Tuesday, 18 March 2008

The Gas Gottta Come From Somewhere


Swiss energy firm EGL has just signed a deal for a (relatively modest) quantity of gas from Iran. Well, we’re always being told we need to diversify our sources - specifically, diversify away from Russia - not least by the USA which vehemently opposed Russian gas imports to Europe in the first place.

Needless to say, the USA has decided they don’t like Europeans buying gas from Iran either. Unfortunately for their position, such an import deal does not violate either UN sanctions or indeed the US Iran Sanctions Act (a typical piece of US extra-territorial judicial reach), so their complaint is that it “violates the spirit” of sanctions.

They had better learn to live with it. Unless you believe in (a) frankly infeasible levels of nuclear and/or renewable energy developments; (b) a very decisive move in favour of coal (see our earlier post on energy policy); or (c) the complete collapse of European energy demand in an economic meltdown – then WE WILL NEED GAS. Lots of it.

And the more diverse the sourcing, the better.

Meanwhile, over at Robert Peston, commenters are getting exercised by the idea of Euro-utilities taking over British Energy. Does anyone believe in free trade ?

ND

28 comments:

Edland said...

Are we going to be able to afford to buy the gas though?

Bill Quango MP said...

ND why do you persist with gas? You know it has already been decided that Wind and water are going to save us.Ask the BBC, this is from 2005.

A report by the Sustainable Development Commission (SDC) has said.

The report maintains it is possible to meet the government's target to have renewables provide 10% of the UK's electricity by 2010.

If wind farms take off, it claims, that figure may rise to 20% by 2020.

Seriously, what % are your more realistic expectations for wind/water by 2020 ?

Real Schadenfreude said...

"Meanwhile, over at Robert Peston, commenters are getting exercised by the idea of Euro-utilities taking over British Energy. Does anyone believe in free trade ?"

Fair enough. After all, it can only be a matter of months before they sell off the MoD to China.

Real Schadenfreude said...

One point I would make about CUs comments on energy supply is that "security of supply" is about more than simply who we get our gas from. It is also about CAN we get our gas from ANYBODY?

Currently we are about to enter a major recession where we already have a severe trade deficit. Will we be able to export anything of value to allow us to import our gas? Before WWII these security of supply issues were considered important but nowadays we are happy to be totally reliant on foreigners of dubious reliability. Either that or we simply have a government that is incpable of putting together anything that resembles an industrial policy. I suspect the latter.

We have to stop thinking in cash terms. This "if we pay more for renewable energy it will make us less competitive" nonsense has to stop. It will do no such thing since we have a floating currency. We have to think in terms of resources. We only have one resource left to us in the UK - human labour. If we use a lot of our human labour resource to swap for foreign energy resources - is that really the best use of that UK labour? I doubt it. If we use our own labour to build renewable energy supplies this will make a vast difference to our trade deficit and may be crucial to our safe conduct through troubled econimic times ahead.

Nick Drew said...

Ed - a two-part answer:

Macro - if we can't then no-one can and, like oil, the price will fall until it's affordable again (current prices are way higher than cost)

Micro - some OAPs are going to get very cold during this downturn, I'm sorry to say: blame Brown

Nick Drew said...

Mr Q - wind is a bad joke, the places where it is apparently making a sizeable contribution (Denmark, N.Germany, Spain) are (1) able to access plentiful, instantly- available hydro- electricity** to balance their grids for when the wind is either too weak or too strong to generate; and (2) it costs them a great deal of money to balance their grids in this way, and they only do it because the political will is there.

In the UK we definitely don't have (1) and it remains to be seen whether we have (2), given that it will cost us even more (becoz we don't have (1)!). We might get to 5% wind by sheer force of £££, before someone blows the whistle.

As I've said before, GDP will trump GHG in my opinion

**before someone asks where you get hydro-power from flat places like Denmark + N.Germany, the answer is Norway & Sweden, via the tremendous and highly competitive 'Nordpool' electricity market

Nick Drew said...

RS - a different train of thought altogether. Not sure I agree but I will ponder some more on what you say. See also answer to Ed above, Part 1

Edland said...

ND but we are getting relatively poorer, so less able to afford to buy what we need on the international markets.

hatfield girl said...

Scotland could generate a great deal of hydroelectric power, though Scottish Power belongs to a Spanish company currently dealing with a French company to gain nuclear plants and expertise.

Nick Drew said...

Ed - if 'we' (the west) can't afford it, believe me the price will fall - at least for quite a while

Chinese and Indians may be getting relatively more wealthy - indeed they are and will continue to do so - but their demand alone isn't (yet) enough to sustain $100 / bbl oil. In fact, only deliberate withholding of oil by producer nations can sustain this price. (Average cost is still comfortably less than $ 40)

HG - actually, the Scottish Power franchise is the lowlands. The other Scotties - Scottish & Southern - have the highlands: they used to be known charmingly as NOSHEB = North of Scotland Hydro Electricity Board

They (and everyone else) state that Scotland is already maxed out on hydro. I'm not an engineer, I have no opinion beyond what I am told on matters like this.

