Actually, there was something in the Budget ...

... 179 references to 'energy', and well over 5,000 words.

Having now read the full Budget doc, it turns out the seemingly footling stuff on energy prices that dominated the headlines was far from the end of the story.

It starts with the predictable "not our fault, guv" - in some statistical detail - and, yes, there are the sticking-plaster give-aways the headlines were all about, which seem to characterise Burnham's style.  But there is bigger stuff, too: "This Budget represents a shift in the government’s approach to energy".  Since there's no space here to summarise the whole lot, it seems to mean two main things, the first of which had already started under the last Tory government: a gradual switch away from dumping all "policy costs" onto electricity and (to a lesser extent) gas bills, in favour of charging it to general taxation.  There's to be more of that going on now.

Secondly, we have: 

... this Budget kickstarts the long-term action required to get energy costs down for good: 

• Controlling energy costs – no new policy costs will be put on bills until a comprehensive Cost Control Framework is in place at the spending review in 2027, which will set budgets for components of energy costs, including policy costs.
• Prioritising a cheaper energy mix and procuring new generation only where it lowers bills, benefits the system, and can be accommodated by the grid.

Now that could be really interesting.  Of course, "lowering bills" can get very theological when the playing-field is fundamentally tilted by not attributing the costs of intermittency etc to the causes of that intermittency - but it's a very interesting line for them to be taking, and provides a stick with which to beat them when, e.g., the next batch of CfDs is to be awarded.  No more floating offshore windfarms at £216.49/MWh: in fact, only solar farms could creep in under that definition, properly interpreted.

On top of this, it's becoming increasingly clear that the bloated DESNZ budget is being raided to fund all manner of things - small things this time round, of course, but when the Defence aspect of the putative 10-year Plan hoves into view, it is likely to hit DESNZ up for quite a few quid more, with correspondingly more bleating to come from the usual quarters.  Finally, there is a bit on the energy aspects of data centres, for anyone interested.

And the aim of all this?  "Cutting bills to reindustrialise the country."  Sic!  A laudable aim indeed.

Unfortunately, just when you think Miliband's fantasies have been consigned to where they belong, it's all spoiled by the assertion that "The focus now is to unleash cheap electricity".  WTF?  Where have you been hiding it all this while?!

ND  

Jackdaw - bingo!

From the day Burnham took office, the green-left has been howling at him not to approve Jackdaw & Rosebank.   This raucous attempt at intimidation possibly peaked with a piece in the Graun analysed at C@W here, when more than 20 distinct (and awfully shrill) "arguments" were made, one after the other - and hilarious reading they still make.  It was always pretty obvious they did protest too much which, as regards Jackdaw at least, they probably now recognise themselves.  

And now he's gone and "Failed His First Big Test" or, as we would put it, "Passed".  Time will tell if the threatened back-bench revolt / party split / defections to the Greens will result.  I'm guessing not, but will be taking a forensic interest in how things pan out in the public debate.  (If anyone spots a really juicy piece in an obscure journal etc, do let us know.)

As we said all along, Jackdaw (gas) was always the easier decision to make and to sell.  You don't need to have a degree in Party Management to see the logic in running it first, in order to see how matters pan out from here (- not to mention in order to get the gas ashore this winter!)  If it turns out to have burned a bunch of political capital, Rosebank (oil) might have to wait.  If, by contrast, it's a walk in the park, Rosebank will follow, as night follows day.  Fahnbulleh seems to be briefing that she's agin'; but let's see.  That might just be to get the protestors off her back for now.  It's Burnham's call anyway, and he & Healey might want the exports / jobs / tax revenues / preservation of international reputation.

Not all of the authors of the original 20+ Shrill Arguments will have been cowed by Jackdaw: indeed some of them - including Ed "Climate Vandalism" Miliband himself - had already accepted by then that Jackdaw might be quite likely to fly.  So for Round-2-Rosebank we may expect another round of high-pitch whining and threatening in the days and weeks to come.  Part of our forensic analysis of this political fallout will be to note exactly who considers it worth prolonging the fight - and how much of their own political capital they are willing to expend in doing so.  

That won't include many Labour backbenchers, I'm guessing: so no big backbench revolt.  Of course, one of the 20+ was the threat of defections to the Greens, and loss of votes in the same direction: and for sure, a lot of would-be ambitious MPs are now simply concerned to save their seats.  It helps greatly that "Polanski" is staggering on the ropes, of course: and that the red entryists have systematically made the Green party look anything but cosy & welcoming.

How are the popcorn reserves holding up?

ND

Another reality-check: Rayner approves data centre!

 ... against fierce local opposition - and in the teeth of, yes, housing as potentially being an alternative use for the site.  It's the controversial Brick Lane Data Centre which, in a delightfully pointed insult, offers 4 (four) units of social housing.

What makes it exquisitely amusing is that none other than Housing Secretary Angela 'Stamp-Duty' Rayner has been the one to put her name to the government order overriding lower-tier authorities that would have withheld approval.  One can just imagine the agonies she will have gone through; but, hey, that's the price you pay for the privilege of slipping back into the Cabinet room, eh?  Them's your orders, girl, and leave your scruples at the door.  Still, at least she was able to push a junior minister out in front to make the actual announcement (in her name).   Happily, Parliament is not sitting. 

What I find doubly amusing is the way puzzled progressives can't understand how a data centre can be needed simply to speed up City financial transactions by milliseconds (which is one of the justifications for a DC in the East End).  Surely, they, cry, this is some kind of capitalist joke?  - nobody needs to make even quicker financial transactions ... do they ..?   Well, I have a first-hand story about this for another occasion: bottom line, it's all a lot more real than the ignorant could ever imagine.

On the subject of Them's your orders, girl ... with the fatuous 'consultations' on the Jackdaw and Rosebank fields being about to close, we are all greatly looking forward to Miatta Fahnbulleh being forced to walk the same plank and approve one or perhaps both of them in the next few weeks (doubtless on one quiet Friday evening during the Recess, with another junior minister out in front).  It'll be fun to watch her squirm.

ND

Rosebank and Jackdaw: green-red panic setting in

They're tugging at the heartstrings, scraping the barrel, lighting the gaslights and pulling out all the stops  -  Stop Burnham Approving New Oil & Gas!  As a planted piece of the purest propaganda of desperation (and the Guardian is a willing receptacle) it would be hard to beat this one. 

Burnham risks first revolt as PM over apparent support for North Sea drilling - Labour MPs fear No 10 team lack up-to-date energy insight and don’t fully recognise voters’ climate concerns   

Burnham, of course, has done nothing more than offer a bit of glaringly obvious commonsense. As the article quotes him saying: “The question isn’t whether Britain will still be using oil and gas, the question is where does it come from.”  Well, yes.  What's more, the article helpfully goes on to display two graphs that prove his point: we'll be net importers of both oil and gas for the foreseeable future.  QED.  

