More evidence that nobody believes in climate policy

The Economist notes that far from pulling back from the oil and gas business, governments - allegedly concerned with climate targets - are actually expanding their fossil fuel businesses and that exploration activity is expanding across the board:

Such behaviour, on the face of it, makes no sense. One possible explanation is that companies are betting that government climate policies will fail; they will be able to burn all their reserves, including new ones, after all. This implies that global temperatures would either soar past the 2°C mark, or be restrained by a technological fix, such as carbon capture and storage, or geo-engineering.

Recent events make such a bet seem rational. On April 16th the European Parliament voted against attempts to shore up Europe’s emissions trading system against collapse. The system is the EU’s flagship environmental policy and the world’s largest carbon market.

Putting it at risk suggests that Europeans have lost their will to endure short-term pain for long-term environmental gain. Nor is this the only such sign. Several cash-strapped EU countries are cutting subsidies for renewable energy. And governments around the world have failed to make progress towards a new global climate-change treaty. Betting against tough climate policies seems almost prudent.

Lords of misrule

I thought yesterday's Liberum Capital note was very interesting, particularly the suggestion that investors reckon that government energy policy is risible. When one thinks about it, the idea that voters would tolerate the vast spike in energy costs that our political masters seem to want is preposterous.

It's interesting then to see today's House of Lords report on EU energy policy (see here, BBC coverage here). Their lordships have decided that there are two things putting off potential investors: the incorporation of a minimum carbon price into the ETS and the lack of a requirement for a fixed proportion of renewables in the energy mix by 2030.

The calculation seems to be that investors will be enticed in if the public are fleeced sufficiently; big bad capitalists will simply be unable to resist all that easy money. Liberum, on the other hand, seem to have thought things through a little further, asking themselves whether the public will tolerate being fleeced to the extent envisaged in Westminster and Brussels. They conclude, correctly in my opinion, that transfers to big business on this scale will be seen as intolerable.

The difference in opinion between the real world and the political world is rather stark, don't you think?

Quote of the day

[It's a] struggle to find a single fund manager that believes energy policy is credible... That is why they are not investing.

Peter Atherton

The lights may stay on, but the economy may go out

Peter Atherton, the head of utilities research at UK broker Liberum Capital has issued an extraordinarily damning assessment of UK energy policy. The good news is that he reckons the lights may not go out. The bad news is that he thinks that this will be because of a "huge spike" in energy prices. This will of course extinguish much of the UK economy.

Here are a few of the highlights in the report.

UK energy policy is not plausible...

The Energy Bill ...effectively re-nationalises the investment-making decision process in the power sector. But it is not clear that policy makers yet appreciate that this also means that the risks and costs associated with these decisions must also transfer to the public.

Click to read more ...

Diary date

This panel debate is tonight in central London.

Will the lights go out?

In February this year, Alistair Buchanan of OFGEM, warned that Britain was on an 'energy rollercoaster' with the combination of old coal and atomic power plants closing and overseas gas supplies shrinking leaving future domestic energy reserves "uncomfortably tight". More recently the finger was again pointed at government for significantly underestimating the scale of the capacity crunch facing the country.  But with government denying any complacency and confident of the provision of secure supplies and the current cold snap testing the stored gas supplies, we ask 'Will the lights go out?' '  FES has brought together 4 excellent and highly knowledgeable speakers covering a range of specialist perspectives to find out;

• Volker Beckers, Former Group CEO, RWE nPower plc 
• Ian Marlee, Senior Partner, SG&G Transmission at OFGEM
• Peter Atherton, Utility Research at Liberum Capital and giver of the FES 2012 annual  lecture - Utility Finance in the 2010s
• Gaynor Hartnell, Chief Executive of the Renewable Energy Association.

Details here. As always, if someone can do me a report, that would interesting.

