Today I gave the following speech at the ENVEXX oil and gas conference in London…
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Good afternoon. I’m delighted to be here today – thank you to Mike for inviting me.
The new dislocation in the energy markets has Ed Miliband and others jumping up and down about how this underlines the need to get off gas and move to clean energy as fast as possible, just as they did when Russia invaded Ukraine in 2022.
He was wrong then and is wrong again now.
Let me begin with the Government’s current strategy. At its core, the policy is presented as a coherent plan to rapidly decarbonise the power system, electrify large parts of the economy, and replace fossil fuels with renewable energy, primarily wind and solar.
Supported by batteries, interconnection and increasingly complex system management, while at the same time discouraging domestic oil and gas production on the assumption that declining demand will make it redundant.
On the surface this sounds reasonable, even attractive, because it promises cleaner energy, lower emissions and lower costs. But when you look more closely at the engineering realities, the economics of the system as a whole, and the real-world consequences that are already emerging, the contradictions become very hard to ignore.
In fact, what we’re doing risks locking in the exact outcomes policymakers say they want to avoid, namely long-term dependence on oil and gas, rising costs, a steady erosion of domestic industrial capability, and an energy system that becomes less rather than more secure.
The first and most fundamental problem is that we’re not actually reducing our dependence on oil and gas at all, we are simply choosing to import it instead of producing it ourselves.
Even under the most optimistic projections the UK will continue to use significant volumes of oil and gas for decades to come.
For example, the government’s plan to electrify homes requires the installation of 600,000 heat pumps per year to get people away from gas and heating oil. At this rate it will take 47 years to achieve remove oil and gas use from domestic heating! And we’re no-where near meeting that installation target so in practice it will take even longer.
What does the government have to say about this long term reliance on oil and gas? Absolutely nothing. Not a single thing. Just constant repetition of the “get off gas” mantra.
Worse, we’re actively suppressing domestic production, sending a clear signal to investors that the North Sea is closed for business.
This creates a black hole at the heart of policy, because we’re locking in continued demand for hydrocarbons while dismantling our ability to supply them. The inevitable result is a greater reliance on imports, higher exposure to international markets, and loss of control over a critical part of our energy system.
That’s not a transition, it’s a deliberate choice to increase vulnerability.
At the same time, this approach is already having visible economic consequences, particularly in the oil and gas sector where the pace of decline is not gradual or managed but abrupt and increasingly damaging.
We’re seeing around a thousand highly paid, highly skilled jobs being lost each month in regions where alternative opportunities are limited and where the energy sector has long been a cornerstone of the local economy.
These are engineers, geoscientists, offshore technicians… people with decades of accumulated expertise. Once those skills are lost they are extraordinarily hard to rebuild.
The idea that these jobs will be replaced by equivalent roles in renewables does not stand up to scrutiny. Almost all the jobs in the renewable energy supply chain are located overseas, and the few based here attract much lower wages than typical oil and gas jobs.
So we’re not managing a transition from one industry to another, we’re presiding over a decline in domestic capability, replacing it with an increased reliance on imports.
Renewable energy is presented as a route to energy independence. But this too is misleading. Wind and solar are weather-dependent – they generate electricity when it’s windy and sunny, not necessarily when we need it.
Managing that mismatch requires a whole set of additional measures, including backup generation, which in practice still means gas-fired power stations, or large-scale storage which remains technologically and economically constrained.
It also requires a major expansion of the transmission network to move power across the country from wind places to demand centres, and increasingly complex balancing actions to keep the system stable in real time, when clouds and gusts of wind create variability that must be managed.
All of these come at a cost, and yet most of the public discussion focuses narrowly on a measure known as the levelised cost, which artificially flatters renewables by excluding many of these expenses.
The levelised cost is effectively the price at the station gate. It’s not the cost that a consumer must pay to receive electricity on demand. If we only paid the levelised cost of wind and solar, plus some cost for delivery, we would only receive electricity when it’s wind or sunny.
What actually matters is the full system cost paid by the consumer. This has to cover the cost of building renewables and connecting them to the grid, the cost of delivering electricity across the grid to consumers, the cost of backup when they’re not able to run, and the costs to balance the grid and keep it operating correctly.
In a renewables-dominated grid these costs are much higher than for gas-fired and other forms of conventional generation such as nuclear.
Yet policymakers cling to the argument that renewables are cheap because the wind and sun are free. Well wind and sun may be free but the equipment to convert them into electricity and deliver it to consumers consistently is very expensive.
So wind and solar electricity are not cheap and they do not and can not provide energy security.
This is even more apparent when we consider that electricity accounts for just under 20% of UK energy demand, so a huge electrification programme would be needed. Yet there is no consistent strategy to deliver that across heating, transport and industry and what little there is will take decades to realise.
Another strategic dimension is the extent to which the government’s energy transition relies on global supply chains that are heavily concentrated in China.
From solar panels to batteries to the processing of critical minerals, we increasingly depend on imports from a single country that is not necessarily aligned with our broader strategic interests.
We’re replacing one form of dependency – on imported fossil fuels from countries which are for the most part close allies such as Norway and the US, with another dependency, this time with a country which is not.