PS in the UK, the small amount of hydro we do have doesn't count as renewable ! (but burning diseased cattle carcasses does)

Mark Wadsworth said...

I believe in (b) a decisive move in favour of coal. Of which we have plenty, as it happens. Or worst case, nuclear, provided we don't subsidise it.

As to the side-swipes about Johnny Foreigner snapping up our utilities, this is A Good Thing, if the worst comes to the worst, we have him over a barrel and not him us.

mutleythedog said...

OAPs won't get cold - they just won't pay the bills - Chaos Day is coming...

Real Schadenfreude said...

Some of your comments about wind power don't apply to the UK:-

1] We are the proud recipient of 60% of Europe's energy. We are a wind rich country (must be all those baked beans. You can only get them in the UK). Ironically
the problem in the UK is that there is TOO MUCH wind, as this forces wind turbines to shut down.
However, this doesn't present so much of a problem relating to balancing of supply and demand.

2] We have a long coastline with a big temperature differential between land and sea - due to Gulf Stream keeping the ocean at a relatively constant 12Celius whilst the land temperature changes like crazy. Consequently we have those bracing sea breezes almost all the time.

3] UK studies have shown that wind farm generation requires minimal balancing when wind farms are spread over a large proportion of the UK - i.e its windy up north when its calm down south.

4] Wind turbines taken in total have considerable momentum when spinning and thus energy is not immediately lost to the grid when wind dies down.

I read a very good article by the Institute of Electrical Engineers (now known as the nstitute of Engineering and Technology) about this last year. If I can find a link to it then I will post it here.

I would also point out that France generates most of its electricity from nuclear power plants which are an absolute nightmare from a balancing pov as they take months to run up to full power, where they must stay. Hence France has to find interesting ways of disposing of the excess electricity such as exporting it to the UK on undersea cables, where we have our morning cuppa an hour later than our European cousins. The point is that France took the brute force approach to energy supply during the 70s by building up nuclear power plants to ensure they could meet the peak demand. Why did they do that? Because they couldn't afford to import all that fuel during the 70s when the OPEC oil cartel pushed the prices sky high. We, of course, had North Sea oil which we frittered away and now we have nothing.

dearieme said...

Wind power will always be uneconomic because wind energy is so dilute, spatially and temporarily, thus requiring massive capital costs. That's why it was sensible to look at wave power and to consider tidal power. Nuclear is a wonderfully dense energy source (which it needs to be given its other shortcomings). Oil and gas are best if they are cheap enough. If not, coal, though I suspect that British coal is unlikely ever to be competitive on any useful scale with coal from e.g. Queensland. Wishful thinking isn't a good substitute for engineering reasoning.

dearieme said...

Oops: "temporally".

Edland said...

I have it on good authority that tidal and wave power are good prospects in the UK. Nuclear is only ever good for base loads i.e. about 30% max. Wind is stupidly expensive. We need coal to meet the rest I would think.

Real Schadenfreude said...

Wave power doesn't work very well and has enormous maintenance costs. Tidal power works very well, and there are some pre-existing schemes that have been running for some time. Wind power works far better than you are claiming. Beware that there are many competing interests that are willing to dispute wind power's advantages - there's a huge amount of money at stake.

The cost doesn't matter so much, and that's why Germany and Denmark are going for it in such a big way. It is the need to ensure their trade balance stays in the black. We have a huge hole opening up in our trade balance due to oil and gas running out. What the hell are we going to export to pay for our growing imports of ever more expensive fuel? Share certificates in failing UK companies? I have no idea. So I would suggest that building power plant that really costs very little and dramatically reduces our imports might be a good idea. And its becoming a btter idea every day.

Oh, and I am an engineer, not a wishful thinker.

Nick Drew said...

Mark - agreed on both counts

Mutt - some will not pay, as you say. But the proud ones will freeze - Chaos, or even Doomsday I fear

Nick Drew said...

RS - now I'm sure I disagree with you. The 'wind blows somewhere all the time' argument is a fallacy promoted by the wind lobby: it sounds vaguely plausible but (a) for efficiency you need to balance more locally than at 600 miles distance (b) when extreme weather patterns hit, they blanket the whole country (indeed the whole of NW Europe) - and that can be just when you need reliable electricity the most.

But we don't need to guess - just make wind pay for the balancing it requires ! If you are right, windfarms at opposite ends of the country will do balancing deals between each other. Just watch 'em !

(I'm being facetious, they won't; trust me)

So I am broadly with Dearieme and Ed on this. (And yes, the coal will mostly come from overseas)

Edland said...

An engineer no less!

I said that wave has good **prospects** not that it worked beautifully already.

Wind: indeed Denmark has already decided not to build any more because it isn't reliable enough (they have to export most of their power to their larger neighbours when the wind blows, and import it back when it doesn't, which wouldn't work well on our bigger island).