Charlie Flindt on the lights going out

BH reader Charlie Flindt has a comment piece up at Farmers Weekly about the possibility of the lights going out:

What's scaring me is that we are going to have to get used to power cuts. Too many years of energy policy being dictated by the "EcoTaliban" and their useful idiots in government mean that dark days - and nights - are coming

Read the whole thing.

Bringing politicians to Booker

Christopher Booker is in fine form this morning, describing in horrific detail the steady progress of the UK's energy system towards disaster. Perhaps mercifully, he does not move on to consider what this will mean for the economy as a whole and for individuals.

[It] is all insane in so many ways that one scarcely knows where to begin, except to point out that, even if our rulers somehow managed to subsidise firms into spending £100 billion on all those wind farms they dream of, they will still need enough new gas-fired power stations to provide back-up for all the times when the wind isn’t blowing, at the very time when the carbon tax will soon make it uneconomical for anyone to build them.

Update on Mar 24, 2013 by Bishop Hill

Interestingly, a leader in the Telegraph calls for the government to repeal the Climate Change Act. One can't help but be reminded about Winston Churchill's quote about being able to trust Americans to do the right thing once they've tried all the other options.

Nice to hear, but ten years ago would have been better.

Update on Mar 24, 2013 by Bishop Hill

The Mail is headlining on the excess deaths from the current cold weather.

Freezing Britain's unusually harsh winter could have cost thousands of pensioners their lives.

This month is on track to be the coldest March for 50 years – and as the bitter Arctic conditions caused blackouts and traffic chaos yesterday, experts warned of an 'horrendous' death toll among the elderly.

About 2,000 extra deaths were registered in just the first two weeks of March compared with the average for the same period over the past five years.

Bad to worse

National Grid have spoken out before, but now the power companies are starting to voice their concerns over the shambles that successive governments have made of the power sector and the very real possibility that we may soon see the lights going out.

The boss of the energy firm SSE has warned that "there is a very real risk of the lights going out" in Britain.

Ian Marchant said the government was significantly underestimating the scale of the capacity crunch facing the country.

The energy minister says it's all going to be OK and that there is plenty of spare capacity in the system.

Time to start panicking I guess.

Miller and the lights

David Miller covers the environment beat for BBC Scotland and today his big story was the closure of the Cockenzie coal fired power station under EU legislation. His [update: his unnamed colleague's] article on the BBC website was pretty awful stuff, with the first half of the article reporting the fact of the closure (while making no mention of the EU's involvement) and the second half being handed over to WWF to allow them to celebrate it.

Reading this before my first cup of coffee, I was somewhat grumpy in the tweet I sent Miller:

@BBCDavidMiller 50% of article given over to environmentalists. No questioning of whether the lights will stay on. #normalservice

However, Miller seemed to take notice and tweeted back that he would ask the question in an interview he was about to do with someone from Scottish Power, the operators of Cockenzie. The interview is below for those that are interested. It wasn't encouraging.

GMS

The Smart Money - Josh 206

I wonder who will benefit the most from Smart Meters?

Cartoons by Josh

The green, the crooked and the incompetent

Updated on Feb 25, 2013 by Bishop Hill

Leo Hickman tweeted a link to this fascinating set of minutes from the September meeting of the DECC Science Advisory Group (SAG). SAG features several familiar names, including John Shepherd, David Mackay, Stuart Haszeldine and David Warrilow.

The whole document is worth a look, and it's only seven pages long. We learn much of what is worrying DECC's scientific advisers, for example the horrific (but presumably distant) prospect of low energy prices:

John Shepherd pointed out that whilst energy efficiency policies are required, they risk being ineffective while energy prices are low. Other SAG members observed that incentives such as a substantial price on carbon were needed to promote innovation and reducing carbon intensity, and it was vital to avoid carbon lock-in.

Click to read more ...

What next?

The energy regulator has repeated the point I made here a few days ago. With a swathe of coal-fired power stations ready to close in March, the chances of avoiding power cuts looks very slim.

