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The Present and Future of Energy in the United Kingdom

EconomicsScienceTechnologyPolitics

Published on undefined

Written by Harry

24 min read

As I’m sure everyone in the UK has seen at this point, there has been a spike in not only our energy bills but the cost of filling our cars up! Many call this a crisis of one description or another but I refuse to use that word for basic economic realities and I don’t believe that emotive language will help. There are many reasons for the prices of energy to rise which I will touch on, since to understand where the future lies we need to understand the present.

 

Why are Our Energy Bills Up? 

The average rise in energy bills this year is around £700 per household, quite a spike since this is a raise from £1,300 to £2,000 in costs per year. This begs the question: What on Earth has happened? 

Obviously prices for gas have gone up world-wide since gas is sold on the global market, though this in itself is also a factor! This is because the global market is split generally into 4 groups, the UK being in the largest and most free-market orientated group, the gas-on-gas market. This market has huge advantages as infrastructure, gas pipelines and storage between North America and North-West Europe, are excellent allowing for gas to be easily pumped, stored and sold by anyone on an open market! This also means that prices are transparent and readily available for all to see, hence within weeks of this price rise you can get an accurate estimate on your future bills. As this is the most free-market orientated group for gas trading, this is probably the best case scenario as the other groups are either based on oil-linked pricing or effectively socialised markets, such as in Russia.

So, since gas is sold on a global market you need buyers and sellers, the buyers are obvious since that’s me and you, however gas also needs to be extracted, processed and distributed. The issues we see are mainly because extracted gas is purchased by Western companies from Russia, which is the second biggest gas supplier in the world. As a reaction to its recent Ukrainian invasion, Russia is currently experiencing many sanctions from many countries, with the EU reducing two-thirds of Russian gas imports and the US not buying any fossil fuels from Russia at all. Needless to say, less supply means higher prices and while only 4% of gas in the UK is supplied by Russia, the price for 100% of the gas increases thanks to the global market. Though we have focused on gas here, oil and even coal prices have risen due to these sanctions too, gas is the main issue for the UK however as 85% of homes have gas powered central heating, and a third of the country's electricity is produced from burning natural gas.

Supply is not the only side to this equation however, and might not even be the main reason for the rise in prices. The Russian supply issue only kicked in after the initial invasion at the end of February this year, however we also had the petrol “crisis” in October of last year, and prices have not recovered since then, in fact they have only risen. The rise in the price of petrol initially started because of headlines telling people that price may rise, leading to the natural reaction of people panic buying. Annoyingly this is not the first time this has occurred. The reason for these headlines was due to the news that lorry drivers, who deliver petrol to petrol stations, were in short supply, an issue Wellington Project founder Michael covered here. Petrol supply chains are based on a just-in-time (JIT) system meaning petrol is delivered as close to the time when it is needed, which cuts down inventory space and time required and therefore cost. However with a drop in the number of lorry drivers this means the JIT system is strained, the media hears this and warns people in a not so calming way, causing petrol shortages and consequently a price rise.

Now that we have more lorry drivers and panic buying is over you may wonder why petrol prices are still increasing and breaking records. Part of the reason is demand remained high, as covid restrictions ended in the new year people were eager to get out more or started car commutes to work again. Rise in demand means a rise in price as supply needs time to react, if it can, and while this accounts for the small rise coming into the new year there is also the issue of Russian oil supply being sanctioned as mentioned.

Now onto the final main reason for the energy bill rise, the weather! Due to the winter of 2020/2021 being colder and wetter than average, this was yet another increase in demand to heat homes. That should be self explanatory but the weather being rather unpredictable didn’t help into the summer of 2021 when the UK had low winds. This meant gas had to be used to make up for the lack of wind turbines producing energy (which is our main renewable resource and second largest energy production method). Details of our energy production can be seen on the graph below, sourced from grid.iamkate.com.

 

 

Now you know the biggest reasons you see a spike in the price of your energy bills and petrol, plenty of demand increase, not just in the UK but world wide, and unfortunate political and economic reasons for supply to be restricted. Hopefully the future will be one of providing solutions to both energy costs and issues energy production can involve, including to the environment and economy. 

 

Where Will We Get All Our Energy From?

