Energy Security

Debate between Alan Whitehead and Emily Thornberry

Thursday 8th July 2010 Westminster Hall

[Dr Alan Whitehead (Southampton, Test) (Lab)]

The debate is about energy security. As the Minister emphasised, the debate on what we do with energy policy over not only the next five years but the next 30 or 40 years is essential. In that context, I am rather sad that such a small but select gathering is here to debate the issue. Energy security should be at the heart of all the decisions that we make on energy policy in the narrowest sense. However, in the wider sense, it should also be at the heart of how we plan our resource use, the energy efficiency mentioned by my hon. Friend the Member for Islington South and Finsbury (Emily Thornberry) and the deployment of our transport resources. All those matters relate one way or another to the question of how secure our energy supplies will be and how we will deploy our resources to ensure that the lights go on, transport moves, industry is secure, the country remains economically prosperous and we remain secure in our homes. Energy security is as central as that to our way of life in the future.

As far as energy security is concerned, we live in a very uncertain world. We have challenging and serious commitments to meet to ensure our energy security in the context of the rapid decarbonisation of our economy. We need to make sure that our supplies and our energy production are secure in the context of moving from a high-carbon to a low-carbon economy in a short time. In talking about the path from here to 2050, we should reflect that in the past 40 to 50 years we have in any event rapidly changed the mix of our energy economy. We have moved from dependence of about 90% on coal for energy to a figure of about 12% to 15% in 40 years or so. I anticipate that there will be similar rapid change in the next 40 years. The question is whether that change can be accomplished in accordance with the energy security considerations that I have set out.

As to some of the assumptions that continue to be made in some quarters about how energy supplies in this country will go, I fear that the answer may be a distinct question mark. For example, to take as a starting point our continued dependence on oil, world oil resources are presently set at about 42 years. That is on the basis not of all the oil reserves in the world, but of all those that it will be reasonably possible to exploit, and that there is a reasonable likelihood of our knowing about in the not-too-distant future.

There is at the same time a dash to secure oil supplies. Recently China has been rapidly attempting to exploit and secure oil reserves in Africa, and other world economies are pursuing the same tactics. Therefore, the idea that there will be a ready supply of oil at a reasonable price—a price that can sustain our economy—while our North sea oil reserves are reducing is at the least an interesting one. I am not a peak oil alarmist but the very interesting recent report by my right hon. Friend the Member for Croydon North (Malcolm Wicks) on energy security in a changing world went into the question of peak oil and the point at which, although reserves will exist for a longer period, production relative to demand will be decreasing. It is suggested that that will happen from about 2030.

[Emily Thornberry]

Does my hon. Friend agree that although our oil production from the North sea will decline at a rate of between 6% and 10%, it will nevertheless continue to play a vital role in our energy mix in the next 10 to 20 years?

[Dr Whitehead]

Indeed, it will continue to play that role, and the fact that we have indigenous sources of oil, as it were, will be something of a proof against increasing vicissitudes in the rest of the world. Nevertheless, that continued oil production is not divorced from peak oil considerations—it is an essential part of them. The likelihood, therefore, that by 2050 oil will, because of its scarcity, have to be used primarily for non-vehicular purposes such as making plastics and other chemical necessities, should be taken into consideration in our long-term thoughts on energy security.

The likely scenario in the next few years, should that analysis be even remotely correct, is that the world will continue, among other things, to attempt to defend its oil interests by covert or overt military means. Indeed, a little while ago Dan Plesch of the Foreign Policy Centre estimated in a paper that the cost, indirectly or directly, of defending oil interests from a military point of view came to about $150 billion a year. If we consider the areas of the world—mainly in the middle east—that have been defended in that way, and the likely reserves in those countries, that comes to about $20 per recoverable barrel. That is an interesting reflection on what is likely to be the increasing additional cost of oil in the next few years.

In the context of climate change and our ambition to reach the targets we have set, it is absolutely right that energy efficiency will play a substantial role. Indeed, if EU energy efficiency targets of even 20% are met by 2020, that will result in something like a 13% reduction in electricity use in the EU. That underlines the key role of energy efficiency. I am completely with the Minister as to the key role it must have in our energy security—another example of protection of the home front in energy matters. However, the changes in our energy economy that will result from a far lower dependence on oil in the long term will almost certainly mean a much higher dependence on electricity for, among other things, transport, particularly with the rise of electric vehicles. At least part of the energy efficiency gain will be offset by increased demand for electricity as electric transport becomes increasingly the norm.

