Drive to Sustainable Energy Future

1.0 Introduction

The Energy White Paper 2007 set out by the UK government emphasizes the sustainable energy future by producing around 20% of our electricity from renewables by 2020 with the final intension of 40% energy from low carbon resources through investment in energy efficiency and clean energy technologies thereby creating “low carbon economy” to maximize economic opportunities (Department of Trade and Industry [DTI], 2007a).

With the declining oil and gas reserves in the North Sea and the imminent termination of a number of nuclear stations raised the question of lights going out in the near future (Department for Business, Enterprise and Regulatory Reform [DBERR], 2009). The apparent fragility of oil imports from Russia and the Middle and the predictive loss of one-third of energy production in the coming 12 years along with accelerating fuel import ratio sense real catastrophic destruction of the UK’s future energy security (DTI, 2007b).

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With the energy policy demonstrated in 2007 White Paper (Energy white paper, 2007) superseding the White Paper of 2003 (Energy white paper, 2003), the UK government expresses strong wishful thinking of future of secure energy, by suggesting the development of renewables, energy-efficient infrastructure along with strong policy currents would placate the impending energy gap with an overarching vision of energy efficiency and security without replacing the nuclear baseload (DBERR, 2008).

2.0 Major Threats to UK Energy Scenario: Predicting When Lights May Go Out?

2.1 Current Scenarios

The rapid move away from self-sufficiency to the import-dependence of energy creates a challenging problem for the UK. Currently, we face, short term, medium, and long terms problems with energy security; with the danger of interruption to energy supply from other European countries (Oil & Gas UK, 2009). Norway is the source of the larger share of energy suppliers of the UK, with Russia, West, and North Africa and the Middle East playing a considerable part in import. Coal is mainly imported from South Africa and Russia (Department of Business, Enterprise, and Regulatory Reform [DBERR], 2009). As the medium-term risk, the scheduled termination of a number of coal-fired and nuclear power stations has led to questions of replacement power generation. The Government has estimated that this will amount to a ‘gap’ equivalent to around 30 percent of today’s existing capacity (DTI 2006a). In the long term, the fundamental concerns are about meeting future energy demand. In the first category, options for the UK’s temporary solutions to energy security

3.0 UK, Energy Security Scenario: The Facts and Figures

3.1 Use of Fossil Fuels in the UK

According to DTI, 2006b about 90 % of the UK’s demand for energy is from fossil fuels. UK has become a net importer of energy in 2005 after 28 years of continuous export, because of the terminal depletion of oil reserves in the Northern Sea (Oil & Gas UK, 2009). 2010 energy statistics show an overall decrease in indigenous energy production of 5.8 percent compared to the second quarter of 2009 and the indigenous production was not meeting the net consumption leading the UK to one of the net importers of fuel; this trend continued from 2004 onwards (Department of Energy and Climate Change[DECC], 2010). Table 3.a shows the data of primary fuel production of the UK from 2008 to 2010.

Table 3.a: Indigenous production of primary fuels in the UK, 2008-2010.

Source: DECC, (2010).

3.2 Consumption of Total Fuel

The total consumption of primary fuel was 209.6 million tonnes of oil equivalent in 2010 compared to 2009 (temperature corrected with 0.2 degree Celsius colder than 2009, seasonally adjusted annualized rate). The consumption of coal and other biofuels (Solid) rose by 13.4 % during this period (Figure 3.b).

3.b: The consumption of coal and other biofuels, 1920-2006

Source: DECC, 2007

3.2.1 Highlights - 2010

Total production- 35.5 million tonnes of oil equivalent, 1.8 percent lower than in 2009.
Petroleum production- 6.2 percent lower in the third quarter of 2009
Natural gas- 9.6 per lower than the third quarter of 2009 and the third quarter of 2010.
Primary electricity output – 23.8 percent lower in 2009
Nuclear electricity output- 26.6 percent lower within the same period (DECC, 2010)

3.3 Oil Production, Demand and Consumption Data

Almost 75% of crude oil was supplied by Norway in 2009 (DBERR, 2009). Russia, Saudi Arabia, and Algeria are also important suppliers for the UK (see Figure 3.c). Imports of petroleum products came from France, Germany, Kuwait, and the UAE. The statistical report on oil production and consumption published by DECC, 2010 illustrated that oil production fell every year from 1999 to 2010, reaching a peak in 2006. Energy projections establish that the fuel scarcity and import dependence will rise from a projected 4% in 2010 to 20% in 2020 (DECC, 2010).

Fig 3.c: UK crude oil imports by world region

Source: DBERR, (2009).