A huge debate in modern politics revolves around this question and absolutely everyone has an opinion on the matter. I have no qualms about this, it is only natural people are worried about their bills almost doubling and many subjects at school, from physics to geography, giving at least a basic education on energy and where we can get it from. I’m going to leave personal opinion out of this particular article and focus on the facts at hand, I leave my YouTube channel for that sort of thing.

As for the facts at hand I am going to go through some main resource suggestions for our energy to give an overview of each.

 

Oil and Gas

The future of oil and gas is one people are rather unsure of, with claims over the past decades that we have reached peak oil, the theory that we have reached or gone past the highest point of oil production and will only produce less in the future. This theory is commonly misrepresented as an ever changing theory as to when peak oil will be reached. Hubbert, the first person to advance the theory in 1956, predicted in the US peak oil would be reached between 1965 and 1975, but world-wide we would reach it around the turn of the millenia. After which oil production would drop over time and ultimately be a very rare resource after 2150. So peak oil theory does not mean we are going to suddenly hit a shortage, in fact Hubbert predicted we had 2 centuries to come up with a new plan for energy, but instead have a steady decline of oil production giving us time to come up with good alternatives, this is inevitable and necessary to come up with some alternatives.

Peak gas runs along the same principle, there will be a peak for gas production and steady decline after said peak. A recent report predicts it to be 2035, with a revised peak oil year to be sometime before then, as the below graph shows we still have not reached peak oil.

 

 

So far I have given oil and gas information in a global context, however in the UK we are still very reliant on both, with gas for the national grid and oil for our petrol and diesel demands. Something we are constantly told by all parties we need to change.

In November 2020 Boris Johnson put forward a Ten Point Plan for a Green Industrial Revolution point 4 is the move to zero emission vehicles. As of now the government has plans to eradicate the sale of cars and vans that solely run on petrol and diesel, allowing electric and hybrid to be sold and presumably tractors and lorries that rely on diesel will still be allowed to be sold. This is part of Boris Johnson’s “green industrial revolution” a government forwarded plan intended to tackle climate change and create jobs, though this still is not enough for some environmental activists.

As for oil and gas in other sectors, boilers relying on fossil fuels are being phased out and outright banned in 2025 for any new builds. With heat pumps being used instead and government incentives including the Domestic Renewable Heat Incentive which will make payments to households producing renewable heating (unfortunately the scheme ended 31 March 2022). Heat pumps do in fact produce less carbon emissions than boilers, require less maintenance and have lower costs to run (saving up to £1,400 a year). However issues arise with a large upfront cost (up to £3,000 for a gas boiler where as heat pumps can be over 9x that amount), installation of heat pumps cause issues with your home, with house cladding needing to be penetrated and intakes needing to be put underground or at the side of the house. Whatever way you heat your home now it appears heat pumps are the government’s current focus for central heating so expect to require one if the net-zero target of 2050 remains.

Finally we have the national grid, oil is not relied upon here but gas most certainly is, the 10 point plan seems to indicate we will still be reliant on natural gas as point 8 shows intention for investment in carbon capture and storage. This is a simple but expensive process of capturing carbon emissions and pumping them underground, in the UK’s case under the North Sea. However with the other points focusing on renewable and nuclear energy so expect gas to be less relied upon in the future.

I should end this section by mentioning coal, coal produced 1.8% of energy in 2020 for the UK, and an agreement headed by the UK at COP 26 made promises to phase coal out by 2024, though it will still be used for home fireplaces.

 

Fracking

 

Fracking is a very contentious issue in the UK and one where the environmental activists appear to have won. With government focus being more on renewable and nuclear energy, opening fracking sites would not make much sense, although would potentially be useful. Environmental factors have generally been overstated when it comes to fracking, as my video shows, and as we move toward this green industrial revolution we need interim energy sources.

The US has become a net exporter of petroleum, thanks in part to fracking, though it doesn’t look likely the UK will have as much benefit from fracking. Although early estimates showed there could be up to 64.6 trillion cubic metres (tcm) of shale gas in the UK, a recent study shows this overestimated and only up to 330 billion cubic metres (bcm) will be commercially viable. This is still plenty and represents up to 22% of projected energy use from 2020 to 2050, there are a couple of issues extracting the gas however.