My hon. Friend the Member for Islington South and Finsbury has already dismissed some of the scares and myths about gas. It is true that the short-term alarms about energy security that have recently been raised in relation to gas are largely unfounded, for the reasons we have heard today. However, there is another reason, which has not sunk widely into our consciousness but is nevertheless important. Part of our gas energy security has been derived not only through interconnectors—which, as has been observed, can work both ways, and did during our cold winter, with movement out of the UK as well as into it—but by ensuring, pretty much as a deliberate act of policy by the previous Government, that there was sufficient liquid natural gas landing capacity. There was a substantial increase in that capacity. Of course, liquid natural gas is a world-traded commodity and one might ask how secure it is likely to be. One reason why it is likely to be far more secure in the not-too-distant future is the rise of shale gas, particularly in the United States. Gas is extracted from shale beds in a way that was not technically possible a few years ago. Its exploitation in the past few years has, among other things, added about 25% to estimates of United States gas reserves.

I might add that gas is not a particularly benign fuel for the environment. It is not as intense, in relation to CO₂ emissions, as coal, but it is very intense nevertheless, and was the subject of a recent letter from the Committee on Climate Change recommending that future gas-fired power stations, as well as existing and future coal-fired plants, should be CCS-adapted. We should not for a moment believe that gas is the alternative or the answer to the end of the oil economy or the diminution of the coal economy. Nevertheless, shale gas in the US and elsewhere has transformed the picture in recent years of likely gas reserves. Indeed, the liquid gas receipt terminals in the United States built for the same reason as those that were built in the UK are, in effect, standing idle because of the change in the gas economy that has resulted from the emergence of shale gas.

Incidentally, shale gas poses an additional problem, as it is no more environmentally friendly than any other form of gas—it is, in essence, the same stuff—and the technology of fracturing rocks to extract it results in substantial emissions of methane into the atmosphere. Indeed, the chemicals that are used in its extraction are particularly climate-unfriendly, so it is not a panacea. I merely note that as an addition to the debate on where we are on gas security.

All things considered, even with the increase in reserves in particular countries, it is likely that gas has perhaps a 60 to 70-year exploitation against production life ahead of it. For two of the key elements of our energy economy, we are living on borrowed time, and we need fundamentally to recognise and understand the consequences for our own energy security that the post-peak world oil economy and, to a lesser extent, gas economy will introduce—this country will either have to scramble for those resources or go in a different direction—and how those scenarios will play out over the next 40 years.

I have not mentioned coal. This country has some 200 years of coal reserves, and there is a similar level of likely reserves against production around the world. Indeed, in looking at how our future energy economy might best be fashioned, it seems inconceivable that we would ignore the role of coal—with, I trust, carbon capture and storage firmly attached to it, because of our carbon abatement commitments. Nevertheless, using coal as a substantial part of our base-load energy economy over the next few years is not just a good idea for balance in the energy economy but an important part of our energy security considerations.

The starting point for energy security probably has to be a common-sense view. Politicians always feel that people should be wary of common-sense views—on occasion, that means they come up with views that are precisely the opposite—but, in the case of our energy security over the next 40 years, a common-sense starting point ought to be that if we should produce as much of the energy required in this country from sources that we control, and that we do not set too much store by sources that we do not control.

That is a common-sense absolute which, of course, is mediated by a great many factors, not least the interconnection and balancing of supplies, and the role of the European Union in how supplies work, but in a world with all the dangers, concerns and scarcities that I have mentioned, a common-sense starting point ought to tackle the issue of how we deploy our energy resources over the next 40 years. The question that then arises is whether the UK can be energy self-sufficient in the way that it has been in the past. If that common-sense principle were applied to our future energy security, we would be talking about an energy economy in which, yes, oil and gas—particularly North sea gas—will have a role, but, increasingly, biogas produced from our own indigenous natural resources could be injected into the grid and take the place of mineral gas coming from the North sea to a surprisingly large extent.

I am not sure that setting an enormous amount of store by a technology that relies on a fuel of which we produce not one ounce in this country is a common-sense view. Setting aside any of the questions at the front of our minds about build scale, commissioning, public subsidy and other aspects of nuclear power, we must remember that, because nuclear is not renewable, it is reasonable to ask questions about the security of supply of uranium for reactors, should we build them in this country. This is not necessarily to take a side on the nuclear debate but simply to ask that question.

Given the likely reserves of uranium—on the present supply against production—its life is roughly that of oil: 40-odd years. However, if there were a large number of nuclear builds over the next 20 years, the amount would come down dramatically. On present figures, it appears that uranium could become scarce during the lifetime of a future nuclear reactor built in this country. That ought to raise a question mark about energy security, and about the role that nuclear may play in future considerations for the UK.

Indeed, given our concerns about our carbon dioxide emissions and footprint, new supplies of uranium would need to be found. Otherwise, existing supplies would be depleted, and the richness of uranium per tonne of rock mined would be so low that the carbon footprint would eventually equate to that of a gas-fired power station. That would not follow the low-carbon footprint route for our energy supplies in the long term. The figures relate to Australian and, to some extent, Canadian supplies of uranium. There are richer supplies in places such as Kyrgyzstan, but they raise the same questions for energy security in an uncertain world set against supplies of oil and gas.