3.3.1 Highlights

Indigenous production of crude oil and – 6.2 % lower in the third quarter of 2010 than a year earlier. In the third quarter of 2010, the UK witnessed the net import of oil and oil products by 5.3 million tonnes. Imports decreased by 6.1 percent over the same period
Overall, stocks of crude oil and petroleum products were 2.8 percent lower at the end of the third quarter of 2010 than a year earlier.

Fig 3.d: Production of crude oil and NGLs

Source: DECC, (2010).

3.4 Gas and Other Gas Products

Gas is the most used energy resource in the UK than any other primary fuel, which provides 39% of the total energy requirements. The domestic sector primarily depends on gas for heating and other major purposes. Most of the UK’s gas imports are projected to be from Norwegian North Sea gas fields also piped through the UK-Belgium interconnector between Zeebrugge in Belgium and Bacton in Norfolk (Green et al, 2006). During the winter seasons, the UK heavily depends on this source for meeting energy demands. Liquid Natural Gas (LGN) is also imported from Algeria in considerable amounts (Figure 3.d)

Fig 3.e: UK imports of gas by country/interconnector, 2005

Source: DTI, (2007).

3.5 Reliance on Norway

According to the projections of the Norwegian Petroleum Directorate, Norwegian energy supplies are expected to be continuously meeting UK’s fossil fuel needs for the next 20 years starting from 2008 with a total of 4.7 billion m3 oil equivalent (Norwegian Petroleum Directorate 2008).

3.6 Current Scenario (2010)

Total indigenous UK production of natural gas in the second quarter of 2010 was 5.0 percent lower than in the corresponding quarter of 2009
Demand for gas in the second quarter of 2010 was 9.6 percent higher than the level in the second quarter of 2009 (DECC, 2010). Figure 3.f shows the 2010 scenario of the UK’s net exports and imports of gas from Norway and other European countries.

Fig3.f: UK’s net exports and imports 2010 scenario

Source: DBERR, (2009).

3.7 UKCS Supplies

Based on the National grid’s 2010/11 forecast (NTS Deliveries) annual production of natural gas is 9% lower at 42. 2 bcm from 2009. From the 2010/11 projections yearly production begins at +/ – 10% and subsequently growing by +/- 2 per year. Figure 3.g shows actual annual UKCS supplies and demand since 2000/01 (Not weather corrected). The % import line relates to NTS demand including both Irish and IUK exports, if these were excluded, the % for imports would be lower (National Grid, UK, 2010).

The existing and development plans for import capacity is around 170 bcm/year and even higher if all LNG proposals are included. This far exceeds the UK’s projected import requirements at the end of our 10-year planning cycle of about 65 bcm. The necessary energy gap is observed under the present projected scenario (Figure:3.h) and this could even go worst as the impeding energy issues are not solved with a systematic and well-planned strategy, policy, and work plan (Fuel poverty advisory group [FPAG], 2007)

Fig 3.g: National grid’s 2010/11 forecast on UKCS Supplies

Source: National grid, (2010).

Fig 3.h: UK gas production and demand, 2010.

Source: FPAG, (2007).

3.8 Energy Prices

Current energy prices and the number of houses and other domestic, industrial sectors experiencing fuel poverty and deprivation is increasing leading to the serious questions of energy security and stability and effectiveness of energy policies in the UK

3.9 Highlights

• Average coal prices were 11.4 percent higher in real terms including and 12.6 percent higher excluding CCL in Q2 2010 compared to Q2 2009. Heavy fuel oil prices were 27.4 percent higher in real terms than a year ago (Figure 3.i)
• The Government said, last summer, that it expected electricity power cuts for the first time since the 1970s (FPAG, 2010)

Fig 3.i: Standard domestic energy bills, 2000-2010.

Source: FPAG, (2010).

4.0 Energy Policies and Regulations: Energy White Paper
2007

The UK 2007 Energy White Paper, released by the Department of Trade and Industries (DTI, 2007) makes an optimistic effort to put the UK on a path to cut carbon dioxide emissions by some 60% by about 2050, with real progress by 2020, producing around 20% of electricity from renewables creating “low carbon economy”. Renewable energy obligation (RO), ROC, Feed-in Tariff (FIT), Energy Bill 2010/2011, Nuclear Energy Policies, 2008 provide a clear idea that the objective improving energy efficiency should combine – individuals, businesses, and industry, the government should encourage businesses and individuals to promote energy efficiency and self-generation by modern technologies though incentives (Banfill et al, 2008). Annexure 1, and 2shows energy policy changes Table 4.a shows various policies for energy efficiency and consumption established in Energy white paper 2007 (Renewables Advisory Board [RAB], 2010).