Not only is China not a close ally or even a friendly state, there are significant ethical and environmental concerns about the supply chains that underpin the energy transition.
There are significant environmental harms associated with the vast amounts of metals that have to be dug out of the ground and processed, using a great deal of energy and toxic chemicals.
The worst are from the production of rare earth magnets used in wind turbines and electric cars but not conventional generators or petrol and diesel cars – these are so polluting to produce that no country other than China allows it to be done at an industrial scale.
There are also ethical concerns ranging from the use of child labour in Congolese cobalt mines, to the competition for water for human use and agriculture from lithium production in South America and manganese production in South Africa. And of course ongoing concerns around the use of forced labour in China.
So the government’s energy policy is to replace reliable conventional electricity generation with unreliable wind and solar. To replace reliance primarily on Norway and the US for oil and gas for a reliance on China for renewables. To swap domestic carbon dioxide emissions for overseas emissions and other forms of pollution and social harms.
And to simply ignore the many many years it would take to replace current uses of oil and gas with electricity. For the risks associated with this lengthy transition there is simply no plan.
So the real question is why is Ed Miliband and the government are determined to ignore the oil and gas beneath our feet, or at least beneath our waters.
We are told that the North Sea is a mature basin as if that means it’s no longer worth bothering with. More oil and gas has been produced in the past than can be produced in the future so we shouldn’t try to extract it. That the oil and gas is sold on the international markets so there’s no point producing it since we will receive no benefit.
Being mature does not mean being effectively dead. I’m in my fifties and by most people’s standards would be considered mature – in age terms at least! But I’m far from retirement and even further away from death from old age. A mature person is not written off as not worth bothering with. The same applies to our North Sea oil and gas resources.
Similarly, being “in decline” is not a reason to discard our domestic resources. The moment a new mine or reservoir is opened, it begins to decline, yet nobody would begin production on day 1 and end it on day 2 because of decline.
The reality is that there is plenty more oil and gas under the sea, and we absolutely can benefit from it.
Norway has made significant finds in the past year, adjacent to the UK sector. The border between us is political not geological – some of those reservoirs almost certainly extend into the UKCS, but with a drilling ban we can’t verify that.
And technological developments continually increase the amount of hydrocarbons that can be economically produced from known resources.
With a more favourable fiscal regime, the removal of the drilling ban, and a more supportive regulatory environment, we could slow or even reverse the current decline in UK oil and gas production.
All of the gas produced comes onto the GB gas grid – that’s simply where the pipes go. It is not sold on international markets.
It is also not sold at an international price. Yes, the British gas index, NBP is linked to overseas price indices – gas now trades globally – but it is not sold AT these other prices. NBP tends to trade at a discount to the main European market.
If we produce more of our own gas we will displace imported LNG which is the most expensive source of gas we buy. LNG attracts liquefaction, shipping and regas costs which our own production does not. Since our gas price is based on the marginal source of gas delivered into the British market, the more we produce the less often LNG will set the price, particularly in the summer when demand is lower. This will result in real reductions in prices.
On top of this, the UK earns significant tax revenues not just from oil and gas producers but also from the extensive UK-based supply chains that support them. This is worth £billions per year and could fund price support for energy bills or reductions in the fuel duty.
The picture with oil is similar except much of the oil we produce has to go overseas to be refined. This is because we only have four refineries left, in part due to our high energy costs. However, the tax position is the same – producing oil brings significant revenues to the Treasury.
So what should the government do?
First – abolish the windfall tax on oil and gas production, lift the drilling ban and create a more supportive regulatory regime that incentivises the development of new oil and gas fields
Second – incentivise long term fixed price gas supply agreements with the US and Norway rather than the short-term floating deals that dominate the market. Locking in a portion of our demand for 15-20 years will reduce our exposure to price shocks.
Third – cancel the carbon tax which makes energy expensive, harming British households and industry. This is a particular challenge for refineries which have to compete with imported products that are not subject to similar taxes. Incentivising upgrades to our aging refineries would also be a good step.
Forth – cancel the expensive legacy Renewables Obligation scheme, and the latest Contracts for Difference round whose contracts have not yet been signed and suspend future subsidy auctions until prices are under control. And move all subsidy costs from bills to taxation. This would immediately reduce energy costs for homes and businesses.
And Fifth – cut fuel duty. Half the pump price of petrol is tax: fuel duty and VAT. We actually pay VAT ON the fuel duty. Cutting this will again have an immediate impact on energy costs and boost the economy
The reality is we will use oil and gas for decades to come. Instead of fantasising about an unrealistic clean power utopia we need to take concrete pragmatic steps to secure our energy supplies based on the energy we actually need. And domestic oil and gas production is at the heart of this.
Thank you
Absolutely spot-on as usual Kathryn.
As you rightly point out electricity is only 20% of UK energy demand. And wind and solar provide only 5% of UK energy demand (Digest of UK Energy Statistics 2025). And that was the easiest 5% by far because up to that point we could just about use every Kwh generated by wind and solar. But from now on every new turbine or solar panel adds to the excess generation and has to be stored or ditched meaning that the costs of these intermittent renewables will increase at an exponential rate just as the efficiency will decrease.