Ironically, we could increase our supply of uranium by sequestering supplies that are kept for military purposes and translating them to domestic nuclear purposes. If we did so in this country, we could double the life of our uranium supplies without taking uranium from elsewhere, which raises the interesting question of developing a domestic nuclear power programme to thwart a military nuclear programme, but perhaps that is a debate for another day.

I asked whether the UK could be energy self-sufficient in future. The answer is yes, but the best energy security in this changing world will probably come from forms of collective energy security which, at the very least in Europe, ought to be at the forefront of our minds. We have heard some bad stories about connectors, but the more connectors this country has with Europe, the better off we will be not just in terms of our own energy security but in terms of Europe’s as well, for reasons that I shall come to in a moment.

We should also consider new connections. The programme ought to be imaginative in terms of the connections within Europe and making the most of Europe’s energy supply resources. We should, among other things, go further forward from having point-to-point connections for future wind farms in the North sea, for example, and connect those supplies across Europe in what is called the supergrid—it is, in fact, a sensible addition of connectors with nodal hubs, particularly in the North sea—to ensure that the transferability of energy supplies is complete. Of course, we have a gas supergrid in Europe and there is, effectively, the beginnings of an electricity supergrid. An essential part of our future energy security is a supergrid for renewables.

The things that I have just mentioned are just part of the answer to the question, “Can we be self-sufficient in our energy supplies over the next 40 years?” The facile answer to that question, which we occasionally hear, is, “Why, oh why, can’t we be self-sufficient in our energy supplies, because we are the windiest country in Europe, with the biggest tidal range and the biggest effective waves in Europe? We must be able to be energy self-sufficient, mustn’t we?” It is true that we have the biggest wind supply and the greatest tidal range of any country in Europe and we have the largest range of facility of any country in Europe, but that in itself does not answer our question. The analysis in a recent report by the offshore valuation group entitled, “The Offshore Valuation: A valuation of the UK’s offshore renewable energy resource”, is increasingly providing an answer.

The group eschewed the idea of going for the big picture or saying, “We’ve got all the resources, therefore it must work”, and instead did a sober analysis, area by area, of this country’s renewable offshore resource, looking at where the constraints were in landing, or depth of offshore water, and considering what proportion of our theoretical resource could be landed, assuming the investment was there to make the landing possible.

The group assumed a relatively modest proportion of the total practical resource, setting aside those areas where constraints were likely to be insufficient to render exploitation practical. It suggested that only about 29% of the practical resource would be harnessed by 2050. On looking at that resource, it found that the full practical resource of 2,131 terawatt-years exceeded UK electricity demand six times over. The practical landed resource would, on that basis, not only easily be able to deal with the UK’s practical demand, but would make the UK a substantial net electricity exporter. Incidentally, that figure would be likely to encompass the spike in electricity demand—and the difference that that would make to our energy economy—from electric vehicles.

The group included a number of scenarios in its report. The middle range of scenarios, under which there would be 29% of resource utilisation, would mean an install capacity offshore of about 169 GW, capital expenditure of just over £400 billion over the period to 2050, and annual revenue of £62 billion, and thus a substantial income-generating capacity for the UK. The UK would also be a net electricity exporter, after all the demands here were taken into account. That brings the connectors into context. We have always assumed that connectors are based on the idea of balancing the UK system, so that energy comes in from abroad when the UK does not have sufficient resource of its own. The prospect of the UK systematically exporting from its connectors is a secure foundation for our energy security considerations in future.

The report also considers a matter that a number of people have considered: whether the UK energy economy can stand the penetration of renewables in a scenario such as the one that I have just mentioned, which suggests that a penetration of renewables of some 50% would be the consequence of such practical exploitation of UK offshore facilities. It also adds floating wind and tide and wave to fixed offshore wind, as technologies that would be deployed in respect of that outcome. That scenario suggests that it is necessary for the energy economy to have a reserve of some 34 GW, which is getting on for 50% of the present total capacity of our electricity supply, to balance the 50% renewables penetration. The report is also clear about the changes that are taking place, as the Minister mentioned, in respect of the smart grid, energy efficiency considerations, storage, the continuing use of inter-country connectors and the role that small-scale generation plays in the energy economy, all of which would have a substantial hand in ensuring that the balance was possible under that level of penetration.

The long-term answer to the question, “Should we, from a common-sense point of view, source as much of our energy as possible from indigenous resources?” is yes. The answer to the question, “Can we source as much energy as possible from indigenous resources?” is also yes, but neither of those answers is based on fanciful assumptions about how our energy economy might develop. There are realistic scenarios for the next 40 years, showing a change in the relationship between our energy supply and our energy use, and a change in the make-up of that relationship in such a way that our energy economy is fully secure by 2050, against what we know will be increasingly violent vicissitudes in the world energy economy. If we can achieve that starting on this Government’s watch—great progress was made on the previous Government’s watch—not only will we secure our energy supplies for the future, but we will secure our carbon commitments at the same time, which is the other key element.