So what 'arguments' do the green-reds throw into the mix?  They are many, varied, disingenuous, shrill, and reeking with desperation: every damn' thing they can think of.  Including Gaza!  I kid you not - see below.  As part of the usual service I distill them for you here in order of appearance, starting with the one in the headline:

• Burnham's team is ignorant / stupid / out of touch / whatever ...
• ... though not Andy himself, of course - so he's in danger of looking like a gullible dupe
• He'll face a revolt.  His first revolt!
• FFS, Andy, we're on fire here and it'll be your fault!
• Climate Experts (no less) are against his proposed pragmatism
• The UN Secretary General is against it [features twice in the article]
• Labour MPs are fearful they'll lose votes to the Greens - a new 'surge' of defections looms
• The ice caps are melting, the world is on fire, etc etc
• It will only make a 'tiny' difference to energy prices.  [Tiny?  I'd say "undetectably small" or more probably zero - and it's wholly irrelevant anyway, see below]
• It would "send the wrong signal internationally".  [In fact, the only argument that's even vaguely coherent {1} - and even then, it's wrong]
• Lewis said approving the field would show Burnham was “not looking at the evidence” ...
• ... and that Labour risked adding “the stain of the climate crisis” to the party’s record, alongside Gaza.  [Are we getting into a new variant of Godwin's Law here ..?]
• Britain was the first country to industrialise and we have a duty to lead the world on net zero
• The case made by oil and gas companies is self-interested  [- and presumably also that of the Unions that are also pro drilling - which is not mentioned, of course]
• Allowing production will be to exploit a (wicked) "loophole"
• It's (arguably) against Labour's GE Manifesto [Glad they added 'arguably' because on a close reading, it ain't - the Manifesto was carefully ambiguous] 
• If it comes to a vote he would need Tory and SNP votes 
• If it doesn't come to a vote [which it won't], it'll be a (wicked) "administrative measure", how evil is that?!
• Concerns "extend across the Labour party, transcending factions and 'tribes'. The Guardian has contacted or been told of concerned MPs including ministers and junior members of government, longstanding senior backbench MPs and committee figures and new MPs from the 2024 general election intake" 
• Several influential economists told the Guardian that increased drilling would not help the UK economy ... [followed by some utterly ignorant 'economic' bullshit + doubling down on some of the above.  Have these 'economists' not heard of the benefits of employment?  Tax revenues? Balance of payments?  When have they ever opposed local production of any other commodity or product?]
• It runs counter to the 'clean energy superpower' mission
• It will lead to "extra use [of oil & gas] and more greenhouse gases". [Now which is it, eh?  Too small to have any macro impact on the market - correct, see above - or big enough to cause an increase in demand?  FFS]
• "Keep the peace" by allowing Jackdaw but scrapping Rosebank.  [It's fair to say the argument for Jackdaw / gas is much the easier to understand, not least because the gas will definitely be used in the UK, and will back out equivalent quantities of the far more polluting US-sourced LNG]
• It Will Cause Political Damage - and poor little Andy, badly advised as he obviously is, Just Can't See It !

Wow.  If you think I'm kidding - when did a Guardian article last contain 24 arguments? - check it out for yourself.  As I said: reeks of absolute desperation.

We must hope young Andy is proof against such stuff.  From the C@W standpoint, he's on probation here.  Anyone care to predict how he'll come down?

ND

_____________________

{1} I did say that, in amongst the plain risible and the politico-hysterical, I did say there was one semi-coherent argument in there, albeit false.  It's the old business of asserting that we must nobly lead by example, even if that comes at a cost to ourselves.  Well, as least that's a tacit admission we're talking about virtue-signaling, and that there is no other rational case that stacks up on its own merits.  But of course it falls down when we recognise that none of the USA / China / Russia / India / Saudi Arabia / Brazil etc etc gives a flying f**k what we say or do - they are guided entirely by their own assessment of their own interests.

The great Miliband guessing game

Well, then: is it to be:

• Thanks, Ed, but you're not needed now
• Ed, I need you to to stay where you are, it's great job you're doing in keeping the greens onside
• Ed, you're my Chancellor - you're the only one who can solve Rubik's Cube
• Ed?  No no, it's David I wanted on the line

And so we all wait.  Meanwhile, however, a couple of big energy decisions must surely be made real soon:

1. Rosebank (oil) and Jackdaw (gas)
2. DESNZ capital budget being sacrificed for Defence spending: where does the axe fall?

1.  The joke is that the Jackdaw platform has already been built and is out there in the North Sea, fully installed and ready to go; first gas in October if the starting gun is fired this month.  Surely, surely that wouldn't have happened without a clear nod from the Treasury?  Nobody develops an offshore platform on spec.  It really does look as though the formal go-ahead decision is just a formality.  Also, the case for home-produced gas is the easier to make, for Mili or whoever has to front for it.  (Mili always gets Shanks to front for the decisions he's unhappy about.)

Rosebank is a bit different: it'll be produced via a floating structure / subsea completion.  Again, the structure is complete and making its way over from Norway, but the briefing is, that's being done at the producers' own risk.  And if it's a 'no', it could be used elsewhere.  Also the argument for loacl oil production, though still perfectly sound, has just a couple of extra (low) hurdles to jump: and Mili has staked his colours to the 'No Rosebank' mast - so, a bit of humiliation involved.

What would be even funnier, is if he gets offered the Treasury provided that he green-lights both Jackdaw and Rosebank on his way to the DESNZ door.  Does Burnham have a sense of humour?  He certainly likes industry and jobs.   

2.  OK, so the A46 Newark Bypass extension has been sacrificed for Defence spending.  Big deal: it was only ever a nice-to-have.  Yep, the big capital budgets to be raided will be those of Mili at DESNZ.  Now most DESNZ capital schemes are loaded onto electricity bill-payers' bills, the big exceptions being:

    (a)  HMG's equity contributions to Sizewell C, given that EDF refuses to take equity risk (which we've written about many times)

    (b)  The farce that is Carbon Capture and Storage - by far the biggest (thus far) at £21bn (sic) of HMT's best pounds, NOT recharged to bill-payers.  Very unusual.  And very stupid. 

I think we can guess which will be the sacrificial lamb, notwithstanding Mili's considerable attachment to it.  

More popcorn, please, as I raise a hopeful glass to Burnham's sense of fun.

UPDATE:  Right on cue, this from the DTel: 

Miliband willing to approve North Sea oil to land job as chancellor - Energy Secretary wants to prove he is a ‘pragmatist’ rather than a ‘zealot’ on environmental policy to help his case for being chancellor

ND

The 'evolution' of the Russian oil and gas industry

Wind the clock back to 2022 and Russia has the biggest oil and gas infrastructure in the world: the country is sometimes referred to sarcastically as a nuclear-armed gas station.  It's fully functional, although not very sophisticated - the amount of wasteful flaring that goes on is legendary (of gas at oil production facilities, and of oil at gas producing locations); and there are few conventional sophistications such as accurate metering and non-return valves.  Nonetheless, it's the primary pillar of the Russian economy.

What a target!

