nuclear.
On the other side of the coin, if you’re facetiously mocking the UK’s building of wind turbines by saying “not much use now, eh?”, you’re both missing the positive impact of all those emissions that haven’t been emitted and failing to realise just how much those wind turbines have saved the UK during the autumn. The truth of it is that the UK’s energy plan was and remains a good one as it picks its way carefully between the intermittency of renewables and the need to use natural gas. Time then for our politicians to wake up to what being reliant on natural gas actually means.
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