Milliband must know this so what drives him? There are only two answers. Madness or Money.
Best regards
Steve Davies
Excellent summary Kathryn
All good except subsidies to general taxation. The lack of transparency is bad enough now, will be worse if just part of the massive cesspool of taxes. Instead spend much more time educating on the true costs of renewables and stop the nonsense. Also on renewables, we once had an Offshore Supplies Office to make sure the new industry (oil and gas) resulted in local capabilities and jobs. And that was when the alternative was a good actor, not bad actor like China.
Very interesting point Daniel. I’d like to learn more about this from you, please
Well said!
If wind and solar are free, so are oil and gas. No-one paid to put them under the surface. In every case though, there is a cost of exploitation, so renewables are not special in this respect.
Another brilliant paper by Kathryn dealing with the real facts in relation to renewables.
I have never supported renewables as a viable replacement of our current energy supplies.
I have been a fan of SMR’s for a long time because of the faster project build.
By paralleling up multiple SMR’s it saves on the replacement project time of the conventual large nuclear reactors.
Whenever a SMR is due for replacement there will be a faster turnaround and less disruption to the grid.
There should be a long term plan of installing multiple SMR’s to meet future energy needs.
The Career Politicians need to reduce the unnecessary planning regulations, and come up with a long term plan to save the grid which is slowly dying!
To try to synchronise an electronic renewable to a rotating machinery grid is madness.
Rather use the renewables for other uses in the rural areas. Ideally have them on their own grid. It won’t be cheaper but it may satisfy the green brigade who have to accept the real costs of renewables.
Renewables are like electric cars and heat pumps, they are not really cost effective and Mad Ed and the rest of the loonies really need a wake up call.
How many “kill switches” have been installed in the Chinese renewable electronics? Just asking.
“I have never supported renewables as a viable replacement of our current energy supplies.”
And yet renewables have replaced just under half of our current energy supply.
“I have been a fan of SMR’s for a long time because of the faster project build.”
They have literally NEVER(!!) been built. So I don’t think you can assert that they will be quick to build.
“To try to synchronise an electronic renewable to a rotating machinery grid is madness.”
No, it’s software, and it’s robust and flexible.
“How many “kill switches” have been installed in the Chinese renewable electronics? Just asking.”
There are verifiably no “kill switches” on solar panels.
The truth is that you wish to ignore the damaging impact of burning fossil fuels. These are warming the Earth at more than 0.25 °C/decade and so reducing their widespread use is urgent. And you suggest relying on SMRs which are – literally – a fantasy technology with unknown costs, delays and consequences. There is a reason that we have big nuclear reactors: it’s because they work more efficiently with less enriched fuel. And this is actually quite important.
“Renewables are like electric cars and heat pumps, they are not really cost effective and Mad Ed and the rest of the loonies really need a wake up call.”
ICE car production has been in decline since 2017 and this is unlikely to change. Electric cars are extraordinarily cost effective and most people who have driven them don’t want to go back.
Heat pumps are extraordinarily cost effect. I heat my 162 m^2 home for less than £100/year.
“Mad Ed and the rest of loonies”
Really?
Generally agree; however, putting subsidies on general taxation is not a good idea. We need more transparency on the costs of policy decisions, not less. That is the most fundamental issue with renewables. You can hear every day someone who should know better pontificating on the low costs of renewable energy – which is a massive untruth if accurate fully-costed economics are shown.
Thank you Kathryn for all your work in explaining to the public the very heart of our energy problems namely green zealot Ed Miliband. Keep up your brilliant work.
Good Morning,
I could summarise your article as “advocate for oil gas companies says we need more oil and gas”. Mmm. An unsurprising opinion.
The actual situation is this: Oil and companies have knowingly expanded production for decades knowing that they were creating a grave climate crisis. The reason was the staggering amount of money they could make. As a consequence our Earth is warming at roughly 0.25 °C per decade. This is the problem which needs to be addressed. A secondary byproduct of reliance on oil and gas is the chronic instability of supply which repeatedly plunges our economy into chaos.
Steve Davies Comment is interesting, ending with an ad hominem attack on someone who is working to address the root cause of repeated energy cries. But his attack doesn’t really make sense. Miliband is not mad, he just disagrees with Steve Davies. That is not a sign of madness. And “Money”? The big money is all with the oil and gas industries!
We are facing difficult times for sure, but the idea that more “business as usual” will produce solution does not convince me at all.
Best wishes
Michael
Michael thank you for your comments. Yes, we are in a climate crisis but the drive for intermittent renewables is taking us nowhere due to its immense inefficiency and cost. It’s a dangerous distraction and a waste of money and is slowing down our potential reduction in carbon emissions. We should be going all out for energy efficiency, nuclear and carbon capture.
By the way, since when was it inappropriate to question a politician’s motives? If I could expect a response I would write to Mr Milliband and ask him directly – what’s in it for you?
Steve, Good Afternoon.
