Should the UK be aiming for energy independence?

19 August 2015 (Last Updated August 19th, 2015 18:30)

The UK, like many countries, is debating the ramifications of its increasing reliance on overseas energy imports. But with many different options to reduce risk outside of domestic production, is energy security a more reasonable goal than energy independence?

Should the UK be aiming for energy independence?

Jasmine

The UK has achieved a mixed record on energy independence since the 1970s. The rapid development of oil and gas on the UK Continental Shelf transformed the country from a massive importer of energy for around 50% of its supply to a net exporter by the early 1980s.

Riding high on a wave of North Sea oil, Britain remained a net energy exporter for the vast majority of the '80s and '90s, but the steady decline of North Sea production meant that by 2004 the country had once again become a net importer - and the margins have widened every year since. Today, the UK is back to 1970s levels of energy independence, with imports once again comprising nearly 50% of energy supply.

The UK's increasing reliance on foreign suppliers for key energy supplies has been a focus for government discussion, and a source of much finger-pointing over what's to blame. In a February interview with the Daily Mail newspaper, Institute of Directors senior infrastructure advisor Dan Lewis argued that fracking for shale gas was the UK's only chance to make inroads towards energy independence.

"These [energy import] figures show the cost of refusing to be realistic about our energy policy," he said. "Years of dithering and indecision mean that we're way behind with replacing our nuclear plants, renewables are intermittent and have been able to meet about one-sixth of our electricity needs at best, so all that's left is fossil fuels. That means prioritising the cleanest gas. Luckily, we have significant shale gas resources in the UK. If we don't embrace fracking we will be throwing away jobs, tax revenues and a source of raw material for our manufacturing industries."

Energy security over independence

But in an era of rapidly depleting fossil fuels, is total energy independence still the right goal? Certainly the shale gas boom has massively helped the US to boost domestic energy production, but a similar situation is unlikely to occur in the short-term for the UK, where local resistance is higher and service capability is lower.

A 2011 report by the House of Commons' Energy and Climate Change Select Committee stated that an increasing reliance on energy imports is "inevitable", but argued that higher levels of energy security - which is really what we're talking about when we discuss energy independence - could still be achieved with "a diverse energy portfolio that does not rely too much on either a single supplier or a single fuel".



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Professor Paul Stevens, Chatham House's senior fellow for energy, environment and resources, made a similar argument while giving evidence to the same committee. "I think putting energy independence and energy security together is a mistake because it implies that energy independence, somehow defined as not being dependent on imports, will generate energy security," he said.

"If you look at the UK over the last 40 years, two of the major energy crises were created by problems with domestic energy supplies, namely the coalminers' strike. The French President is kept awake at night by the thought that the nuclear engineers will go on strike, in which case the French lose 80% of their electricity. Putting the two together, I think, is a mistake."

Energy market reform is an excellent example of a method of improving energy security without actually changing the supply situation. The recent establishment in the UK of a capacity market, by which utilities are paid a retainer to guarantee the availability of electricity when it is most needed, will go a long way towards easing the tight supply strain during winter months.

Gas storage and reinvesting in the North Sea

So the energy security concept focuses less on the binary measure of whether or not a country is domestically self-sufficient and more on a comprehensive programme of diversification and risk reduction across the national energy supply landscape. This is particularly important in the UK, one of the few countries in Europe that is becoming more reliant on foreign supplies, especially as nuclear and fossil fuel plants come offline and institutional demand continues to be driven by the electrification of heating and public transport systems.

An important part of this risk reduction process, at least over the next decade, is shoring up production capacity and storage infrastructure for traditional fossil fuels. Fracking is a possibility to give the UK access to new sources of unconventional gas and oil, but the economic case has not yet been proven in the UK, and local environmental opposition is proving to be a stubborn thorn in the side of the staunchly pro-fracking Conservative government.

Given the uncertainty that still lies in fracking's future, the government is committed to doubling down on North Sea oil and gas production, pushing forward the recommendations of the recent Wood Review and the Oil and Gas Fiscal Review. The Energy Bill that is currently progressing through Parliament will create a strengthened regulatory body that will have the power to improve productivity and collaboration among North Sea operators while attracting more investment in new exploration projects. "By reinvigorating our domestic oil and gas industry, we will reduce our reliance on volatile foreign imports," said the Department for Energy and Climate Change (DECC) in a statement in July.

"Fracking is a possibility to give the UK access to new sources of unconventional gas and oil, but the economic case has not yet been proven."

The UK is well connected to the regional gas market through its high import capacity, including major liquefied natural gas (LNG) terminals in Wales and the Isle of Grain on the Thames Estuary, as well as interconnectors linking the UK to the Netherlands, Belgium and Ireland. Nevertheless, long-term gas security and insulation from future price shocks needs to come from a much larger gas storage capacity, which so far has not materialised.

"We have built very little [gas] storage in the privatisation era, and that is not because we do not have a lot of projects," Professor Jonathan Stern of the Oxford Institute of Energy Studies told the Energy and Climate Change Select Committee in 2011. "There are lots of projects out there, but the commercial environment has not been such as to see them come forward in a timely fashion, and we have had serious problems with the Rough facility [the UK's only gas storage facility] several times. We are not in any sort of panic situation, but we still have only about 5bcm of storage, and we probably need at least twice that and possibly even more than that. In the current commercial climate, I do not see that coming forward."

Unfortunately, Stern's warning has been borne out by the intervening years, with British utility Centrica cancelling two major storage projects in 2013 after the government announced that no subsidies would be offered to encourage more storage building. More recently the Rough long-range storage facility off the coast of Yorkshire recently had to cut its total stored gas by up to 29% in March this year because of well integrity issues, sparking fears of increased gas prices for the upcoming winter. If the government wants an effective buffer against gas price volatility or supply disruptions, it has become clear that the free market is unlikely to provide it, and some form of incentive now seems necessary.

Diversifying energy sources: nuclear and renewables

The effort to secure the UK's (or any country's) energy supply is a many-headed hydra, and outside of securing fossil fuels and the introduction of beneficial market mechanisms, there are other energy sources that must be tapped to adequately diversify the country's energy mix.

The development of next-generation nuclear has long been an ambition of the UK Government, and more nuclear plants could be the key to reliable, clean baseload generation to reduce reliance on imports. But the road towards replacing the many plants due to come offline by the early 2020s has been made slower by the wider nuclear malaise across Europe. Hinkley Point C, the reactor that is intended to be the first of 16GWe of new nuclear capacity operating by 2030, is still mired in cost concerns and a contentious legal challenge from anti-nuclear Austria.



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Renewables, meanwhile, look in worse shape today than they have in years, in terms of policy support. Fresh from a stunning election victory, the governing Conservative Party has announced a raft of cuts to renewable subsidies and other incentives, including the end of renewables' exemption to the Climate Change Levy, cuts to onshore wind and solar subsidies and the cancellation of several prominent energy efficiency programmes without any replacements announced, which undermines the effort to reduce demand, an important facet of energy security.

Certainly, renewables need to be developed and deployed in conjunction with other sources; intermittency and low load factors mean that reliable back-ups will be required for the foreseeable future. But without the significant investment brought out by favourable government policies, the UK's energy supply won't be diverse enough to avoid dangerous over-exposure to fossil fuels.

"Only last week the National Grid highlighted the UK was set for brownouts this winter, so we cannot understand why incentives for technologies that will keep the lights on in the UK are being removed," said Veolia UK technical director Richard Kirkman in late July. "We appear to be entering another Dark Age where we will return to total fossil fuel reliance, power cuts, low confidence in UK investment, opening the door for fracking activities to maintain energy security."