Well, Ukraine started setting about it seriously in 2024.  To start with, their offensive means being rather slight at that stage, they went for plant in the neighbouring oblasts.  Right from the word go, these pinpricks revealed huge, structural vulnerabilities.

Vulnerable ...

Russia immediately realised just how serious it might be, and set about devising counter-measures.  They encouraged oil enterprises to invest in small arms (requiring a change in the law) for local defence[1], and experimented with wire cages and steel gantries to create physical barriers - an utterly futile effort because, even if a drone hits a cable ten metres away from its target, it stands a very good chance of rupturing it anyway.  We know all this because helpful Russian locals are keen on home videos and social media - and of course good old Google Earth provides astonishingly detailed coverage of most of western Russia, filmed closer to sensitive facilities than is allowed in Western countries! 

Then, there's that lack of non-return valves, meaning that a single blazing tank can burn for ten days - there's no way of cutting it off from the pipeline network which then gaily feeds the flames.   Oh, and effecting repairs ain't so easy: any component even vaguely sophisticated comes only from western manufacturers and is under embargo - meaning costly and time-consuming black market procurement. 

Other palliative measures have been tried.  Initially, officials would simply lie about the damage done.   There are strict Russian injunctions against publishing photos of these goings-on - hah!  To this day, every strike is broadcast to the www in realtime.  Then, there are missions by the Orthodox Church, variously to bless oil facilities, to pray for their safety, and to send clerics to attend upon the fire-fighting efforts[2].  Evidently this approach has its limits.[3]

Well.  As Ukraine develops ever longer-range strike capabilities, the list of potential targets gets bigger and bigger.  And of course their location is known rather exactly, and they can't be moved!  Nor, in practical terms, can they be defended.  They are being picked off, one by one - the three most noteworthy being perhaps successive raids on the main Moscow City refinery and one close to St Petersberg, plus Omsk.  The first two of these prime targets bring the war rather close to home for everyone in those cities with a pair of eyes (and a nose); the third sets distance records (getting on for 3,000 km).  And of course, there are serious fuel shortages - in Russia! - to the point where exports have been banned and very large-scale imports are being sought; but the harvest is still under threat, industry is feeling the pinch, and ordinary Russians, particularly in the south and west, are really stuck.

Notwithstanding the Deputy PM's classically euphemistic description of this, ("interruptions in the supply of fuel caused by changes in logistics") even Putin - who likes to keep his hands clean from disasters of all kinds - has been forced to pronounce.  Here are his dicta of yesterday: 

He called the difficulties with fuel "temporary" and associated, among other things, with "the enemy's attempts to disrupt the vacation season".  (Oh yes, the Russian vacation season is uppermost in Kyiv's strategic thinking.)  

"The safety margin of the Russian energy system is one of the highest in the world." (Measured by reserves in the ground, presumably.) 

"The enemy is trying to create a nervous situation in Russian society."  (Trying?) 

He called for a speedy decision to subsidize fuel purchases  (Not clear where the money will come from for that, but let's see.) 

He instructed the speedy deployment of "the capabilities of small and medium-sized businesses in the production of petroleum products". 

This last one is very interesting.  Sure enough, for a country in dire straits, it's a feasible approach to squeeze a few more drops from what's available.  We know from how ISIS conducted its affairs in the areas of Iraq and Syria it once controlled, that home-made micro-refineries are a Thing.  And of course Russians are pretty well versed in home-based distillation!  All this said, at the end of the day a big economy, and certainly one with a huge defence-industrial base on a war footing and trying to ramp up as fast as possible, needs massive quantities of high-grade fuel that only large-scale, uninterrupted, fully industrial production processes can provide - as 1944-45 Germany discovered.

However laughable micro-refineries are as a 'solution' to Russia's problem, one can't rule out a proliferation of medium-sized plant - given time.  But development of this on any scale would be a matter of years, not months, and require skills and components that "medium-size businesses" won't find readily to hand - even if their staff all manage home-made vodka stills on the side.  And it would never be able to produce high-grade product.  And there would be other vulnerable choke-points to be found in such a newly-diversified system.  And individual new targets would be even less plausibly covered by air defences.  Etc etc.  In sum: this is truly desperate stuff.

ND

[1]  As one Russian milblogger put it, "successfully" shooting down a drone with small arms directly over the target is likely to be "a posthumous achievement".  Gotta love Russian sarcasm.

[2]  In one famous incident, a posse of Orthodox clerics attending a tank blaze after three days of futile fire-fighting to assist with their very best prayers, were killed when the tank exploded.  The same fire burned on for another week.

[3]  But clerical efforts continue.  The Church has been ordered to organise a pilgrimage, starting out at the Omsk facility, Russia's largest (now closed following this week's bombardment), and proceeding to join the dots of refineries all along a route ending in Crimea.  Reportedly, the Church has refused to carry out the last bit because Crimea is too dangerous for clerics just now.  But the Church has renewed its demands for the raising of tithes, priority for priests in gasoline allocations, and the banning of abortion and neo-paganism.  See?  Russia is a different world.  

Goings-on in the BP boardroom: WTF?

BP is a genuine puzzle.  How can an enormous company of considerable long standing with some seriously impressive attributes, be so maladroit in its senior appointments?  With the summary eviction of Mr Manifold[1], BP will have had 3 chairs and 5 CEOs since 2020, and a heap of embarrassment.  This is a crazy level of volatility at the top.

It's not a company I have definitive views on; but inevitably I have had loads of dealings with them over my decades in the industry.  (They offered me a job once: but I didn't want to move to Japan.)  Here are some observations.

• Although superficially they might all look pretty similar, big multinational oil companies aren't remotely all operating under the same business model.  We can map out a spectrum.  At one end we have Exxon - fundamentally centred on building and managing physical assets; i.e. engineer-driven, and deeply suspicious of finance & trading activity, which it minimises very purposefully.  At the other end,  BP  - plenty of capable engineers and physical assets, but also exceptionally capable and commercially active traders and finance types.  At these two extremes on the spectrum, the respective P&L and balance sheets aren't very similar.[2]  
• BP has shown itself somewhat prone to accommodating the woke agenda.  The 'Beyond Petroleum' rebrand dates as far back as 2000, under the proto-scandalous John Browne[3], so that until recently the eco-'green' stuff was fairly prominent in the business, almost as much as the traditional 'green stuff'.  They have also made several 'questionable' appointments of females at very exalted levels, IMHO for the sole purpose of having wimmin in senior jobs because at least a couple of them are self-evidently not up to the job.
• More generally, they seem to hire outsiders for top jobs far more than is usual in the industry.  Really confident big companies of long standing place far more trust in promotion from the ranks of their long-term employees - rightly or wrongly. [4]
• However, the boardroom nonsense of all kinds clearly hasn't been at the expense of their trading prowess.  And overall, I have a fair degree of respect for the senior working-level management of the company across the board, who mostly seem to get on with business in an intelligent and competent way.

All that doesn't lead me to any firm conclusions about BP's future.  But the company has been such a major part of the UK business scene for so long, I have to believe many C@W readers will have well-informed perspectives on the company.  So - the floor is yours.