“Immense inefficient and cost”: As I am sure you know, around 80% of petrol and diesel fuel is wasted as heat. Around 45% to 55% of gas energy used to generate electricity is wasted as heat. And around 60% of nuclear power is wasted as heat. Also all nuclear, gas and oil all cost more that their respective renewable counterparts.
Burning gas for heating is around 85% efficient but a heat pump is around 350% efficient
“intermittent” ” Indeed, intermittency is a big problem for renewables. But nonetheless the fact is that in the UK more electricity is generated from renewable sources at lower cost than electricity generated by gas. And that fraction is increasing. This makes us less reliant on volatile imports and already partially insulates us from the forthcoming crisis.
Intermittency is also a problem for fossil fuels – just on a different time scale with different causes. The crisis we are facing this year arises from our dependence on fossil fuels.
“Nuclear””: it’s the most expensive and slowest option and is only around 40% efficient, but I don’t object to it in principle.
“Energy efficiency”: I absolutely agree.
“Carbon Capture”: As someone who has actually paid for carbon capture, I can tell you it doesn’t work.
In any case, best wishes.
Michael
“…electricity is generated from renewable sources at lower cost than electricity generated by gas.”
Oh for God’s sake, not this again.
Just look at the strike prices for Contracts for Difference, significantly higher than the average market price.
Wind generation is not cheaper than gas generation. It just isn’t.
If it was, guaranteed prices above the market price would not be required.
It isn’t, so they are.
Hello Michael
You are certainly right that fossil fuels are inefficient which is one reason why it is so bad that the concentration on intermittent renewables will keep us hooked on them for so much longer. Just to double the current meagre contribution of wind and solar will take far more than doubling the amount of generating plant, plus a whole parallel infrastructure of storage, transmission and grid-balancing. The rest of what are loosely called ‘renewables’ are known as ‘thermal renewables’– i.e. biomass – which is far from carbon-free. The only (relatively) carbon-free generators of significance are hydro (tiny contribution), nuclear, solar and wind.
Many of the costs of renewables are ‘hidden’ – i.e. charged against the fossil-fuel back-up that supports them. In addition the Government is now considering hiding the escalating cost by transferring some of it from electricity bills onto general taxation.
When I worked for a large housing association we looked into the relative benefits of ways of reducing the heating costs of our housing stock, including solar and heat-pumps. The clear winner was energy efficiency – i.e. insulation and general reduction of heat-loss. Mostly this could be built into the fabric of the building and would never require maintenance. It represented an investment showing a positive return over the years. Electricity generation is a cost, not an investment.
Hence – energy efficiency before generation. Well, we agree on that!
Best regards
Steve
Hi Michael
I would like to point out that what Steve said (about Milliband) is not ad hominem but more abusive. If one said that someone is a silly billy or had been paid by Big Green as so his arguments should be rejected then that would be ad hominem.
As to efficiency I would point out that UK law prohibits so the idea that heat pumps generate more energy than they consume would violate the Laws of Thermodynamics and, being akin to perpetual motion, could not be patented. This is perhaps because comparing different efficiencies . – and perhaps Mr Davies was considering something else . (NB Wind power can never be 100% efficient – as that would involve reducing exit wind speed to zero)
As to waste heat. The current government stand is that EES is only for the production of electricity and if, for example one were to use thermal energy storage to drive a gas turbine then any waste heat could not be used for (for example process heat or combined heat and power). I asked .
So waste heat depends upon what you want to do with it; (even if it driving a heat pump!) it is a political decision – possibly pedantic or a function of wanting only electric solutions (i am not sure that there has been any thought (from government spin-doctors ) about waste (energy) streams from high temperature processes – such as hydrogen or steel or glass production)
As to intermittency. The cost of delivery of wind power should include the cost of backup too – be it energy storage or gas turbine generation). I do not agree with it going on general taxation as that is just another way of subsidising NG and windmills); smoke and mirrors.
The arguments about intermittency for thermal based generation is misleading; one could just as well argue similarly about
Morning Michael British Gas authorised installers of heat pumps are refusing to install heat pumps in many properties because of the poor ‘u’ values of these buildings accordingly the efficiency claims made only apply to the buildings complying to the most recent building regulations regarding thermal insulation Therefore in many cases heat pumps simply do not work
Paul Kenyon,
Good Morning. British Gas is a company which sells fossil fuels. That they should find an excuse not to install heat pumps is really not surprising.
“Therefore in many cases heat pumps simply do not work”
The fact – in case you are interested – is that heat pumps can heat any property that can be heated by a gas boiler, no matter what the state of the insulation. And that heating will be more efficient than a gas boiler which typically converts 85% of chemical energy into heating power in the house. My own heat pump operates at about 370% efficiency – delivering around 3.7 units of heat into the house for every unit of electricity used. I purchase most of the electricity at night making my heating also far cheaper than gas.
https://protonsforbreakfast.wordpress.com/2026/02/17/the-most-obvious-way-to-plot-heat-pump-performance/
Some heat pump installations are way more efficient, but some are less. One older survey suggested the average efficiency was around 290% – still dramatically better than a gas boiler.