The first issue is the government, not only are fracking regulations tight, for example fracking must stop every time a seismic event above 1 on the Richter scale is detected. This is equivalent to a lorry driving past you and they happen almost daily naturally in the UK. This makes extraction very expensive as starting the process again takes time and resources, affecting profitability, along with the potential that as little as 60 bcm may be commercially viable (only making up to 4% of projected energy usage) fracking may not be viable after all.

However with recent news that the fracking ban is being pushed back a whole year clearly the gas is still at the forefront of the government's mind. Should gas prices rise consistently high enough we may see fracking platforms pop up around the North and Midlands, as Scotland, Wales and Northern Ireland all have fracking bans.
 

Wind Farms

 

Finally onto renewables, offshore wind power is likely to be renewables biggest future in Britain. The 10 point plan from the government has advancing offshore wind as point 1, their main selling point for this plan. The plan is to get £20 billion of private investment by 2030 which they hope will cut emissions by 5% (as of 2018 emissions) over a ten year period from 2023. The government’s plan appears to rely on private investment because they have set a target.

Offshore wind is being focused on as onshore wind already has a big presence in the UK, together they already provided just under 9GW (19.6%) over the past year. With these plans for offshore wind the government’s target is 40GW produced by 2030, with 60,000 jobs being created and 60% of the spending will be reinvested into the economy by government estimates. What will happen if these estimates are off is anyone's guess, the government subsidies for offshore wind have been rising for the past decade, from £70 per MWh in 2010 to £110 in 2020. Though, as Matt Ridley points out, since energy is more centrally planned now the government chooses where our energy comes from, rather than the market, so subsidies renewables. However when these renewables aren’t meeting demand, such as our not so windy 2020 winter, fossil fuel providers are subsidised too, with over £13 billion given to oil and gas providers since 2015.

It may seem strange to you that we are constantly told wind power is the cheapest source of energy, if this were the case why subsidise it then subsidise fossil fuels? And why are energy prices going up? In the introduction I only covered gas prices for good reason, renewable energy providers buy electricity from fossil fuel companies when their wind turbines aren’t generating enough. This in fact increases demand for gas and raises the price further, but this purchased gas energy is not reflected in reported wind costs. This is where a misnomer comes in about wind costs, they are cheap but only when running, which is about 70-80% of the time, but only at about 30-45% efficiency, production of which is entirely dependent on how fast the wind is blowing. Another issue is that wind turbines are most effective at night, when demand is lowest, so a lot of energy at this time is wasted, though this can be solved with storage solutions I will go through later.

Finally there is the cost to make wind turbines, each offshore one on average needs about 8 tonnes of copper to make hence the cost to just make 1 turbine is between $2.6-$4 million (£2-£3.6 million). It also takes the energy equivalent of 150 tons of coal to make a wind turbine, of course these emissions are not taken into account in wind energy production.

So at the moment it looks like offshore wind farms are going to be the biggest energy project for the UK, with innovations made on floating wind farms that can move to where the wind is strongest. However there is a deafening silence on reports to tell the public how much gas will be relied on while wind storage solutions are looked into.

 

Solar Power

 

Wind power's younger brother, this renewable resource does not produce anywhere near as much energy as wind, only 1.24GW or 4.1% of the past year's energy production. There is nothing in the 10 point plan about solar energy so it appears to be the private sector who will be building any new solar farms, with subsidies of course. All the UK’s solar farms are inland and are likely to remain that way, with 469 solar farms currently running. The largest solar farm covers 250 acres, and the smaller ones covering only an acre so a main issue with solar farms is space, causing issues for communities that don’t want their local green fields covered by blue panels.

Solar farms have similar issues to wind farms as the energy produced is cheap, but they can only produce energy when the sun is shining and are only 15%-22% efficient. When not enough energy is being produced, energy has to be purchased from the more reliable gas and coal providers. The cost to make solar farms is generally smaller, costing an estimated £600 million to cover 2,800 acres, though this might be an underestimation as Shotwick Solar park cost a projected $105.4 million (£80.57 million) for an area of 220 acres. Solar energy 

Future large scale solar projects do not look likely in the UK due to planning permission but we will likely see small scale projects being built and completed, over 300 projects have been submitted or approved as of March 2022. However the land is in competition with other markets, such as the housing market, so how many of these 300 will go ahead is hard to say, but with the silence from the government’s plan for solar it will be up to the market.