Coal: could be imported but when our currency falls to sensible levels we can start digging it our of our own ground again.

SACKERSON said...

Keep plugging away at these issues, Nick.

CityUnslicker said...

great post Nick, I am with you in principle....

we must build nuclear now,
we must re-invest in coal
we must do what we sensibly can with renewable and some energy conservation ideas.

overall of course our energy demands will fall with global warming; noo need for central heating for much longer. So those pensioners won't die after all Mutt!

Real Schadenfreude said...

"The 'wind blows somewhere all the time' argument is a fallacy promoted by the wind lobby: it sounds vaguely plausible but (a) for efficiency you need to balance more locally than at 600 miles distance (b)"

Firstly, how do you think we balance supply right now, when peak demand is enormously different from minimum demand? Coal fired power stations also take some considerable time to run up to full efficiency. That's why there was such interest in gas powered stations, which run up much faster. Also if you believe that the wind power will come only from the most extreme source, then the average distance to the customer will be somewhat shorter than 600miles.


"when extreme weather patterns hit, they blanket the whole country (indeed the whole of NW Europe) - and that can be just when you need reliable electricity the most."

When extreme weather hits we normally have some idea that it is coming. This can be somewhat easier to deal with than for, instance, a sudden increase in demand as people watch the news of the twin towers incident and then go out to have a calming cuppa. We already need to deal with huge fluctuations on the demand side, so dealing with huge fluctuations on the supply side are not as difficult as you might think. We provide massive spare capacity to ensure we can meet the peaks in demand, and enormous amounts of energy is stored in the network.

"But we don't need to guess - just make wind pay for the balancing it requires ! If you are right, windfarms at opposite ends of the country will do balancing deals between each other. Just watch 'em !"

Blimey, that sounds a bit harsh! After all, we currently have to balance supply and demand for the whole country (not Scotland, since it is electrically isolated fromt he rest of the UK, which is why Scottish hydro "doesn't count") - but this balancing act isn't performed by the generators is it?

"(I'm being facetious, they won't; trust me)"

Nor should they - no one else does. I'm wondering why you think that wind farms owned by different generating companies should be a special case? Time for you to declare your interest!

"And yes, the coal will mostly come from overseas".

Along with the oil and the gas. Of course we are still producing oil and gas - but not for much longer. As the global demand for oil, gas and coal rises, so will its cost. At the same time our own resources will be depleted. This will open the already yawning trade deficit to epic proportions. You still haven't said what you think we should trade to allow us to import all this oil, coal and gas? What's the big picture? The long-term strategy? Seems to me the only thing we can trade is our brains - and unfortunately there are another 6billion people willing to prove they have brains too. I think it would be a very good idea if we sought to reduce our liabilities on the input side. Either that or invade Saudi Arabia and set up home there.

Nuclear - on the face of it this seems like a reasonable idea. Uranium is quite cheap. There are two problems however - we no longer know how to build nuclear power plants so we would have to import all of them from France. That certainly isn't going tohelp our balance of trade. Secondly, if it is a good idea for the UK then presumably it becomes a good idea for the rest of the developed and developing world. What price would you put on Uranium then?

You are only seeing this in terms of the raw cost of say coal generation vs renewables. That may seem appealing to someone that believes unreservedly in "free market" economics. After all, the free market tells us that if the UK simply goes bust then it deserved it, and the people of Britain should simply up-sticks and move to Australia! But since we don't have that kind of freedom of action, it seems to me that we are forced to ensure that UK PLC rermains solvent at all times. And to do that it must have a strategy to protect its long term balance of trade.

Nick Drew said...

RS - lots of thoughtful points, only time & space for 1-liner replies:

how do you think we balance supply right now, when peak demand is enormously different from minimum demand? ... We already need to deal with huge fluctuations on the demand side, so dealing with huge fluctuations on the supply side are not as difficult as you might think

Disagree. As you say elsewhere, high demand is relatively easy to predict, at least 24 hours in advance (weather / tea-break during FA Cup). Unpredictability on the generation side comes in much larger units (I include regional blocks of wind power) and with very much less notice - it's more by way of 'accidents'

balancing act isn't performed by the generators

Agree - it is done in the various 'balancing market' mechanisms, but mostly of course by unsubsidised generators who must pay their own way ! Wind is subsidised and it still bellyaches.

I'm wondering why you think that wind farms owned by different generating companies should be a special case? Time for you to declare your interest!

My only interest is as a consumer. No special cases - but equally, no subsidies, is my motto

I think it would be a very good idea if we sought to reduce our liabilities on the input side

Agreed, and efficiency / conservation should be the No.1 target for this. Anything that is renewable and economic is really great too.

Nucs

Agreed: am equally skeptical about the economics - but the answer is the same: don't subsidise, & we'll find out !

You are only seeing this in terms of the raw cost of say coal generation vs renewables

No, I fuly recognise that if we value security-of-supply we need to price it (just like pricing CO2). And it ain't easy, either.

For another post, perhaps !

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