Friday 7 January 2022

Holland's energy commitment for the new year - a practical guide for UK energy policy

"The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails." William Arthur Ward

The huge natural gas reserves in Holland have meant that the country has been a petro-state for a while, just a very quiet one. There is a reason here as to why it is such an agreeable country, even if my personal business experience of dealing with the Dutch is they are as tough as nails when it comes to negotiating. 

However, as with all of Europe, they have been prone to green-virtue signalling about their energy for a long time. Given the pre-disposition for windmills, you would expect nothing less. However, as is typical across Europe, a lot has been spoken about but not much done. Since 2015 they have though moved electricity generation from green power from 5% to 15% of the Dutch grid. Oh well, I am sure the climate will be thankful for this. 

All the rest is gas, all 85%. 

So of course the recent shift in gas prices has a strange dynamic in Holland, on the one hand the huge Groningen field can still produce a huge amount of taxable profits, on the other the citizens re very exposed to the huge prices increases. 

So, making a sane decision for once, the Dutch have decided to double the output of Groningen field this year, making Exxon and Shell very happy. This will actually wind down the field, maybe even causing a few earthquakes. No matter, desperate times (and profitable ones) and desperate measures. The domestic supply will be sated, profits made and, err, problems kicked into the future if the Russians continue to ignore their customer base. 

Meanwhile, in the UK, we still have politicians wittering on about the need to go green at all costs. The Liberal Democrats are actually suggesting windfall tax on Oil and Gas businesses now, to help the consumers - just as they need funds to open up capacity. The Scots have already cancelled the huge Cambo filed development off Shetland, incredible; the Tories are considering subsidizing the retail energy sellers to help them hedge the market - not thinking at all about supply or the further downside risks of hedging in a volatile market. 

The solutions to the crisis are actually within our grasp, but the politicians we are led by will suggest anything but the obvious and practical solutions. The UK should still be an energy exporter with certainly no domestic shock - indeed, it should be windfall times with our gas reserves. It is totally stunning how stupid and badly advised they are collectively. 

"Oh, what a tangled web we weave, when first we practice to deceive!" (Sir Walter Scott, 1808)


dearieme said...

In matters of commerce the fault of the Dutch Is offering too little and asking too much. (Canning.)

anon said...

@All the rest is gas, all 85%

Ahem, no. Still a nuke, and 4 coal powerstations, all pumping away merrily.

DJK said...

Hunterston B AGR shut today. As the BBC notes, without comment, "The Scottish government has long been opposed to building new nuclear power stations".

Nick Drew said...

There are going to be so many conflicts of 'green' policy with Actual Reality in the coming months & years

the classification of nukes and gas as 'green' in the EU 'Taxonomy' is just the start.

James Higham said...

"maybe even causing a few earthquakes"

What's an earthquake or two between friends?

Anonymous said...

The solutions to the crisis are actually within our grasp ...


Is there a paywall we are all missing?

Anonymous said...

"The legacy costs from the Renewables Obligation Certificates (ROCs), the feed-in tariffs (FiTs) and low-carbon contracts for difference (CfDs) are a major contributor to rising final prices, and should be separated out, ring-fenced, and placed in a ‘legacy bank’.

They should be charged separately and *explicitly* on customer bills. Industrial customers should be exempt. Once taken out of the market, the underlying prices should then be falling. "

- Dieter Helm

jim said...

Using gas is bad but better than using coal. Using nuclear is expensive and stores up a long-term cost and problem. Theoretically we could sequester CO2 and produce giant fizzy pop bottles underground or giant carbon dust heaps. Wind and solar are good but limited in usefulness.

Green energy is a lovely idea but not much of it about. Easier to say 'cut all this green c%^p' and do something practical. Which does not solve the real problem but gets politicians off the hook for a while.

Using gas is practical and buys us time to develop hydrogen production and fusion and to wean ourselves off coal. But none of this is cheap. In fact we have hardly explored the true costs. If I have to find another £800 for leccy/gas and fork out £3K for a new boiler and £xxx to have a car charger fitted, I will not spend that money on holidays or Netflix. Indeed a diet of bread and scrape looks not too far off. Lord make me virtuous - but not yet.

The reality is we won't be weaned off gas and will very slowly cut our use of coal. Anyway, who gives a s&*t, neither the Yanks nor the Chinese nor the Ruskys will cut back much and if bad things happen c'est la vie.

Anonymous said...

Jim - "Using nuclear is expensive and stores up a long-term cost and problem."

Also Jim - "time to develop hydrogen production and fusion "

We can produce vast amounts of hydrogen next week if we wish - it just takes vast amounts of electricity. The question then becomes - "how do we produce this electricity?" at which point we are back at square one.

As for fusion, it's been 5 years away for the last 60 years easily, longer even than the fabled Iranian nuclear bomb, which has been months away for 30 years now.

"will very slowly cut our use of coal"

There are only 3 coal power stations left, two of which are due to close or be gas-converted in the next year. AFAIK the only major coal user is steel making, where we currently import the coking coal - and people are trying to stop us replacing the imports with a new Cumbria coking coal mine, conveniently situated on the Coast To Coast Path.

rwendland said...

> [ROCs, FITs, CfD costs] should be charged separately and *explicitly* on customer bills

That's a good idea Anon@6:55, I'm all for accessible information. (Onto my hobby-horse.)

It would of course highlight the longest-running and thus most expensive CfD for Hinkley Point C, 35 years long and around £112/MWh (inflation linked) if it was working this year. The wind CfDs are only 15 years long, so Hinkley Point C would show up on the bills for an extra 20+ odd years ("+" as it won't be operational until ~2026 when the 35 year clock starts).

Interesting that the French don't plan to build more than one of these (expensive prototype) EPRs for themselves, but the cheaper and easier to build EPR2 (eg with only a single skin containment building). They figure the EPR2 can be built for £7 billion (8.3bn euros), whereas a Hinkley Point C EPR reactor costs around £11.5 billion.

Why are we still considering financing 2 more of these expensive EPR monsters at Sizewell C?