ND

UPDATE:  Someone pointed out to me that I couldn't possibly have been referring to Meg O'Neill, and they were right.  I wasn't.  She's good.

_________________

[1]  Cue the obvious jokes about Manifold sins and wickedness ...

[2]  Shell, incidentally, is pretty much bang in the middle

[3]  Scandal notwithstanding, Browne was a serious oil man.  He called the market correctly in 1997, judging $10 to be the bottom (when the Economist was suggesting $6 was coming) and bought Amoco. 

Arco and BurmahCastrol at the absolute bottom of the market, doubling the size of BP.  That's impressively good business judgment - speculative, but based on solid knowledge, experience and instinct, rather than a bought-in price forecast from some 'econometrics' outfit. 

[4]  The pros and cons of this can of course be argued at length: maybe for another post.

The subliminal impact of $4 gasoline

As is well known, the USA as a nation is addicted to motoring.  The "summer driving season" is a major phenomenon in the oil industry, when many Americans think nothing of driving thousands of vacation road-miles.

And various points along the price curve have mythical status.  It used to be considered that "3 dollar gas" was something no President's reputation could survive: a simple metric for consumer inflation as it is felt in the pocketbook.  More recently, "3 dollar gas" has become a semi-ironic [1] nostalgic look into the rear-view mirror: hey Bud, remember when we used to worry about $3?!   [2]

But $4 is now a reality.  I suspect that simple number alone could be a subliminal factor in dishing Trump amongst his regular base of support.

ND

________________

[1]  To the extent Americans do irony 

[2] To be fair, it was known to hit $6 - in California.  But that state, like NYC, is often thought of as not really America.

Negotiating with Iran? Waters always muddy there

So are there any substantive negotiations taking place, as Trump avers?  Or "talks"?  Or even "talks about talks"?  Well something, probably: but there's very good reason to be genuinely confused rather than just plain disbelieving.

Here's a first-hand story.

Back in the mists of time, when dinosaurs (Saddam, Khomeini etc) roamed the earth, I was working for a US oil company.  Then, as now, there was an American embargo on selling stuff to Iran; but the Iranians needed specialised oil products that they were unable - strange though this may sound - to produce locally themselves: and somehow we had State Department approval to sell it to them.  But it had to be done very discreetly.

Negotiations commenced, in London and Hamburg, with no American staff members involved.  There were several difficult issues to resolve, so it wasn't a simple horse-trade on price; and the whole thing was quite drawn-out.  We had an OK working relationship with our Iranian opposite numbers.

Then one day another Iranian turned up unannounced at our London offices and sought a meeting: he knew all our names & telephone extensions.  We hastily convened, and he laid out on the table all the paperwork relating to the deal, announcing that we would be dealing with him from now on.  Being somewhat taken aback, we were entirely non-committal and progressed nothing beyond making a few notes.  Upon his departure we called our previous contacts, who told us to have nothing to do with this individual, and that the whole episode was "a mistake" and should be forgotten.

We could only conclude there were competing middle-men in play and that in this murky world, copies of the paperwork could be procured for a price.  The complicated deal eventually came to completion after several more weeks.

But not without another remarkable episode.  With a particularly knotty issue being thrashed out, one of our interlocutors suddenly leaned forward and said in agitated tones:  you must concede this point to me, otherwise my family will be arrested!

I have been in many a difficult & protracted negotiation, including with Russians and Chinese counterparties.  But this is not a gambit I have met, before or since.  I have to tell you that we politely ignored his personal anxieties (genuine or otherwise) and proceeded with getting to the ultimate handshake by more conventional horse-trading.

Yes, customs & practices in that part of the world are, well, a bit different (I could tell you other stories about dealing with Arab counterparties - and Russians** & Chinese, too.)  For all his vaunted "New York real-estate expertise" Steve Witless-Dummkopf doesn't look to me like the kind of person who'd be much good at figuring out what's really going on.  Heaven help us all.

ND

_________________

** The critical trap with Russians is their readiness to fall silent in meetings for very sustained periods of time - the record in my experience was something like 45-50 minutes: a tactic designed to make the other side's nerve crack & offer just any concession they can think of to break the apparently awful deadlock.  Well, if that's all you are made of, it'll work every time.  But 'silence implies nothing' is the operative axiom.  Oh, and never get stuck with a firm homebound airline booking (which most people do, just to get out of the miserable surroundings).  They'll back you up against it every time. 

When does the AI bubble burst - and what then?

That AI is currently inflating a mighty economic bubble is a commonplace observation.  A vast proportion of US economic growth (as conventionally measured) and stock market value is related to AI.  Every damned company on the planet is trying to portray itself as somehow AI-contributing or AI-powered - and they are frequently getting a gratifying share-price kicker from it[1].  Presumably, the pension industry is pretty addicted by now.

In the real world, the vast and (we are told) exponentially-growing demand for electricity - 100% secure baseload electricity to boot - made by data centres is seriously distorting electric power-system planning for many a nation.  Coming atop the average grid's already torturing itself - and its hapless bill-payers - to accommodate the diametrically opposed demands of a decentralised renewables-based future, this is a serious spanner in the works.  And of course governments everywhere are anxious to play host to new data centres, Starmer's as much as any; and are making this a policy priority.   But the (would-be) data centre builders have twigged that these contortions on the part of conventional grid operators may very probably not prove successful - and thus are talking about joint ventures with nuclear generators and ... sponsoring nuclear fusion development! [2]  Yup, it's a completely irrational bubble.     

But what does that tell us about AI itself?   Not much, beyond the obvious fact that it has gripped the universal imagination to the extent that dollar signs rotate in every businessman's eyeballs.  

Well.  Railways had a mania, and many a railway company went bust.  The technology and much of the infrastructure they built is still evolving and very much in use.  We had a dotcom bubble.  It burst, alright, but it didn't mean the internet was a phantasm.  Enron was a bubble: but it didn't mean the Enron vision for how energy markets should be configured was wrong.  (Even China is trying to figure out how to bring that revolution into its own constipated energy sector.)  Etc etc - these techie-based phenomena are not like Dutch tulip mania: nobody needs tulips, but everyone needs railways / electricity / the www / .... and, probably, we'll continue to want and need the advances that are made under the banner of 'AI'.

So: if history is any guide, it'll be a painful financial collapse; a reshuffle of the runners and riders in the "AI industry" (for those who don't break a leg & are not shot by the vet); and the underlying new tech rumbles on to find a more stable way to become a permanent fixture in all our economies and our ways of life. 

Views?  Predictions?  Timing ..?

ND

UPDATE: a bucket of cold water over certain claims for AI:

________________

[1]  Even Drax, FFS - a floundering, downsizing biomass-burning power company.  

[2]  On the eve of the 2007-09 financial crisis, a high-end energy-specialist VC firm of my acquaintance was looking for opportunities to invest in unsubsidised nuclear powerplant development.  When money is aimlessly sloshing about on that scale, that's when you really know a financial crash is coming soon.

