Drive to sustainable energy future: An assessment of efficiency of energy policies and legislation based on the Energy White Paper 2007 of UK in developing secure energy future
The Energy White Paper 2007 set out by UK government emphasises 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 coming 12 years along with accelerating fuel import ratio sense a real catastrophic destruction of UK’s future energy security (DTI, 2007b). With the energy policy demonstrated in 2007 White Paper (Energy white paper, 2007) superseding the White Paper of 2003 (Energy white paper, 2003), UK government expresses a strong wishful thinking of future of secure energy, by suggesting development of renewables, energy efficient infrastructure along with strong policy currents would placate the impeding energy gap with an overarching vision of energy efficiency and security without replacing the nuclear base load (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 import-dependence of energy creates the challenging problem to 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 larger share of energy supplier of UK, with Russia, West and North Africa and the Middle East playing 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 per cent 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 net importer of energy in 2005 after 28 years of continuous export, because of terminal depletion of oil reserves in Northern Sea (Oil & Gas UK, 2009). 2010 energy statistics shows an overall decrease in indigenous energy production of 5.8 per cent compared to second quarter of 2009 and the indigenous production was not meeting the net consumption leading UK to one of the net importer 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 UK from 2008 to 2010.
Table 3.a: Indigenous production of primary fuels in UK, 2008-2010.
Source: DECC, (2010).
3.2 Consumption of total fuel
Total consumption of primary fuel was 209.6 million tonnes of oil equivalent in 2010 compared to a 2009 (temperature corrected with 0.2 degree Celsius colder than 2009, seasonally adjusted annualised 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 per cent lower than 2009.
Petroleum production- 6.2 per cent lower in the third quarter of 2009
Natural gas- 9.6 per lower than third quarter of 2009 and the third quarter of 2010.
Primary electricity output – 23.8 per cent lower 2009
Nuclear electricity output- 26.6 per cent lower within the same period (DECC, 2010)
3.3 Oil production, demand and consumption data
Almost 75% 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 in every year from 1999 to 2010, reaching the peak in 2006. Energy projections establish that the fuel scarcity and import dependence will rise from projected 4% in 2010 to 20% in 2020 (DECC, 2010).
Fig 3.c: UK crude oil imports by world region
Source: DBERR, (2009).
Indigenous production of crude oil and – 6.2 % lower in third quarter of 2010 than a year earlier. Third quarter of 2010, UK witnessed net import of oil and oil products by 5.3 million tonnes. Imports decreased by 6.1 per cent over the same period
Overall, stocks of crude oil and petroleum products were 2.8 per cent 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 UK than any other primary fuels, which provides 39% of the total energy requirements. 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, 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/inter connector, 2005
Source: DTI, (2007).
3.5 Reliance on Norway
According to the projections of 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 per cent lower than in the corresponding quarter of 2009
Demand for gas in the second quarter of 2010 was 9.6 per cent higher than the level in the second quarter of 2009 (DECC, 2010). Figure 3.f shows 2010 scenario of 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 proposals for LNG 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 polices in UK
• Average coal prices were 11.4 per cent higher in real terms including and 12.6 per cent higher excluding CCL in Q2 2010 compared to Q2 2009. Heavy fuel oil prices were 27.4 per cent 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
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 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 per cent 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). 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 is has good renewable resources, which certainly helps UK in its non-fossil fuel energy generation to a large extend. But unrealistic expectation of renewables totally replacing primary fuel is a totally negative choice (Douthwaite, 2009). When Germany from the mid-nineties, almost doubled their energy generation from renewables, UK remains third from 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 surrenders 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 renewables target of 20% by 2020 (Thorpe, 2010).
BERR’s latest modelling 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. 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 micro generation technologies, the poor market penetration due to various factors such as cost of infrastructure, vagueness of policies, improper implementation of 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 of ahead in biodiesel and electrification of transport (King, 2008), UK lacks even plans to propose those solutions. 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 house hold 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 house hold stream announced in 2007 March budget, was suspended during April due to uncertainty and delay. In a new house holder 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).
6.2 Establish a security guarantee on gas supply
With clear understanding of energy security threats, emphasise should be given to maximise the import and market liberalisation of coals, fuels predominantly gas. In the globalisation scenario of LNG gas industry and shale gas value establishing an international trading network, is recommended rather than Eurasian supply chain.
Objectives should be
Establish long term trading contract with LNG and pipeline gas producers in Europe, Norway and international
Market liberalisation of energy in an international context (Mackay, 2009).
An optional extraction of oils from sources in arctic regions and ultra-deep water 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 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 liberalisation 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 debateable levy should start from lower price and can be increased according to the industry till the point of an optimal floor price
Long term investment by increasing the life span 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 in 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, incentivising major plans, establish offshore grids to avoid impact on marine renewable investments, 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 micro generation (photovoltaic, small scale wind turbines, solar panels, biomass). Incentivise 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 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 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 sector in financing, marketing to deliver the Green Deal and other governmental 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).
The increasing energy security problems are grave concerns for UK. The current government trying to ostensibly to leave demand gap satisfied by market intervention of renewables and green policy supports, which is only addressing a very minor per cent of problems. Indecisiveness, procrastination and demand of financial economic infrastructure have been ever ending barriers highlighting problems to a more extend. 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 are 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 tariff, 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 liberalisation, 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 green deal without any financial burdens to domestic sectors are some of the realistic ideas which can be considered for a long term action.
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