Britain’s energy policy is a mess. We have the highest energy prices in the developed world, which is damaging competitiveness, crippling our economy and accelerating the decline of our industries. This is not just economically illiterate, but also environmentally counterproductive and socially regressive.
The drive to reduce carbon emissions produced by the UK may seem noble but it is an organised hypocrisy. We import goods produced elsewhere by nations far less scrupulous about their energy sources and end up off-shoring our emissions, and indeed jobs. Our domestic production of carbon looks lower on paper but our overall consumption remains the same – and the impact on global climate is nugatory at best.
Worse, the means by which we reduce our own emissions – importing solar panels and electric vehicles from communist China – sustains their coal-powered economy, relies on slave labour and generates huge environmental damage in Africa and the developing world. The price of our energy policy – higher bills, subsidies for renewables, added costs on housing and job losses in manufacturing – are borne disproportionately by the poorer parts of our country. A reckoning with this folly is long overdue.
Which is why Kemi Badenoch’s commitment this week to reform our energy policy is so welcome; she has said the Conservatives would revisit the winding down of oil and gas production in the North Sea. Britain has left ‘vital resources untapped’, she said, while ‘neighbours like Norway extract them from the same sea bed’.
Britain will be reliant on fossil fuels as part of its energy mix for decades to come, regardless of whether we drill our own reserves or import them from other nations. Even Ed Miliband recognises that, though it scarcely features in his public statements. Now economic reality has forced his hand. In July he asked the National Energy Systems Operator to ensure that Britain has 40 gigawatts of standby power station capacity, most of which will come from gas even after 2030, when he piously hopes that 95 per cent of the country’s day-to-day electricity generation will be carbon-free.
Given that Britain’s current electricity demand averages 37 gigawatts, that is a major commitment. An increase in gas-powered capacity is made more, not less, important given Miliband’s commitment to renewables. Wind and, even more, solar power generate electricity intermittently: sometimes the wind doesn’t blow and the sun doesn’t shine so a back-up is required. Yet all Miliband’s boasts about the reducing cost of renewables omit this crucial fact. As the country’s leading energy economist, Professor Dieter Helm, has pointed out, the real cost of renewables has to include this back-up capacity cost. Ignoring this is like ignoring the country’s debt interest payments. Labour would love to live in such a world but the rest of us have to pay the price every day.
The drive to reduce carbon emissions produced by the UK may seem noble, but it is an organised hypocrisy
The real fossil fuel argument is not whether we abandon them altogether but whether we use UK-produced fuels or import them. With the North Sea in long-term decline, we have inevitably become more reliant on imports. It is hard to construct a reasoned argument for prematurely winding down our own industry. Not only will it deprive Britain of jobs and wealth, it will also force up prices for consumers and lead to an increase in global carbon emissions. A growing proportion of the gas we import comes in the form of liquified natural gas, brought here in refrigerated ships. Yet the liquification and regasification process consumes around 10 per cent of the fuel, with a resulting rise in emissions.
Miliband’s department put out a statement this week claiming that Badenoch’s policy would not take a penny off bills or improve energy security. But that is daft. Domestic production is always a fail-safe at a time of increasing global risk. As for the cost, Miliband is wrong to claim, as he often does, that fossil fuels are global commodities and therefore it makes no difference where in the world they are produced. It costs money to transport oil and gas long distances. This is one reason why consumers in the US – which has followed an aggressive policy of self-sufficiency in energy for the past two decades, whoever was in the White House – enjoy such low electricity prices. American electricity bills are one third of ours and gas prices are just 40 per cent of what we pay.
What Badenoch has not yet indicated is whether she would revive the UK shale gas industry. That, rather than the North Sea, is where the more significant opportunities lie. Yet she has made a good step forward in recognising the importance of maintaining a UK fossil fuel supply. Killing off the industry, as Miliband is intent on doing, will make us poorer while doing nothing for the global environment.
If this government were really serious about the environment, it would not be pursuing an energy policy that necessitates higher prices. If we allowed North Sea oil and gas extraction, consumers would pay less, global carbon emissions would fall and the government would have more money to invest in habitat restoration, sustainable food production and cleaner rivers. But that would require better supporting farmers and landowners, with whom Labour has decided to go to war. This government is not taking us towards a greener future, it is simply plunging us deeper into the red.
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