James Allcock RIP, rogue [2]

Continued from last week

So what disturbed Allcock's stately scam ship as it sailed serenely through the market?  The first issue arose in the mid '80s when the laws of supply / demand / price caught up with him, as they always do eventually.  You can suspend the laws of nature, but only for as long as you are willing to throw money at it.  

What happened was this.  He'd secured vast quantities of gas at ultra low prices (the units don't matter, but it was single-digit pence per therm) in the late '60s and early '70s - see part 1.  This was amply sufficient, right through the 70's.  But by the '80s there had been two oil crises, 1973 and 1979; and the price of oil had risen tenfold (sic).  The prices BG was paying for its gas had jogged upwards a bit with inflation and other adjustments, but nothing on that scale.  So the big producers, who were always oil companies au fond,[1] stopped drilling for gas, concentrating on the still bounteous North Sea oil reserves.  There were whole years in the '80s where not a single gas well was drilled - not for exploration, nor even for extending already-producing gas fields.  A complete gas-investment strike by the producers.  BG did the sums, and correctly assessed they'd be facing a supply crisis in due course.  And new gasfields took an absolute minimum of 2 years to bring onstream[2], often much longer if outright new exploration was to be involved.

Still, BG had a monopoly to go with its monopsony, and they knew who was going to pay for the business of digging them out of that hole - its captive customers!  So Allcock did the rounds of the big producers, intimating that BG was now willing to pay prices above 20 p/th - a huge increase - for any new gas fields they could bring to the table in the next few years.  This, of course, set off a new round of stately and highly enjoyable negotiations I described last time, as the producers dug down into the archives for overlooked gas discoveries, and indeed started drilling again for new resources.  It worked: high prices have that effect.  (I've written before about another, hilarious aspect of this episode as the crazy, artificial boom-and-bust cycle ran its inevitable course.)  Thus did Allcock and his monopoly powers - a dismally blunt instrument indeed - avert the first storm that broke over his head.

The second, however, was to be terminal, albeit a protracted affair.  On purely ideological grounds, Nigel Lawson persuaded Thatcher to privatise BG, a task given to Peter Walker.  To make a long story short, in 1986 he succeeded in getting the public to buy the shares ("Tell Sid", for those with 40-year memories), and the legislation ended BG's de jure monopoly / monopsony.  But it did nothing to eliminate or even, in the short- to medium-term undermine, its de facto stranglehold, not least because in the initial legislation, no regulator was appointed!  

And it was Allcock who commanded BG's first and highly effective line of defence: making sure no other bugger could obtain gas with which to go into competition with the monopoly.  In the next part we'll tell the story of his long, ruthless but ultimately unsuccessful rearguard action.  And, no, I haven't forgotten the promised account of the colourful abuses of its monopoly that BG perpetrated over the years - some of which will feature in part 3 and others in a later episode.

ND

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[1] Gas was always seen as a more-or-less unwanted by-product - something that came up from most oil-wells anyway, or something you discovered, disappointingly, when you'd really been looking for oil.  In some places around the world, by-product gas was simply flared

[2] A lead time as short as 2 years would be for a geologically simple gas field in shallow waters, close to existing infrastructure, that had already been discovered but never developed because the price BG had been willing to pay was just too low - the producer had better uses for its development budget

Rogues I Have Known: James Allcock, part 1

Pic:  Daily Telegraph

There won't be many readers who have heard of James Allcock (died at the age of 90, obit here, which you should maybe read first). De mortuis nil nisi bonum, obviously; and I'll immediately say, he was a very nice guy who commanded tremendous loyalty, which (generally) speaks well for a man.  But he was also, how shall we say, a tough customer.  Being, as he was, the head buyer for the old British Gas when it was a monopoly.  I shall explain.  At length.

BG took on the form we most associate with it when North Sea gas hove into view in the late '60s.  The late (and not very lamented) Dennis Rooke was given responsibility for converting the nation rapidly from town gas to natural gas, in which he succeeded, using methods that left a lasting and very equivocal legacy - a story for another day.   It seems from the above-referenced obit, Allcock (I never knew this) had a hand in it, too.

However, it was in his prime as BG's head buyer of gas from upstream producers that I first met him.  Did I say 'buyer'?  BG enjoyed, not only a statutory monopoly, but also a monopsony, which it enforced zealously.  So if your company had discovered gas in the North Sea (and later, off the west coast, too), you had nowhere to go but to headmaster Allcock's study.  The only question was, how painful the experience was going to be.  He had only two forces providing a weak form of discipline on his rapacity:  (a) some customers (particularly industrials)[1] still had the ability to use alternative fuels, mostly oil of one grade or another; and (b) the Norwegians, at least, had alternative outlets for their gas.  Otherwise, he could generally have his wicked way with you; and he & his opposite numbers in equally monopsonistic European utilities used to swap notes gleefully on how roughly they'd rogered their victims.

That said, he was a perfect gentleman, and built a department consisting of three teams of negotiators to carry out his purchasing policy.  You need to know that these negotiations were for astonishing amounts of gas, since Allcock insisted on buying the entire quantity of gas in a given field, which might be producing the stuff for as many as 50 years[2].  So the amounts of money on the table were correspondingly stupendous; the sellers were very big companies themselves (basically, the '7 Sisters' of yore plus the Norwegians, and various hangers-on); and the negotiations were interminable.  Two years for the sale of a single large field's gas was par for the course. 

Each of his teams was led by another perfect gentleman[3] and some courteous juniors, whose conduct was extremely stylised in the oriental fashion.  There were three juniors to a team, and each had their allotted role.  #2 would occasionally get to speak out loud in the meetings; #3 might get to whisper something to #2; and #4 was silent, taking notes.  There would also always be one or more of BG's exceptionally proprietorial external lawyers, who did all the drafting.  Indeed, all the meetings were held at the offices of BG's lawyers, the then firm of Denton Hall Burgin & Warren.  This was to the advantage of all the participating negotiators, since lunch came in the form of a Fortnum's hamper, and the fridge was well stocked too.

Thus, it was possible to be thoroughly rogered by Allcock and his teams, and enjoy the whole process greatly.   One or two of the juniors might have been redbrick, but inevitably the main players on all sides (whichever oil company was selling its gas) were Oxbridge: even the US sellers, and in some cases the Norwegians, made sure to field the "right people" for this arcane negotiation ritual.  Literary references (which would sometimes find their way into the drafting) and Latin jokes were prized currency.

This stately and splendid abuse of BG's statutory powers lasted from the late '60s to the early 90's.  Allcock had to weather a couple of storms - which he did with panache - before eventually competition started developing for real, as I'll describe in part 2.  I'll also give some examples of the outrageous abuse of its monopoly BG perpetrated when this regime still had the power to do so.  

