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Is the future gas?

With rising oil prices and a backlash against nuclear, we need new sources of power

By Prospect   185

Britain should look to gas to replace much of its old power stations in the next decade. That was the clearest line of agreement—although not a consensus—from the Prospect energy roundtable held on 15th June with Chris Huhne, secretary of state for energy and climate change.

There were two reasons for holding the roundtable: the uncertainty which the Arab Spring injected into oil and gas supplies from the Middle East and North Africa, and the meltdown of the Fukushima nuclear reactor in Japan, after the 11th March earthquake and tsunami. Both had jolted energy planning in government and companies, in Britain and beyond.

In Japan, the reactor’s explosion overturned the foundations of energy policy. Nuclear power amounts for almost a third of Japan’s energy. Yet of its 54 reactors, only 17 are now operating. Some are suspended waiting for routine reauthorisation by local authorities. But this may now be delayed—or withheld. The backlash against nuclear power is strong, particularly among younger Japanese (see p24). It is conceivable, senior officials say, that the 14 reactors now being built may not get a licence to begin operating for many years—or at all. Yet the only alternative would be to compete with China for imports of gas. Graham van’t Hoff, chairman of Shell UK, said that Shell had worked with the Japanese government to divert cargoes of liquid natural gas after 11th March, showing the flexibility of supplies.

Germany shut down its seven oldest reactors in response to Fukushima, but may open up one in the winter, because of fears of blackouts. However, all of its reactors are due to close by 2022. In Britain, government advisers have concluded that there were no implications for the siting of reactors, but are still assessing those for design. For all the concern, nuclear will still have to play a significant part in the future mix of energy in Britain, Huhne said, although he was challenged on projections of its likely share and competitiveness by other speakers. It was no coincidence, he said, that the second cheapest electricity in Europe for domestic use was in France, because of the high share of nuclear power. The same week that Scottish Power had announced an 18 per cent increase in prices for its customers, he said, EDF had announced one of 2.5 per cent, while electricity prices were 9.5 per cent lower in France than in Britain.

Projections of the impact of the Arab Spring were cautious but upbeat despite the uncertainty. The Libyan uprising had knocked out 1.8m barrels a day of oil, or 5 per cent of the production of the Opec cartel, that is, 2 per cent of global demand. Saudi Arabia had filled much of the gap.

There was no dispute with Huhne’s assertion of the desirability of energy saving, a central feature of the bill now in parliament, although some scepticism about the potential achievements. But speakers pointed out that if Britain consumed energy at the same levels as today, energy consumption in 2050 would be three times the level in 2000. One panellist challenged Huhne’s emphasis on onshore wind power, saying that government analysis underestimated the potential of solar. The energy secretary said that it was a matter of personal disappointment to him that onshore wind attracted such fierce public opposition, given that the costs were comparable to those of some nuclear plants.

In Britain, the closure of old nuclear and coal-fired plants means that about a quarter of electricity production, or about 20 gigawatts, will shut down in the next ten years. The government wanted to attract twice the usual rate of investment to fill this gap, said Huhne, and so needed to give investors clarity.

Both nuclear and renewables, he said, were characterised by very high building costs up front, even though running costs could be low. Britain’s strategy therefore also depended partly on developing carbon capture and storage (CCS) for power stations fuelled by gas, coal and potentially oil. CCS is not yet commercially established but the government has set aside £1bn to get a commercial-scale plant running. The notion is that, if gas prices are low, Britain could use more gas power stations, but deploy CCS to keep carbon emissions low. The principle was admirable, said several speakers, but the reality was not yet within reach. One argued that recession had done more to cut western carbon emissions than years of pledges and treaties.

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