Alistair Buchanan, chief executive of Ofgem, said the combination of UK power plants closing, foreign gas supplies shrinking, and demand rising, has made British energy reserves “uncomfortably tight”.

Writing in The Daily Telegraph ahead of an industry lecture today, Mr Buchanan has warned: “We have to face the likelihood that avoiding power shortages will also carry a price.”

Click to read more ...

Crunch time

H/T to reader Doug for pointing out this article in the Sunday Telegraph, which looks at the reluctance of energy companies to build new gas-fired stations in the UK because of uncertainty over the future of the UK energy market. However, this bit at the bottom of the article was interesting too.

Much of RWE’s recent UK investment was in two efficient gas-fired power stations at Pembroke and Staythorpe but they “aren’t running a lot of the time” because margins were lower than had been expected. It was “hard to see” RWE investing in more gas plant at the moment, he said.

This is the problem with wind power. Because it is subsidised it gets dispatched first when available. Gas therefore gets used less. But if your gas plant is not being used a lot of the time it is not earning and you are not making a profit on it. Who would invest in new gas plant in those circumstances?

This is all getting very serious. The UK grid is barely able to meet demand now and I think I'm right in saying that a further 4GW of coal fired capacity is due to be removed from the grid at the end of March. That being the case we could start to see brownouts next winter, if not before. The only alternative is to keep coal-fired stations working.

Crunch time is coming, and it's coming soon.

All that is Goldenberg does not glitter

Suzanne Goldenberg enjoys (if that's the right word) a certain reputation among BH readers and her latest offering will do nothing but enhance (if that's the right word) her position in our estimation.

America's carbon dioxide emissions last year fell to their lowest levels since 1994, according to a new report.

Carbon dioxide emissions fell by 13% in the past five years, because of new energy-saving technologies and a doubling in the take-up of renewable energy, the report compiled by Bloomberg New Energy Finance (BNEF) for the Business Council for Sustainable Energy (BCSE) said.

The reduction in climate pollution – even as Congress failed to act on climate change – brings America more than halfway towards Barack Obama's target of cutting emissions by 17% from 2005 levels over the next decade, the Bloomberg analysts said.

The Bloomberg report is here.  It actually says little about emissions, but as far as I can see it says nothing like what Ms Goldenberg suggests it does on the subject of renewables. try this for example:

The reductions in coal generation, ascendancy of gas, influx of renewables, expansion of CHP and other distributed power forms, adoption of demand-side efficiency technologies, rise of dispatchable demand response, and deployment of advanced vehicles are all contributing to the decline in carbon emissions from the energy sector (including transport), which peaked in 2007 at 6.02Gt and have dropped by an estimated 13% since.

And as the report also makes clear, the big change in the energy mix has been the rise of gas:

Total US installed capacity of natural gas (442GW) plus renewables (187GW) is now at 629GW (58% of the total power generating mix) – up from 605GW (56%) in 2011 and 548GW (54%) in 2007. Between 2008 and 2012, the US nearly doubled its renewables capacity from 44GW to 86GW (excluding hydropower, which itself is the single largest source of renewable power, at 101GW as of 2012).

Ofgem and the family bill

Bob Ward is trumpeting the latest propaganda sheet from Ofgem, which details the costs of environmental legislation on energy prices. The impact, he claims, is only around 10% of the average household bill.

Here's Ofgem's leaflet, and here are the relevant paragraphs:

Energy Company Obligation (ECO): A new domestic energy efficiency programme designed to create a legal obligation on certain energy suppliers to improve the energy efficiency of domestic households. ECO is estimated to cost a typical consumer £27 per fuel each year.

The Renewables Obligation: A Government support mechanism for promoting large scale renewable electricity projects in the UK. Ofgem’s estimate is that the cost of this scheme this year is £21 out of your electricity bill (there is no impact on your gas bill for this programme). The cost of this scheme is expected to increase in April 2013.

Click to read more ...