And, to cut to the chase for part 1, Allcock - in his urbane manner - fought the onset of competition all the way.  Given that BG retained a de facto monopoly/monopsony for years after it lost its statutory rights, and never lost its natural monopoly on the pipeline system until it relinquished it voluntarily by demerger, his powers to do so were baleful and very great.  But when, in the early 90's, it was manifestly almost over for his way of doing business, I had a drink with him one day and asked him this: why this stubborn rearguard defence, when the end-point was clear?  I drew the analogy with Germany's immense WW2 losses on the Eastern front: if they'd called it quits after Kursk, say, and fallen back in good order to the German border, Berlin may never have fallen to Russia[4].  As it was, fighting for every hectare they lost countless men for arguably a much worse result.  Likewise, BG was (at the time I posed the question) still mulishly refusing to concede market share, and using its enduring natural monopoly on the pipeline system to make life as difficult as possible for its new competitors, once they arrived on the scene, even knowing that there was every intention on the part of government to make sure the new entrants succeeded.  If BG had fallen back on its then-remaining de jure monopoly of the residential gas market (which it didn't lose until much later) - devilishly difficult for competitors to make inroads into, and not nearly as profitable as the infinitely more accessible industrial & commercial sectors - it could have held that till kingdom come.

He smiled, poured us another drink, and said: "Every day's delay is another monopoly pound in our pockets."

More to follow.  In the meantime: RIP, James, you old rogue. 

ND

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[1] For a sustained period until the late 1980s it was illegal in the UK, and in most of Europe and the USA, too, to use natural gas for power generation .  Bizarre, but true.

[2] The largest North Sea gas field, Leman, started production in 1969 and is still producing to this day

[3] In the early years, at least - things changed towards the end, but, no names, no packdrill 

[4] A counterfactual for the historians, obviously.  But it served my illustrative purpose.

Miliband & the perpetual belief in perpetual motion

There's something very deep in human psychology that encourages people to believe in magic swords, universal elixirs, price forecasts, perpetual motion machines etc etc.  It's out there - and it just needs that little bit more human ingenuity to bring it to reality.

Ed Miliband is (we are told) a human, and clearly suffers from this syndrome.  Here are some of the things he believes in:

• a "net zero electricity grid" by 2030
• nuclear fusion as a practical source of power
• "negative CO2 emissions" from burning trees for power and burying the CO2
• hydrogen as a wonder-fuel of very wide practical application
• himself as a dominant force in a post-Starmer UK government

A man can dream: but he's spending our money on the first four of these (and indirectly, one might say, on the fifth).  In a harder-headed world, they would disqualify him from the fifth.  

Sadly, I don't think they do.    

ND

Cost of Sizewell C, part 2

Part 1 was a qualitative summary of what the SZC deal looks like.  It isn't difficult to find more exact details - Mr W has provided several links & AI will yield more - though history suggests almost anything with a £ sign or a timeline will necessarily be a wild guess.  And even when apparently tied down contractually, EDF shamelessly just asks for more money / time whenever it feels like some, as the Hinkley Point experience amply demonstrates. 

We now turn to the questions posed in Pt 1.  

Why SZC's "identical design" won't cost less than HPC 

We've heard this story before: HPC would be a doddle, because Flamanville and Olkiluoto had blazed the trail for the EPR design.  But of course neither of those was remotely complete & commissioned before work started on HPC, so there was a distinct dearth of Lessons Learned from the outset.  Also, both had started development before Fukushima, so there were always going to be new considerations to contend with.  But EDF persisted with the "cookie-cutter = cost savings" promise: so now SZC will be even easier, even cheaper!  Nowadays, of course, with HPC being a complete fiasco in project management terms, they blame it on the UK regulators moving the goalposts / Covid / inflation etc etc.  Well, all those things to some degree[1]; but how about several outright, scandalous EDF failures along the way?  To give but one example: they failed to make an adequate geological survey of the HPC site, and thus missed systemic faulting in the bedrock.  Result: epic additional quantities of additional concrete being required for the foundations, and at least a year's delay.  There are several more examples of this kind which EDF - & HMG - find it convenient not to mention.  And it ain't gonna change: EDF is not remotely as competent an engineering concern as it ought to be, or as it claims, or as many would like to imagine.  

The other important factor to register is that the challenges for nuke projects on this scale are, in detail, very heavily site-specific.  It's not too much of an exaggeration to say that every big nuke is almost sui generis.  It's absolutely clear, for anyone following SZC in detail over the years as I have, that the Sizewell site poses a load of different engineering challenges that need to be addressed piecemeal.  And again, EDF has been doing this incompetently or, as many believe, deliberately skimpily so that it could keep down the early cost estimates and reveal the "unexpected problems" one by one over the years, thereby "excusing" the relentless increases in budget and timetable they'll drip-feed onto us.  To give just a few examples, of which 2 & 4 are outrageous:

1. HPC enjoys the benefit of an already-existing, conveniently close-at-hand dock for the import of very large items.  Sizewell does not.  SZB utilised a temporary jetty during construction: EDF has shilly-shallied about whether they need to do the same this time around.
2. Access to fresh water (needed in large quantities both during construction and in routine ops thereafter) hasn't been a big issue at HPC.  It's a massive issue in parched East Anglia, and the SZC plans approved by HMG (under the Tories) don't include a resolution of this issue.  (The Planning Inspectorate declined to approve the plans accordingly, but were over-ridden.)  We may be sure that whatever solution they come up with, it'll add significantly to the budget (or dumped onto general water bills!).
3. Faulted or not, there was at least bedrock close to the surface at HPC.  But just under half of the SZC footprint lies on a former marsh (a small river delta) with bedrock very far below surface level.  The piles that will need to be sunk will be very extensive and costly.
4. The coastline of Sufolk is subject to serious, constant, millennia-long erosion patterns - as eny fule kno.  Right now there is a shifting sandbar directly offshore Sizewell which has been protecting it for several years.  But it's on the move, and that protection won't last the 135 years (sic) that the site must cater for, such is the way decommissioning works for UK nukes [2].  So (a) the concrete platform on which SZC will be built, needs to be much higher than that of HPC: and likewise the sea wall.  Additionally, (b) there is a really obvious possibility of sea encroachment inland, on the north flank of the site (the marshy side - that old river inlet): the RSPB which manages that land reckons it'll happen within 50 years at most.  Experts have long told EDF they need an extension of the sea wall to the northern flank accordingly, as well as on the (east-facing) seaward side.  But only the latter is in the approved plans and the publicly-announced cost estimates.  Additionally, in the aforesaid 135-year timeframe, inundation of the whole area is inevitable, so a full operational plan is required for the contingency of the entire Sizewell site - SZA, B and C - operating in 'island' mode on its concrete plinth.  Again, this isn't in any published plan.  Diligent investigation by campaigners has recently revealed that EDF have known about this all along, and do in fact have unpublished "supplementary" plans for all of it.  But of course none of this features in any public "budgeting" or cost projections.
5. etc etc - I could go on.

Against all these cost-boosting special features of SZC, what are the much-vaunted cost savings we may expect from EDF?  Well, they sure ain't going into mass production for EPR reactor castings: they've vowed never to build another one after SZC.  Recently, EDF proudly announced - and the government proudly re-announced it - that they'd be re-using some rubble from a grubbed-up part of the SZA site, in the foundations of SZC.  Well pardon me if I'm less than bowled over by this astonishing feat of saving tax-payers' money.  