You will know of course that most retail establishments – which often leave their doors open! – are heated with heat pumps. The idea that there is *any* property which cannot be heated by a heat pump is a myth.
Best wishes,
Michael
I do advocate for oil and gas but it is important to understand that I am not paid for that. I do it because I think it’s the right thing to do. Oil and gas are important. Actually they are essential to modern life – not just for energy, but technology, medicine and agriculture all depend on hydrocarbons.
Oil and gas companies expand production because there is demand for their products. They do not burn it themselves (to any great extent). A barrel of oil is not sitting there emitting anything (other than a few volatiles perhaps). It’s only when it’s burned that the emissions happen and they are not the ones doing that.
The idea that oil and gas companies should be responsible for the use people make of their products is, frankly, ridiculous.
“The idea that oil and gas companies should be responsible for the use people make of their products is, frankly, ridiculous.”
I completely disagree. Perhaps 60 or 70 years ago this might have been a credible position but not today.
We have known about the global consequences of carbon dioxide emissions since the 1890’s but at emissions of just a few billion tonnes per year, most people considered a modest amount of warming to be a boon rather than a threat. But as fossil fuel emissions grew post-war, extremely clear warnings were given in the 1980’s that continued expansion of fossil fuel production would produce catastrophic global warming. The Oil and Gas companies knew this, but chose to first deny the science – which was clear since the 1890s – and then to work to undermine any co-ordinated effort at moderating emissions. In fact they explicitly learned from the curtailment of the tobacco industry who had (paraphrasing) argued that
“The idea that Tobacco companies should be responsible for the use people make of their products is, frankly, ridiculous.”
Historically oil and gas have brought many benefits – and they will be required for the foreseeable future. But burning oil and gas for energy has created an urgent crisis of monumental proportions, heating the entire Earth’s surface at a rate of over 0.25 °C per decade. Oil and gas had a chance to act responsibly but they knowingly chose not too and continue to act thus. With their vast capital resources they could have been leaders in the new energy technologies, but they chose not to be. we now know how damaging use of their product is, but they refuse to take responsibility.
Best wishes
Michael
Tobacco is a poor comparator. It has zero benefits. Fossil fuels on the other hand have significant benefits and there are few credible alternatives. Vast amounts of capital and natural resources are being wasted on intermittent renewables when they could be better spent mitigating the effects of climate change.
If there were better alternatives to fossil fuels people would be using them and they would stop burning oil and gas. That they are not illustrates that these products are still needed, and will be for decades
“Tobacco is a poor comparator”
It is not a comparator that I chose. Documents reveal it is the comparator chosen by oil companies as a model for how to delay and weaken regulation of the harm produced by using their product.
“Vast amounts of capital and natural resources are being wasted on intermittent renewables when they could be better spent mitigating the effects of climate change.”
Unless we achieve Net Zero, the Earth’s temperature will continue to rise indefinitely. There is no mitigation possible against a world which is 3 °C or 4 °C warmer than the 19th Century and 3 °C of temperature rise is just 60 years away at 5th current rate of increase.
The investment in renewable technologies has already eliminate coal and replaced around half of UK gas used for generation making the current fossil fuel crisis easier to cope with than it otherwise would have been.
Best wishes
Michael;
Best wishes
Michael
The biggest seasonal climate change that comes around every year, where the climate gets significantly cooler in the UK, i.e. winter, is the biggest cause of energy expenditure.
Yes we need to adapt to climate change, and it doesn’t require renewables, but simple insulation. It interesting how many people regard a 1, 2 or 3 degree celsius change to be significant, but forget that there is a 20 degree change every year that we should have been adapting to, to burn less fuel. But it isn’t as economically “sexy” as high tech renewables.
The statement “Vast amounts of capital and natural resources are being wasted on intermittent renewables when they could be better spent mitigating the effects of climate change.”, if you look at the correct aspect of our climate, is actually defacto a correct statement.
To push for renewables as a solution to all the problems is missing the point, and is expensive.
You could apply the statement to the oil & gas industry and say how bad they are, but, what happens when you reduce your energy demand from 20,000kWh heating per annum, to just 2,000kWh?……..how many capital intensive renewables do you need then……could we just burn a few logs of renewable fuel, grown in the UK?
We live in a paradoxical universe, that some statements are wrong if you apply them to a limited aspect, or with a limited interpretation, but can then also be correct, if you only apply them to the right question.
“With their vast capital resources they could have been leaders in the new energy technologies, but they chose not to be. we now know how damaging use of their product is, but they refuse to take responsibility.”
I just love it when people shove all the responsibility onto others, absolving themself of any blame.
With the oil crisis in the 1970s, my father took responsibility and built a solar hot water system from 12 radiators installed onto a modified roof of one room of an extended bungalow, and used to car-share at times with another work colleague. Any home owner can take responsibility and insulate their home, or install energy efficient appliances, renewable energy generation, CHP, buy some land to grow crops for food and fuel, buy the most economical car, or cycle, or use public transport, or car share, or even work to invent, develop, build and sell such useful products, or to advise others how to do so.