Table 4.a: White Paper 2007, Energy-efficient policies

Source: RAB, (2010).

5.0 Energy Security of UK: Failure of UK Operating Policies (2007- 2010) – Concerns

5.1 Generating Capacity

According to Defra, 2011 figure the margin of capacity over demand falling away to just seven percent by 2017 – which according to the Government’s own analysis is not enough to prevent a rising threat of power cuts (Defra, 2011)

• Gas –Other countries that rely on imports make sure that they have enough storage capacity or long-term contracts to secure supplies. Yet the UK has, at best, just 16 days of gas storage capacity, 38 compared with 99 in Germany and 122 in France (Defra, 2011)
• Nuclear and coal power – Nuclear stations- Hartlepool and Heysham (a total of 2.4GW) are disconnected, and Hunterston and Hinkley, are on reduced yield. Also, 2 nuclear stations are planned to decommission by 2010 of 7.4GW and 9.8GW (10% and 13% of generating capacity). The expected closure of 12GW (15% of capacity) coal generating plant by 2016 aimed at CO2 reduction by Large Combustion Plant Directive (LCPD) of 2008 will cause a huge energy gap (National Audit Office, 2008). In context 23GW (30% generating capacity) have to find an alternate solution (DBERR, 2007).
• Renewables – UK has good renewable resources, which certainly helps the UK in its non-fossil fuel energy generation to a large extend. But the unrealistic expectation of renewables totally replacing primary fuel is a totally negative choice (Douthwaite, 2009). When Germany from the mid-nineties, almost doubled its energy generation from renewables, the UK remains third from the bottom of the table of EU renewable energy use (EC, 2008).

RO has been inefficient by allowing the subsidies leaking from developers. The problems of surplus funds (buy-outs) given to ROC surrender to government, instead of electricity generators. ROC returns and its periods are uncertain in the future for average men particularly for small scale generators with up to 20% commission, administration, and set-up fees for the small scale feed out with unpredictability. Non-Fossil Purchasing Agency has been gathering funds from RO to support NFFO and funds are given to Treasury rather instead of supporting renewable energy projects. From the DTI projection, it is clear that continuing with the RO will not help to meet the renewables target of 20% by 2020 (Thorpe, 2010).

BERR’s lat modeling for the UK, with banded ROC inputs included, gives an anticipated figure of 14% renewable electricity by 2020 (DBERR, 2011). This does not correspond to the projected level values. The market failure of renewables is also a growing problem the government is facing. Even though policies including FIT and other promotions and incentives to encourage economic microgeneration technologies, the poor market penetration due to various factors such as cost of infrastructure, the vagueness of policies, improper implementation of the policy by overlapping business integration and organizational strategy makes it a resistive development (Green deal group, 2008).

Oil- The alarming depletion of oil resources and increasing import is not apparently making a difference in the new policy views. Even though other European countries have gone so much ahead in biodiesel and electrification of transport (King, 2008), the UK lacks even plans to propose those solutions. The UK is also falling behind in establishing smart grids (McCarthy et al, 2010).

Governmental efforts to fund small-scale were unrealistic, regularly reformed. The Low Carbon Buildings Programme (LCBP), has been farce by underfunded projects with £6.5m as household grants, also they were set to decrease yearly with only £1m in 2008/9. DTI forced a cap of £500,000 on grant allocations, leading to the depletion of allocation after 12 hours and 75 minutes in March after the announcement. £6 million LCBP household stream announced in the 2007 March budget, was suspended during April due to uncertainty and delay. In a new householder stream (2008) capped grants were at 50% of the cost for solar PV, or 30% for wind turbines, and 30% for solar thermal hot water. This also has ended in 2009. Lack of long term planning and investment are also main problems (Ofgem, 2009).

6.0 Possible Solutions to Overcome the Scenario

6.1 Assure Capacity Balance in the Electricity Market

by encouraging open market competition and transparent cost comparison energy alternatives and funding resources, also care should be given to demand-side measures (Anderson, 2007).

6.1.2 Establish a Security Guarantee on Gas Supply

With a clear understanding of energy security threats, emphasis should be given to maximize the import and market liberalization of coals, fuels predominantly gas. In the globalization scenario of the LNG gas industry and shale gas value establishing an international trading network, is recommended rather than the Eurasian supply chain.

Objectives should be established a long term trading contract with LNG and pipeline gas producers in Europe, Norway, and international
Market liberalization of energy in an international context (Mackay, 2009).