What else does all this leave us with?  Several things:

• As mentioned before, the government is clearly desperate (they know wind + solar + batteries won't suffice) which, coupled with the endless willingness to be bullied by the French[3], is a recipe for bad deals at the start of the piece and non-stop piss-taking by the French thereafter.  It's exactly what's happened with HPC, is still continuing with HPC, and has been happening thus far with SZC.  Why would it stop?
• Even if we reckon the SZC deals are struck and definitive now, think of the scope this cost-plus arrangement gives France to pass through, well, anything they think they can get away with onto the "Sizewell C" account!  Accountants are good at providing "alternatives" when it comes to cost allocation ...   Sizewell B costs;  general EDF engineering charges; "management fees" (much beloved of all "related-party" arrangements when one player pulls all the strings). etc etc.  Now EDF retains just 12.5% equity in SZC, so on any cost that would otherwise be for EDF's own account, but that its accountants reckon can be passed through the SZC books, EDF sees at least a seven-eighths reduction, or more: and that's if it's borne by the equity.  To the extent it's passed through on the cost base or the appalling overrun indemnity scheme, it could be anywhere up to a 100% reduction.   Moral hazard, or what?  
• One last thing: surely, you may say, there are audit rights for HMG to stop any such hanky-panky taking place?  Doubtless, this is true, in that the contracts presumably say so.  But here's the thing: when the astronomically-subsidised Drax was caught (by the BBC!) playing silly buggers with its fuels reporting, and was forced to admit to Ofgem and DESNZ that it didn't have adequate data to account for everything it was self-certifying, it got a rap over the knuckles (£25m penalty) but nothing more.  MPs clamoured for full audits to be conducted of everything before a penny more in subsidy was paid to Drax - we are talking billions, after all.  But at the Select Committee hearing, both DESNZ and Ofgem stated clearly that they had no resources to check everything Drax tells them in its self-certified reporting on its complex fuel-sourcing operation. 

Why do we imagine that with this new, multi-billion subsidy arrangement for another operation of enormous complexity, EDF won't be able to rely on the same shameless, shoulder-shrugging insouciance from DESNZ and Ofgem that Drax seems to enjoy.  Too big to fail - and too big to audit!  

What other reasons might there be for the charade?

There's a longstanding thesis, much peddled by the SPRU team at the U. of Sussex, that the unspoken motive for UK 'civil' nuclear policy is cross-subsidy for our military nuclear programmes.  This once seemed more of a conspiracy theory than it does now: read this, from Kier Starmer just last week - his "strategic steer to the nuclear industry".  

... Nuclear technology is vital to our country’s economic growth, energy security, and national defence. It delivers reliable, low-carbon electricity and supports our nuclear deterrent ... We are building on this legacy with clear commitments on the future of our nuclear deterrent, our submarine programmes, Sizewell C and the SMR programme. 

Surely, the only intended readership for this bellicose Starmerite "strategic steer" is one V.V. Putin.  I rather doubt L'il Volodya is quaking in his boots.

ND 

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[1] As blanket excuses go, Covid is particularly open to challenge.  Building works were never subject to lockdown, the reasoning being they are outdoors.  I know a great deal about another large construction project which was comfortably able to speed up its project schedule and reduce its costs during Covid, when (a) various restrictions arising from the need to work around nearby sites of regular employment were lifted, because these other sites were now shut down; and (b) labour costs came down because many construction-related trades found that much of their regular work dried up.  OK, maybe (a) doesn't apply so much in the middle of Somerset: I'm just saying "Covid" isn't a free pass on costs and schedules.   

[2] The way we decommission nukes in the UK involves taking away some of the radioactive stuff upon cessation of ops, then sheathing and just turning the keys on the rest of the site, walking away, waiting for cooling down & the half-life effect (venting into the atmosphere, BTW) to reduce the radiation enough for final clearance.  SZA is in that state right now; also HPA.  2160 is accepted by EDF as the relevant date for SZC.  There's no chance the Suffolk coastline stays as it is for that long: and some extreme scenarios suggest 2190 would be the date.

[3]  I mean, what else can they do to us?  Take even more of our money and do even more nothing about the small boats - check.  Be even more beastly to us over any attempt to engage in ordinary trade & diplomacy with the EU - check.  What favours are we buying when we give them everything they ask for on HPC and SZC, with fat cheques included? 

Sizewell C - what'll it cost us? (part 1)

Spoiler alert: nobody knows; and it's not clear anyone cares who has agency in the matter[1].  We've written about aspects of this any number of times - see the tabs below if you're interested.

Recap on Hinkley Point C:  granted a long and very flexible CfD (there's an extraordinarily lax backstop date for start-up, which the government glibly extended when EDF requested, so it can't be reliably built into system planning - which negates the supposedly vital aspect of "reliable baseload power" which is nukes' raison d'être) with a handsome, index-linked strike price.  It doesn't even compel EDF to build the thing at all ! The one aspect that might have been seen as in our favour is that EDF bears 100% of any hypothetical the absolutely inevitable monstrous cost overrun.  But even that is irrelevant because again, when asked, HMG just gives them more money.

SZC:  EDF nonetheless vowed never again to do another nuke on HPC terms (wonder why..?), requiring instead that they be shielded from almost all construction cost risk[2], but again with no meaningful timetable for completion; and that they be funded throughout construction, even if over-running[3].  They also demanded their ongoing costs be met via the electricity price after they (hypothetically) commission the damned thing - it'll be something like a CfD with a rolling cost assessment setting the strike price: though for some reason HMG et al are loathe to use the CfD / strike price nomenclature.  Oh, and EDF have successfully demanded hard cash - billions - upfront from HMG to fund "development work" prior to taking the decision to go ahead, even after having said it'll be the same design as HPC AND they'd been working on it for 10 years already.

This subsidy approach is being delivered via a variant on the Ratable Asset Base (RAB) approach, beloved of US utilities for decades, the Thames Tideway Tunnel, LHR T5 etc etc.  Bottom line, we all get to pay in installments, starting right now.  Remind me again, when will it start up?  Say after me: Nobody Knows and Nobody Cares. 

Why was this agreed?  The ostensible reasons are:  (a) the nuclear lobby has persuaded successive governments we must have more nukes;  and (b) "it's much cheaper this way" - a material portion of the total HPC cost is financing charges.  [Why can't French-government-owned EDF finance more cheaply than the UK government?  Very good question.  Always bear in mind, though, that for the French the Whole Point of HPC and SZC is as part of their grand strategy to get other nations to contribute to their humungous nuclear liabilities - see this post from 18 years ago.]  

Oh, and over & above this notional cost saving via lower financing costs (real enough, if you accept the premise), they also promise cost savings via the cookie-cutter effect, because SZC will be the same design as HPC.  We return later to this delightfully simple notion confected for simpleton politicians.