It would be interesting to see how many people who moan about the oil and gas companies aren’t actually doing anything themselves to help. Wasn’t there a case of an “Insulate Britain” protester, who hadn’t even insulated their own house.
I’ve got a series of projects lined up for the next 10 years, but then I’ve cut gas and electricity use by 20% of each already, and will be installing top-range windows <1.0U value this year…….reinvesting savings bit by bit, then the roof, then the walls, and 5kw of solar panels over the next two years, and more later.
When we judge others, that judgement can also apply to ourself in certain circumstances, but some people just don't see it.
A very helpful summary.
Are you getting a hearing in Whitehall?
Another excellent summary Kathryn.
Good suggested actions which of course will be completely ignored. You make a good point about LNG not always price setting – I recall when co-produced gas (came with the oil) could at times supply nearly all demand and we could get negative prices at the NBP. Sadly politicians and the Department are allowed to repeat factually incorrect statements.
I wasn’t the only one with my head in my hands yesterday when I listened to PMQs and the argument that Rosebank is a quasi-judicial process. It’s shamefully misleading and I recall the result of a judgement which would make any hydrocarbon extraction illegal due to the emissions when burned.
Tail wagging dog yet again.
Keep fighting with logic and facts.
Thanks for sharing your insight, Kathryn!
” incentivise long term fixed price gas supply agreements with the US and Norway rather than the short-term floating deals that dominate the market. Locking in a portion of our demand for 15-20 years will reduce our exposure to price shocks”
This is a nice thought, but it’s going to be complicated, both in terms of the incentives of the counterparties.
Long-term contracts are always in-the-money for one side, and out-the-money by equal measure for the other. For example, when it’s out-the-money for the supplier, it can be difficult to get volume because they have the wrong incentives to perform the contract. I have many years of experience on both sides. Contracts always have enough to make it worthwhile to put some resource into “maximising” value, and the legal and operational games start from there.
The UK power and gas market structures are not conducive to long-term contracts. Retail customers do not have the commitments of the participants in the wholesale market, so the latter will always see the volume commitments in a long-term supply agreement as a long position. When measuring-up their trading exposure limits, these long positions are killers for trading creditworthiness and the availability of trading counterparties..
Simple economic theory suggests prices will spike up when supply is short, and this is assumed to provide the incentive to invest, assuming long-term contracts are available to back those investments. In practice it is nothing like that for the above two reasons. When things get “hot”, participants stop trading to protect themselves and market liquidity drops, and sometimes participants don’t survive, Failure of the LIBOR market in 2008 is an example – market illiquidity was due to nobody being willing to take exposure to trading counterparties who might not be there in the morning. What do you think will happen when power and gas prices spike up, and credit limits stay the same? Big mark-to-markets on long-term contracts might not be your friend in these circumstances.
The UK should also look to use the vast fully proven reserves of coal that still exist benath our feet.
As usual, your presentations are excellent exposés of the real world and not the fiction that the political zealots like Miliband continue to try and ram down the throats of the gullible, be they MPs or public. You are absolutely correct in calling out the current policies and I’m pleased to note that you have strengthened your rhetoric from “government policies” to “Miliband says”.
I believe that people like you who actually know what you are talking about need to be even more robust in speaking out about the insanity of our present energy strategy.
PLEASE keep publishing your work as widely as possible and hopefully the message will get across and persuade the sycophantic Labour MPs (who toe the Party Line) that the current policy is wrong in so many ways.
Thank you for your excellent work which I always look forward to reading.
Gareth Powley
As always Ms Watt succinctly summarises the stupidities of this (and the previous) Government regarding UK energy “policy”, although you could really argue there is no coherent policy, certainly not to avoid driving the UK into deeper dependency on supplies and equipment from overseas.
So the question is: can anything be done to strengthen the case that many people have been making recently about the need to not throw away our reserves, expertise and independence?
Could quantifying the financial impact of the policies help strengthen the argument and maybe persuade Labour that the current policies are economic suicide?
Who, or what entities and organisations could credibly cooperate to do this?
I firmly believe that unless we start using hard numbers of the billions of pounds impact there is zero chance of sense and logic winning.
Kathryn: you say ‘That’s not a transition, it’s a deliberate choice to increase vulnerability”. Well it certainly looks like that but why on earth would the Government and the many hundreds of people who support its policy wish to increase vulnerability? Do they all really wish to wreck our economy? I find that hard to believe.
Juliet Samuel’s Times article of 25 March “North Sea oil isn’t dead, just sleeping — and it’s time to wake up” was timely in appearing the day before the Conference. It conveys your message to the less-specialised reader and hopefully has been read by some at least of the MPs on the Labour, LibDem and SNP benches in Parliament who still appear to believe (and follow) Ed Miliband. See:
h ttps://w ww.thetimes.com/uk/politics/article/north-sea-oil-gas-ed-miliband-8rzgcl3jz
Exactly, a sane voice that the UK needs to heed.
You touched on it, but I think this needs restating; no matter the expansion of renewables, there will always be holes in the wind that need to be filled. These holes can last weeks, so batteries are hopeless (4hrs max in a world leader like California) For these holes and for when the wind drops (like it does most nights when there is zero solar) we require backup generation that can supply nearly 100% of our demand.