 

Nuclear Power

 

Point 3 of the government’s plan is to build new and advanced nuclear power stations. The government realises energy demands are generally only going to rise with a rising population and incentives to rely on electric cars are being brought in, so a reliable and low carbon alternative is required. This is where nuclear comes in, nuclear power has produced 5.06GW (16.7%) of power over the past year and the government appears to want this share to increase.

The government’s concrete plan is to invest £385 million in an Advanced Nuclear Fund, allowing for funding of development of small scale nuclear power plants. There is also up to £170 million to be invested into Advanced Modular Reactors, with one being built by 2030, which will run so efficiently it can help produce hydrogen and other synthetic fuels that don’t release carbon emissions. There is also the aim to pursue large scale projects but the information on this is vague and the government is relying on their set targets to hopefully get £300 million in private investment.

Nuclear power has been lagging behind where it could be, as tight regulations have stopped innovative and more efficient designs from being built until recently. It is also an issue that about half of our nuclear production capacity will be decommissioned as old power plants come to the end of their life-cycle. Since nuclear, like gas power stations, can be running no matter the weather these new smaller scale designs will be required to make up for the planned renewable projects also in the 10 point plan. A large downside however is costs.

Sizewell C power plant is projected to cost £20 billion and the government plans to up energy bills slightly to help pay for the initial costs, as foreign investment has dried up. This has also been an issue for other plans as Toshiba and Kepco have abandoned plans to build in the UK as they struggle to find buyers. The reason for this is how long it will take for any profit to be seen after investment, it takes over half a decade to build a large-scale nuclear power plant, and only about 2 years for a gas powered station. This appears to be the reason for smaller scale and modular nuclear plants, it cuts the time between investment and completion and can be factory built and assembled on site.

A large issue with nuclear power is the waste products, containing radioactive particles that are radioactive for varying amounts of time. Plutonium, while only sometimes found in fuel rods, can be radioactive for over 100,000 years, though more common isotopes have a half-life of about 30 years. Addressing what we should do with the radioactive waste is vital, as radiation sickness can be fatal, causing problems for the environment if not dealt with correctly. An example being when Britain and Belgium dumped 28,500 barrels of radioactive waste into the English channel, which luckily can be removed.

There are safe ways to deal with spent fuel rods, some can be recycled into new fuel rods, by extracting the Uranium and Plutonium from spent rods and mixing it with fresh Uranium for new fuel rods. For the rest of the waste, it is as simple as inserting spent rods into radiation proof canisters then storing them. They can be stored in near surface or above surface facilities, again blocking radiation from escaping, or burying it deep underground and sealing the tunnel with rock and clay, making sure the radiation is far away from any life on Earth.

Hopefully should government investment pay off, we will see more small scale nuclear power stations that can be well hidden and provide the energy we will be losing from fossil fuels. From recent promises of 8 new nuclear plants to be developed over the next 8 years, it looks like nuclear power will be a big replacement for fossil fuels.

 

Hydrogen

 

Point 2 of the 10 point plan is further growth of hydrogen production, as it only produces water when burned. Hydrogen power can be similar to how fossil fuels power turbines, by burning, but can also be used for hydrogen fuel cells (batteries with hydrogen used as the fuel). There are already car designs with hydrogen cells and have been developed from at least 2013, and it appears hydrogen cars can make the long distances electric vehicles cannot. However the main issue at the moment is infrastructure, which this plan will hopefully focus on alleviating. 

As with other points of the plan the government is putting some investment into the industry and hopes their target will encourage private investment. £240 million of public investment into a Hydrogen fund to be invested into hydrogen infrastructure and production. The government will also work with private business to look into blending hydrogen into the gas supply to have cleaner gas burners in boilers and cookers, hopefully reducing emissions by 9% (of 2018 emissions) by 2030. 

The government also estimates £4 billion private investment into the hydrogen industry, with energy providers like BP putting forward their own plans. The plan generally looks well thought out, with hydrogen being primarily produced by electrolysis of water, powered by renewable sources like wind. It is a good way around having huge battery farms to store the renewable power, and can provide power to more than just the national grid. BP plans to provide hydrogen to new hydrogen powered buses and heavy duty vehicles, should that be successful further infrastructure for hydrogen fueling stations for domestic cars may be a possibility. 

