Digby, energy security and self-sufficiency

Lord Jones of Birmingham (try not to laugh) made his maiden speech in the House of Lords today, on the subject of the Energy White Paper. In a largely unremarkable spiel, most of which simply restated government position, the only comments that went beyond that position were the following:

"In the UK, we are used to being largely self-sufficient in terms of our electricity generation: the people are used to it. But times are changing, and they are changing at a time of rising demand and prices and at a time when energy supplies are becoming increasingly politicised. This is not a position anyone in this country will be comfortable with."

"If nuclear is not available to the energy market as an option, it is likely that in its place much of the new investment will be in gas or coal generation, which, of course, emits higher levels of carbon and leaves us increasingly dependent upon imports for this nation’s electricity generation."

So the argument is being warmed-up that nuclear power somehow reduces our dependence on imports and therefore increases our energy security. Let's have a look at that.

Firstly, nuclear power, as part of the portfolio alongside gas, coal and renewables, does contribute to the diversity of our electricity supplies. Diversity, it is widely recognised amongst energy-policy experts, is the key to security. I am not disputing that point.

But Lord Jones is going beyond that. He is slipping into the realms of autarky - the false economic notion that we are more secure if we are self-sufficient. Though it is a view that is slipping out increasingly often nowadays (I heard a Merrill Lynch energy analyst make the same error recently, before quickly retreating from it when challenged), it is a view that carries little weight amongst serious analysts. We were never more self-sufficient than when we produced most of our electricity from British coal. And our electricity supplies were never less secure, thanks to the dominant position in which this put the mining unions.

But even if it were a valid position, are Lord Jones's claims true? Are we "used to being largely self-sufficient"? And will we be less dependent on imports if we have nuclear rather than gas or coal?

The answer is "no" to both these questions. We import all our uranium for the nuclear power stations, and we have been importing a large proportion of the coal for our coal-fired power stations since the mid-1980s. We are not used to being self-sufficient, and importing uranium will not make us less dependent on imports than importing other fuels. And if it is "rising demand and prices" that Digby is worried about, he should have a look at uranium prices - a tenfold increase in the last few years makes the increases in fossil-fuel prices look insignificant.

This is not an argument against nuclear. This is only one small part of the issue. But it is an unfounded appeal to economic nationalism that ought not to be part of the debate. It makes one suspicious about the merits of the case for nuclear, if these are the tactics that Lord Jones and his political masters have decided to resort to.



Congratulations to Baroness Wilcox, who, in responding to Lord Jones's speech, made the following argument against "banding" the Renewables Obligation:

"Is the Minister not also worried that the Government are continuing the policy that Dr Dieter Helm called, “picking winners”? In October last year he warned of the inability of governments to predict costs and returns from specific technologies. Will the Minister explain why he thinks that the 'man in Whitehall' knows best when it comes to choosing between competing renewable technologies? Does he not agree that under a banding scheme the potential is still there for directing funding away from one source to another for reasons that have nothing to do with cost-effectiveness? Why are the Government continuing to interfere at this level? If they were to ensure a level playing field, the market would make the decision on which renewable is supported, and costs and risks would accurately be taken into account, resulting in a more efficient apportionment of subsidy."

One might quibble with a word here or a word there ("carbon-price", rather than "subsidy", for instance), but that is, in the round, an excellent exposition of the philosophy that this site exists to promote.

She is wrong about cap-and-trade being the right way to avoid picking winners in this context (elsewhere in her speech). Cap-and-trade cannot be used effectively for large parts of the energy market, and relies on arbitrary and often unfair allocations. It is therefore itself a means of picking winners - those that are big enough and used in the large installations to which the mechanism must be limited for reasons of practicality, and those that get more than their fair share of the allocations.

And Ofgem's case against the Renewables Obligation was a bad one, and their proposed alternative even worse, so Baroness Wilcox is mistaken to rely on this source for some of her criticisms. 

But there is time to discuss the merits of alternatives. The important point is that Baroness Wilcox has grasped the fundamental principle from which policy should flow. We don't often have cause to celebrate political pronouncements on this site, so let's raise a glass to the noble Baroness. 

N.B. Some of the above may be unfamiliar jargon. For those lucky souls to whom energy policy is a closed book, the Renewables Obligation (RO) is an obligation on all licenses suppliers of electricity to purchase a defined and growing proportion of their electricity from renewable sources. At present, it distinguishes only a few technologies, such as existing large-scale hydro and Energy-from-Waste, which are ineligible, but treats all the other technologies (and the carbon they save) as equally worthwhile. Under proposals that the Government is clearly determined to ram through, the RO will be "banded", so that some technologies will be treated as more worthwhile (and their carbon-avoidance as more valuable) than others.

Cap-and-trade is an approach to limiting carbon emissions where a cap is put on total emissions of carbon from a set of emitters, rights to emit within that cap are allocated to the various emitters by various means (none of which are satisfactory), and then those who emit more than their allocation trade with those who emit less than their allocation to buy any spare emissions-rights. It requires a level of bureaucracy to assess emissions that makes it impractical to use for smaller installations.

Ofgem is the gas and electricity regulator.