So why duplicate our entire supply system? That is massively expensive and wholly unnecessary. Just use the one system that delivers reliable power, the one that we can easily control, the one that is cheap, the one that we already have.
And if it’s our 1% of global emissions that is the concern (really?), then high density, reliable nuclear is the correct answer.
We need more intelligent campaigners like Ms Porter, not dummies like Miliband.
Divide and conquer…….if you divide all energy sources into individual supplies and make your country dependent on just one of them, you make the country less resilient. There will always be a supply problem at one time or another for various reasons, miners strikes, Strait of Hormuz, Suez, Piper Alpha, variable sun/wind, nuclear accident, cable theft………so you need diversity. There is also the matter of longevity. Some supplies are finite. They say there’s 47 years of oil left………that’s only 47 years, and after? I mean, when do you want the economy to come crashing down?…..tick, tick, tick. Don’t want to worry you, but heads in the sand won’t help one bit. You can forget about climate change. I really don’t want to be a party pooper, but…….just saying. You can adapt to climate change, but when it’s gone it’s gone, can only be adapted to by alternative supplies. If you want the Helium from gas supplies for microchip production, how thorough do you want to be in extracting every last atom of He from the gas? Or do you just want to just burn it without making any effort to extract the Helium?…….do you really want to use it to fill ………party balloons?…….when it’s gone, it’s gone. Helium from gas is easy to extract, but if we get to extracting it from air, at much lower concentration, the price will increase. I’m surprised that the government hasn’t started an efficiency drive to get every last drop of energy being used to maximum effect, we’re still burning methane at just 60% efficiency in isolated CCGT systems. They could have dealt with that for starters, halved the CO2 emissions attributable to electricity production.
It is easy to be profligate when there is a surplus, a glut, but the times they are a-changin.
There are many different vulnerabilities, which do you look at and mention, and which do you ignore?
If you are importing more and more energy as fuel supplies, at what stage, if there were no renewables, would it become uneconomic, if we are unable to increase exports of products or services to pay for that raw material/import? At what stage would borrowing keep increasing, just to buy oil and gas on the global markets? It is fine to say that CCGT systems are all nice and efficient at 60%…..actual system efficiency isn’t as good as it could be, but what about the macro-economic effects and buying the foreign currency to buy that oil and gas?…….we could send them pounds-sterling, printed by the Royal Mint, but what if they want dollars…….we don’t print those, and if we are printing more and more money, how many would they want to buy those dollars?…..things can start to get awfully expensive, really fast.
We’re borrowing more and more already, and the government doesn’t appear able to keep it under control.
The expansion of data centres and cooling is predicted to cause a 20% deficit in gas availability compared with demand by 2030. Chuck in a bit of bombing of gas production in the Middle East, where does that get us?
Divide and conquer…….if you divide all energy sources into individual supplies and make your country dependent on just one of them, you make the country less resilient. There will always be a supply problem at one time or another for various reasons, miners strikes, Strait of Hormuz, Suez, Piper Alpha, variable sun/wind, nuclear accident, cable theft………so you need diversity. There is also the matter of longevity. Some supplies are finite. They say there’s 47 years of oil left………that’s only 47 years, and after? I mean, when do you want the economy to come crashing down?…..tick, tick, tick. Don’t want to worry you, but heads in the sand won’t help one bit. You can forget about climate change. I really don’t want to be a party pooper, but…….just saying. You can adapt to climate change, but when it’s gone it’s gone, can only be adapted to by alternative supplies. If you want the Helium from gas supplies for microchip production, how thorough do you want to be in extracting every last atom of He from the gas? Or do you just want to just burn it without making any effort to extract the Helium?…….do you really want to use it to fill ………party balloons?…….when it’s gone, it’s gone. Helium from gas is easy to extract, but if we get to extracting it from air, at much lower concentration, the price will increase. I’m surprised that the government hasn’t started an efficiency drive to get every last drop of energy being used to maximum effect, we’re still burning methane at just 60% efficiency in isolated CCGT systems. They could have dealt with that for starters, halved the CO2 emissions attributable to electricity production.
It is easy to be profligate when there is a surplus, a glut, but the times they are a-changin.
There are many different vulnerabilities, which do you look at and mention, and which do you ignore?
The expansion of data centres and cooling is predicted to cause a 20% deficit in gas availability compared with demand by 2030. Chuck in a bit of bombing of gas production in the Middle East, where does that get us?
Of course we’ve got a trade deficit of £40 Billion per annum of food……..yes we are a net importer (out of £180 Billion market), and a trade deficit of £63 Billion on oil, petrol, diesel, £49 Billion on gas, £5 Billion on coal and electricity. £1.5 Billion on fertilizer. £150 Billion per annum, trade deficit, on basics…….not even as luxury goods. 44% of the energy we use is imported, after being a net exporter for 24 years from 1980 to 2004…….have you ever wondered why the country’s finances are getting harder to manage?
