EU Referendum


Energy: mushroom management


19/09/2021




It was only very recently that I found myself writing that ministers in the Johnson administration couldn't even tell the truth if they were ringing up the fire brigade to report themselves on fire and ask for assistance. The lie, I concluded, has become embedded in the very fabric of government.

That was said in respect of the ennobled David Frost but, in the more recent context of the security of energy supplies, it must also apply to business secretary Kwasi Kwarteng.

After a series of meetings with senior executives from the energy industry to discuss the impact of high global gas prices, he is telling us that gas supply this winter is "not a cause for immediate concern".

The UK, he adds, benefits from having a diverse range of gas supply sources, "with sufficient capacity to more than meet demand. The system continues to operate reliably, and we do not expect supply emergencies this winter".

He goes on to say that our largest single source of gas is from domestic production, and the vast majority of imports come from reliable suppliers such as Norway, claiming that we are not dependent on Russian oil and gas.

As to "our exposure to volatile global gas prices", rather than assure us that measures were in hand to deal with this crisis, Kwarteng simply hid behind the government's propaganda line, asserting that this "underscores the importance of our plan to build a strong, home-grown renewable energy sector to further reduce our reliance on fossil fuels".

However, at several levels, there are good reasons to distrust this man and, therefore, to reject the line that he wishes to convey – that there is no cause for alarm. In the first instance, while the honeyed words issued by the minister give a patina of reassurance, textual analysis of what he actually does say is very far from settling the issues of concern.

For instance, Kwarteng tells us that the gas supply is "not a cause for immediate concern". Yet, if that is true, it is also irrelevant. If there is to be a gas crunch this winter, then typically it will occur in March or April, when stocks are traditionally at their lowest.

Similarly, the assertion that UK benefits from having a diverse range of gas supply sources is also irrelevant.. On its own, it is empty rhetoric. For sure we have an element of diversity, but that is of little help if there is global competition for supplies and we are way down in the queue.

Nevertheless, the secretary wants us to accept that there is "sufficient capacity to more than meet demand", again phrasing which seems to convey something of value. The choice of the word "capacity", though, is ambiguous. Undoubtedly, there is sufficient capacity to supply all the UK's needs. But capacity is not the issue.

What matters here is accessibility of supplies – the rate of flow through major pipelines and the amount in storage which can be withdrawn quickly to meet peak demands. The assertion that "we do not expect supply emergencies this winter", in this context, is a non-sequitur. It does not follow that "sufficient capacity" will insure us against shortages in periods of peak demand.

And then there is the phrasing: "we do not expect". This is classic Whitehall-ese which simply paves the way for the back-covering statement when the supplies do run out. At that point, the secretary can simply allude to his earlier statement and say, soothingly, "well, we didn't expect that", as if it somehow absolves him from responsibility.

This brings us to the assertion that "our largest single source of gas is from domestic production". This is true, but it is only 40 percent and falling. And what matters is the rate of production. In the summer, historically, we over-produce so transfer the surplus to storage for the winter, when demand outstrips supply. The crucial issue, therefore, is the amount of gas in storage – about which Kwarteng says nothing.

He does, nevertheless, correctly assert that "the vast majority of imports come from reliable suppliers such as Norway". This is true, but that also means that some of our gas comes from suppliers who are not so reliable. And, towards the end of the heating season, when supplies can be critically low, it is on these that we might depend.

In this context, there have been occasions when the UK has been one or two shiploads of LNG away from disaster, the relief dependent as much on the availability of specialist ships as the supply of gas itself. And, with acute global competition, there are no assurances that supplies will be there when we need them.

As to Russia, it is the case that we are not dependent on supplies from that source, although we do get about eight percent of our gas from Russian fields. That, in itself, is significant, but it is not the point. The crucial thing is that most of Europe is dependent on Russian supplies and if there is interruption in supply, then gas supplies which we might draw from – such as in the Netherlands – might be diverted elsewhere.

Then we have the propaganda line about the importance of building "a strong, home-grown renewable energy sector to further reduce our reliance on fossil fuels". This, bluntly, is insulting. A large part of the problem at the moment is that renewables are underperforming – especially wind. By the beginning of September 2021, the UK had 10,973 wind turbines with a total installed capacity of over 24.2 GW: 13.8 of onshore capacity and 10.4 offshore.

Yet, at 2 pm yesterday, the generation from wind, recorded by the National Grid was 0.5 GW, climbing to 2.76 GW by 7 pm and less than 5GW by midnight. For the day, fossil fuels (mostly gas) provided 52 percent of our generated electricity, averaging 13.69 GW. Wind averaged 5.9 percent, delivering 1.55 GW.

Therein lies the problem. For the whole of the past year, wind has only averaged 5.37 GW, delivering 17.6 percent of demand. This has forced gas to take the load, averaging 12.23 GW amounting to over 40 percent of demand.

Thus we are going into the heating season with reserves depleted and, with post other European countries in a similar position, demand for gas has soared and prices have hit record levels. Renewables are not the solution, as the fool Kwarteng asserts. They are part of the problem – a major part of it.

This propaganda element, in my view, does much to erode the trust one might have in the secretary's statements. And underlying this is another serious element – the lack of reliable information on the status of our energy supplies. To put it mildly, the government statistics in this sector are a mess: difficult to find, incomplete and late. The only official information I can find on gas storage is from November 2020, and that doesn't say very much.

Kwarteng, or course, could have supplied the crucial information in his statements, to back up his assurances, so that we could see for ourselves what the situation is. But this is not the British government's style. It relies on its patronising mixture of reassurance and mushroom management, expecting us mere plebs to accept what we are told from our "superiors".

It comes as no surprise, therefore, that we get more information about our situation from the head of Russia's Gazprom, Alexei Miller, than we do our own government. Miller tells us that that natural gas prices in Europe could rise further because of "shortages in underground storage", with stocks 22.9 billion cubic metres below normal levels.

As it stands, therefore, when Kwasi Kwarteng tells us, "Don't panic", there is every reason to run screaming for the exit. With a government headed by a congenital liar, we would be unwise to trust his minions.

Also published on Turbulent Times.