An optional extraction of oils from sources in arctic regions and ultra-deepwater using non-conventional sources of oil can also be considered. IEA projects 7.2-8% global production of oil can be produced from non-conventional sources mainly from the arctic region and Canadian oil- sands between 2005 and 2030 of about 116.3 million barrels per day (IEA 2006). Carbon capture and storage (CCS) technologies can be implemented to cut down the emission of CO2, thereby promoting exploring maximum coal and other fuels, to facilitate market liberalization and enhanced storage infrastructure can also be put in action (UKERC, 2009).

6.2 Reform the Climate Change Levy (CCL) to Provide a Floor Price for Carbon

Removing CCL from ‘downstream’ electricity supply and as an alternative to be, payable ‘upstream’ on the carbon content after its generation

The debatable levy should start from the lower price and can be increased according to the industry until the point of an optimal floor price
Long term investment by increasing the life p of CCL to at least 25 years (Weiske, 2009).

6.3 Facilitate Nuclear Power

Nuclear power has gone down to 13% starting from 1997 to present and long-standing “U” turn refusal to upgrade the existing nuclear plants or establishing new apart from the proposed plant in 2020 should be taken into account. National Planning Statements nuclear power and Judicial Review should be done in the first place to avoid lights going out in the energy gap period (NERA and AEA, 2009)

6.4 Promote Renewable Energy (Macro and Micro)

Promote and invite businesses and competition for macro energy generations including on-shore and off-shore wind, incentivizing major plans, establish offshore grids to avoid impact on marine renewable investments, the possibility of searching for new potential resources like tidal power systems, establishing grid connections and other networks to ensure that it is being a major part of the energy-producing resources (Vernon, 2007).
Policy development and renovations in Renewable obligation (RO) and Renewable company Obligations (RCO), to ensure that it gives the maximum support to domestic, and industrial sectors to adopt self-generation like microgeneration (photovoltaic, small scale wind turbines, solar panels, biomass). Incentivize and encourage local people to micro generate. Renovating feed-in tariff as it is expensive and bureaucratic, and unrealistic, which is not accepted by the target groups making it a resistive even after years of establishments.
Vital and rapid policy establishments such as “green deal” with clear focus and leadership to suit to its basic idea during its operation, also to make sure that it is not becoming another wobbly green project in the paper. Giving powers to councils to identify, demonstrate and establish audit, and establish bills and financial support policies for governmental recognition and permission for the final intension of group economic growth (McCarthy, 2010)

6.5 Reduce Demand in the Domestic Sector: Housing Standards and Green Deal

It is essential to work with improving housing standards; bearing in mind those two-thirds of the gas Britain is used for domestic heating. In the context of this proper insulation and reducing space causing heat loss, improving standards for new construction, retrofitting the older homes and offices, in the first place than prioritizing the energy generation. It is also recommended to renovate FIT and sudden introduction and support for the green deal of up to £6,500 worth of energy efficiency at no upfront cost, with a higher limit for hard-to-treat homes:

6.6 Rebuilding Security

One of the other considerations should be to allow the participation of private, public, and voluntary sectors in the financing, marketing to deliver the Green Deal and other government schemes, and promoting education and awareness in microgeneration and energy savings. Considerations are to be given to conjunction with the Treasury, Green ISAs, green banking, and creating new Green Bonds designed to consolidate within a single institution the existing disparate sources of public investment in the low carbon economy, such as the Carbon Trust and the Marine Renewables Deployment Fund (Forrest and Wallace, 2010).

7.0 Conclusion

The increasing energy security problems are grave concerns for the UK. The current government trying to ostensibly leave the demand gap satisfied by the market intervention of renewables and green policy supports, which is only addressing a very minor percent of problems. Indecisiveness, procrastination, and demand for financial-economic infrastructure have been ever-ending barriers highlighting problems to a more extended. In this context it is essential that a long term focussed, realistic strategies must be developed along with the support and renovation of policies to perform in a timely and successful manner. The energy security issues must be addressed bearing in mind that gas from the Middle East and Russia is only a part of the solution. Development of green energy generations like microgeneration (PV, Biomass, solar panels, wind energy) and macro (Wind turbines, Nuclear energy, hydro energy) are always a great choice. Investing and inviting businesses to operate these effectively is also a prerequisite. It is also necessary to focus on energy usage security to prevent drastic energy consumption figures, energy-smart meters, peak energy tariffs, are really helpful. It is also welcoming that these infrastructures are supported by strong policy and legislation with an aspiration of creating low carbon, high-security energy climate. From the technical side, Market liberalization, financing on CCS technologies to allow maximum exploitation of coal, immediate development of risk-managed nuclear plants, policy support with minor changes in FIT, and introduction of the green deal without any financial burdens to domestic sectors are some of the realistic ideas which can be considered for a long term action.

8.0 References

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