If anyone would like to plug these great big holes, leaking money from the country, please apply to the government ASAP…….which is why we keep getting the politicians banging on about “international investors”…….that only extract more money (profit), but the politicians like the capital investment (short-term sugar rush)
Of course more immigration adds to all of these trade deficits (but no one tells you about that either)……because they don’t actually enhance the exports…….much, but add to the imports needed.
You might be able to see now that there is a huge disconnect between analysis and understanding of finances and what different people are willing to spend other people’s money (taxes) or even normal income on.
When the country is paying its population (and any new arrivals) in goods and services, for much more than they have earned in foreign exchange (exports), we have to borrow, and borrow, and borrow.
We’re getting to structural defects in the economy that have to be repaired at some point, and it’s going to be painful…..lower standard of living, and putting it off will make it worse……you can’t grow an economy if you have limited energy available, and every % pt in growth costs more and more, making balance of payments worse and worse. Unfortunately, none of the politicians are able to deal with the structural problems, because they are actually creating some of them due to their policies.
If you don’t generate your own energy, when you don’t have enough exports of finished goods or services to pay for those imports, you are living beyond your means.
If you invite/accept more and more people who are adding to the imports, again the country is living beyond its means, or at least trying to cash a cheque that it cannot afford, however kind you are trying to be to others, it’s a bit of self-destruction.
You could tax the rich, but then again, that wouldn’t block the massive leaks of money from the country, so it’s a bit like collecting money for some worthy cause, but spending it on…….parties, flashy cars, £10 Billion per annum on importing illegal drugs….etc etc.
Can I put this in another way? We are a country on benefits, we are borrowing to keep the finances afloat. It’s like earning say £40,000 per annum take home pay after tax, but that gets spent on everything, but fuel. Yes we are borrowing to pay for the basics. OK I can make the attribution to fuel costs, and we could just as easily say Gucci, Armani, Ferrari, BMW, BYD, Tesla, any of the imports that are not essential, that could be replaced with UK made products. Or I could say, that foreign holiday / ski trip / cruise or any other luxury……cheap flights to any where you want to export more of your money.
The politicians, with their “free-trade” mantra works if the country is a net beneficiary or even on par, but we are not.
Now, do you want to afford that gas, fertilizer, petrol, diesel, oil, food, all those imports, essential imports, or do you prefer to spend it on BMW, Gucci, Mercedes……drugs? How many designer handbags do you really need?
But I bet they don’t have this on the “finances curriculum”, because so many politicians are even failing at it themselves, and one has to wonder what all that Oxbridge PPE did?
Just imagine, there are some Motability Cars that you can get, £50,000……..300bhp……imports……just go and have a look…….Vertu Motors….Cupra Tavascan base version £47,000 top spec version £60,000
Benefits used to enhance imports……..economic self-destruction…….no wonder the foreign rich are leaving as they get taken for more tax…….but that’s government policy for you.
Tim Stone,
Good Afternoon. I’m afraid I can’t understand the relevance of your remarks to this particular topic.
I agree in general that the country is in a bad way financially. It’s also true that we are a very bad way in terms of climate change.
The question is what to do about electricity generation while bearing mind our financial situation and our climatic difficulty.
Many people on this forum seem to think that continued dependence on imported fossil fuels is the best choice. I disagree. I think this is bad financially – we have to pay for the energy every year – and we make our climate crisis worse.
The last decade of investments in renewable generation have already dramatically slashed the bill for imported fossil fuels and reduced our carbon dioxide emissions.
To me it seems that further investments in renewable generation will further reduce future financial commitments – the cost of running the country – and minimise the climatic damage we are doing.
In any case, best wishes
Michael
IN any case
Why give an economic overview, slightly off-topic, but related? A bit of context always helps, which is missing from the simplistic arguments over LCOEs and Oil & Gas strategy.
Financial matters are multi-dimensional problems that can give simple answers that look to be OK if you look at limited dimensions, but are completely wrong once you take all factors into consideration. With relying on Oil & Gas, there are critical aspects that, with just looking at costs at £:£ comparison as an investment by a company to make profit, or even in terms of “reliability” will not help the UK in the long-term, just as just investing in hi-tech renewable generation also has long-term consequences, and appears to be increasing the cost of electricity because of how it is being done.
Politicians have used financial incentives to achieve certain changes, which could have just as easily been done by legislation, with no cost of subsidies being forced onto the population. Did we need utility scale renewables, or would it have been better to just have let the end-users do the installations when it was economic for them?
Bite-sized analysis can help and needs to be done, but should always be put within the widest context. Individual companies maximizing profit, especially with outsourcing production to other countries, bring different issues into the equation that have to be dealt with, either by those companies, or within a wider context of the whole country.
Yes, there is some climatic damage but not much, when the earth once had CO2 levels much higher than today, but financial damage is also being done. Some people say how brilliant Margaret Thatcher was as a PM, but somehow it is forgotten that her premiership was during the period when the country was getting the most benefit from North Sea Oil and Gas. It’s the economy stupid as someone once said, and that includes all aspects of imports and exports, and benefits (subsidies).
Yes, a great shame Thatcher did not create a UK National Wealth Fund.
Brilliant summary kathryn. Thank you.