Unfortunately it is hard to say what the future of hydrogen fuel is, electrolysis is an expensive process, as is pressurising and storing hydrogen. Also, while hydrogen has just under 3 times more energy potential than liquid fuels like petrol per kg, the fact it is not as dense as liquid fuels means liquid fuels are just over twice as effective as hydrogen, meaning twice the transportation is required to get hydrogen to be as effective as liquid fuels. Of course these issues may be diminished with research and development, but how much hydrogen we will see over the next decade is hard to guess at this point. Though we will likely see some experimental use of the resource.

 

Other Renewables 

Having gone through the government's main plan for future energy resources I think it is time to touch upon other renewable resources.

First Hydroelectric power, it produced 1.3% of power over the past year, however as it requires dams and quite a radical change to local areas for relatively little power we are unlikely to see any large scale projects utilising hydroelectric power.

Next is wave and tidal power, which does have the potential to provide up to 20% of reliable energy for the UK’s demand, but it is not a project the UK is pursuing. There are good reasons for this, the best place for tidal turbines will be right on migration routes for underwater life, a problem wind farms are avoiding with airborne life. There is also the issue of cost, 5 projects in 2008 were proposed with the cheapest costing £2.6 billion which would not be worth the upfront cost, let alone the maintenance cost of turbines being battered by tidal forces.

Geothermal energy in the UK is another project neither the government or private companies are chasing. Although studies have shown theoretically geothermal energy will be able to cover all UK energy demands, it is not technically possible to utilise all the energy and the most effective geothermal energy is at least 7km deep in the UK, at the moment it is cost effective to drill to about 4.5km deep. So until drilling to 7km becomes cost effective this is another renewable we are some years off.

Finally biomass, which produces 6.9% of UK demand over the past year and is technically the 2nd largest renewable resource. However it is not even mentioned in the 10 point plan, though there is a policy statement on the resource from November 2021. The government states they expect biomass to expand to 10% of UK energy needs by 2050, with it even being used to take CO2 out of the atmosphere by CCS of biomass emissions. However biomass has its own environmental issues, including deforestation, soil nutrient depletion and since it requires farmland, it takes away from farmland for food, which pushes the price of food up.

 

Conclusion

So that’s a summary of the current rise in energy prices and where we can expect our energy to come from in the coming decades. It looks like the obsession with net zero emissions by 2050 is forcing the government to focus on zero-emission resources, supporting them with more government subsidies and more readily greenlighting them. However since the reliance on fossil fuels is still huge, more subsidies are then spent on that industry so people are warm in the winter. 

Personally I would leave it to the market but that is not going to happen, so I would at least reduce the subsidies spending and let nuclear catch up for the 30 year lag it has experienced from tight regulations not allowing for nuclear innovation until recently. This would make it economically viable for nuclear investment, while there is still private investment into renewables where viable.

The real solution for net zero, if you think it a worthy goal, is to make the poor countries richer quicker, since when basic needs are met, people generally care more for the long term issues of the environment. This doesn’t have to be done by just giving these countries foreign aid, but by encouraging their food to be on the world market. A good solution Bjorn Lomborg suggests is to open the world markets to farmers in poor countries, and subsidise farmers in the richer countries so they are not hard hit by the increased competition. As much as I hate subsidies, this is a very simple and cheaper way than the government spending billions on wind and solar projects that are unreliable and produce many emissions to build and maintain anyway.

Unfortunately it looks like the government is on the more insular green agenda, with many more wind farms, banning of new fossil fuel cars and forcing new builds to install more expensive heat pumps. However it is not the worst case scenario, far from it in fact, there is still the support for fossil fuels while there is a transition to nuclear, and research going into potentially clean and efficient fuel sources like hydrogen. That’s not to mention that solar panels and wind turbines can be installed domestically should individual households find it to be economically viable, meaning our beach views won’t have to look like that of Rhyl.

 

 

Of course a lot of these are just the current plans, should Labour or, God forbid, the Green party get elected in, expect the already centralised energy market to be going further into socialism. If you want to see a worse energy policy, just look at their policy ideas.


 

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