Russia crisis stokes energy fears
By Dr Jonathan Marshall, ECIU Energy Analyst
Much has been made of the perilous state of the UK’s energy system in the aftermath of the potential gas shortage as last month’s ‘beast from the east’ struck.
Critics of the government were quick to point out how much energy we waste for want of a proper efficiency programme, while those pushing for more domestic energy production have highlighted how dependent on imports the UK has become.
This second point was highlighted further recently, with the arrival of the third consignment of Russian LNG (liquefied natural gas) onto British shores in 2018, at the same time as relations with the Kremlin are turning worryingly sour.
With the closure of Rough, the UK’s largest gas storage site, we are no longer able to lock away billions of cubic metres of gas before each winter, now relying on a growing global LNG market in which Russia is an increasingly major player.
Unlike domestic storage, which is always available, the seaborne nature of LNG supply means it can be sailing across an ocean just when needed the most, leading to price spikes and the danger of higher bills for UK homes.
But it didn’t have to be this way. Just five years ago the Coalition Government was deliberating whether or not to support new gas storage sites, allowing us to lock in supply security even as the reliability of Rough faltered as its 40th birthday approached.
In deciding not to back new storage, then energy minister Michael Fallon expressed an interest in wanting to avoid distortions in the gas market, which – unlike the electricity market – has been virtually free of Government meddling since privatisation. Of particular concern were actions that could impede the development of new sources of supply, under leadership with ambitions in going ‘all out’ for shale gas in Britain.
David Cameron and George Osborne’s enthusiasm for fracking was plain, with the latter slashing the tax rate for onshore gas production to less than half of the lowest rate faced by North Sea producers in a bid to kick-start the industry, while planning decisions were funnelled through central government to bypass less-than-enthusiastic local councillors.
But the industry never got going. From an initial expectation that 4,000 wells would spring up across the country, we are yet to see a molecule of methane. And now the government has admitted that its latest estimate – just 155 wells – is unrealistically high.
Having been sold a vision of greater energy independence and cutting our reliance on energy imports from nations headed up by potentially undesirable regimes, we are now scrabbling around in the market for natural gas to bolster supplies. At the same time, the UK’s fracking industry is hanging by a thread, damaged by unsuitable geology, hurt by initial lobbyist hubris and facing stronger local resistance than ever.
With this winter thankfully nearly over and warmer weather just around the corner, the issue of gas security is unlikely to pop up for a few months. But come next winter, a cold snap could leave us wishing we had our own gas storage and didn’t have to rely on that in other countries.