You can readily research for yourself that when the damn' thing inevitably overruns its "budget" (hah!) the taxpayer + billpayer combo picks up most of the tab.  So what, then, are the incentives on EDF to keep costs down?  Errr ...   Seriously, this is a massive and excellent question we'll return to next time.

Here's the thing: in having thus devised featherbedding that's comfortable enough for feeble, state-owned EDF to be willing to go ahead and build the thing, it's equally attractive for other investors, who are joining the fun and taking equity.  Centrica et al are anticipating low-risk, double-digit returns in return for stumping up their own capital.  [HMG is taking some equity: but why not all of it, HMG with its even-lower cost of capital and endless ability to dump costs on bill payers?  Another good question - to which the answer is presumably: they don't like it appearing on the Treasury's books.] 

Yes, folks, it all smacks of desperation.  And there's nothing you can't (/ won't) do when you're desperate and you can write cheques on other people's accounts.

Coming next:  

• why SZC's "identical design" won't cost less than HPC
• what else does all this teach us?
• what other reasons might there be for the charade?

ND

____________

[1] Curiously enough, some of the people who care are (a) several of the rather diligent French authorities, and (b) the French unions.  They are ignored by the French government.

[2]  The HPC contract already substantially shields EDF from the risk of costs rising because of changing safety regs etc.  Obviously, the cost increases EDF wants to be protected against are those resulting from their own bad decisions, flawed engineering, poor project management etc - which have been legion at HPC. 

[3]  Most householders know you don't pay your builders up-front without stern performance conditions.  Of all the companies not to trust with this, EDF is up there with the dodgiest cowboys in the construction market, as all experience shows.  Never will the government be able to say "how could we have known..?"

Budget chaos - open thread

First things first: Jim wins the compo for most correct guesses at Budget content - by a decent margin, too.  Well done that man.  A (very temporary) job awaits you in Whitehall as official Reeves-whisperer.

The OBR-induced chaos is all very odd.  FFS, Reeves leaked half the Budget, in detail, yesterday - the 'final final' leaks, which once would have been anathema to Parliament and MPs' privileges on being first to learn these things, once jealously defended, not least by successive Speakers.  Hugh Dalton felt obliged to resign in 1947 for less (though some suggest the skids were under him already, and he was glad of the pretext to go).

Anyhow: obviously in the circs, Reeves / Starmer felt they couldn't do anything other than play to their own back-bench gallery.  Feeble politics though it is, I think we all understand.  How much time does it buy them?  Maybe enough, actually:  it might be nicely judged for that specific audience.

On the energy front, the EV levy was inevitable and we may expect it to rise over the years, to replace fuel duty.  (Did any EV user ever imagine otherwise?)  I'm interested in 'pay per mile' - does this mean they are tracking vehicle movements (like Musk and the Chinese do), or is it a self-declared matter on the income tax form?  I would have thought 'pay as metered' would be better - seeing as how smart meters can supposedly detect and discriminate different types of load.  But maybe home charging would represent an easy dodge, even with an SM.

I haven't yet seen the trailed shift of 'green levies' from electricity bills onto general taxation: and I believe they've ditched the idea of scrapping VAT on energy.  Will update when I find out.  Anyhow, it's pretty clear they've completely given up on the £300 bill reductions that were to be achieved via "cheaper renewables".  Not before time: Miliband really does have to ditch that crass rhetoric once and for all, and stop making his DESNZ officials parrot it every time they are asked about bills.

UPDATE:  here's at least part of the energy thing which, I reckon, needs more detail to make total sense of: 

She told the Commons: “The Conservatives’ ECO (energy company obligation) scheme was presented as a plan to tackle fuel poverty. It costs households £1.7 billion a year on their bills and for 97% of families in fuel poverty, the scheme has cost them more than it has saved. It is a failed scheme. “So, I am scrapping that scheme along with taking other legacy costs off bills. And as a result, I can tell you today that, for every family we are keeping our promise to get energy bills down and cut the cost of living with £150 cut from the average household energy bill from April. “Money off bills, and in the pockets of working people. That is my choice ... Not to leave working families to bear the brunt of high prices, like the Tories did. But to get energy costs down now and in the years to come.

So, yeah: no contribution from "cheaper renewables" (- how could there be?)  And on a quick calc (£1.7bn across approx 20m households), that's only £85.  So the remaining £65 must come from some other levy-tweaking.  We need yet another update.

UPDATE 2:  yes, it's a direct transfer of subsidies from bills to general taxation: easy when you know how. 

Energy costs will be reduced by the ending of the Energy Company Obligation, which is currently funded through bills, and through the government funding 75% of the domestic cost of the legacy Renewables Obligation for three years. This is on top of extending the £150 Warm Home Discount to a further 3 million of the poorest households.

So: 150 + 150 = 300 & they'll say they've delivered the £300 reduction promise - for "the poorest households", that is.  BUT, as I keep saying, Mili's manifesto claim was that it would be delivered by cheaper renewables!

UPDATE 3:  the EV tax - eVED - is indeed on a self-certify basis.  It is assumed that the 'honesty' rate will be 98.5%, based on the 1.5% default rate on VED.  Hmm.  That surely has to be optimistic: people pretty much expect to have their number-plate checked by ANPR these days, but who imagimes HMRC will check their milometer?

Have at it all in the comments.

ND 

Sizewell C post ... coming soon

As we await the Budget: our learned visitor Mr Wendland asked for a post on SZC and its subsidy regime.

I've done the reading, sir, and it's a-comin' soon ...

ND

All up for Miliband?

Last week before a Select Committee, a bunch of genuine energy industry experts effectively demolished Miliband's plans - at least in his risible 2030 timing for de-carb and price cuts, if not in totality.  Their numbers and reasoning cannot be gainsaid.  Even the Grauniad has noticed.

And yet he & DESNZ still keep mouthing the same nonsense. "It's all the fault of gas. £300 bill reductions by 2030 are a commitment. 95% decarb elec by 2030. Both will come through investment in renewables, and that's the only way." 

Emperor. No clothes. It's too serious, just to point & laugh.  

I know he thinks Net Zero is his life's mission on earth & redemption for losing the 2015 GE; he's resilient, determined, politically adept and relentlessly optimistic: but how long can he last in office?  Before he's simply pushed by Starmer, or baited beyond endurance by Reeves, or his intellectual pride causes him to throw in the towel?

UPDATE, THURSDAY  -  not saying "you read it here first"; but this morning's Graun reckons it is indeed all up for Miliband's policies & targets.  Can he last until Xmas?  The Budget?

ND

Duty of Candour & the 'Hillsborough Law'

I am no lawyer: but I am very interested in the 'Duty of Candour' principle.  How far, one wonders, will it extend beyond follow-up after "emergency situations" and actions thereupon by the authorities, which seems to be the application for which it is being discussed.

Where I've encountered it before [in my Energy interests] is its application in Judicial Reviews.  The principle is that, inevitably, the authorities enjoy a vast disparity of knowledge and information in such cases, and are required to cough it up, even to the extent of revealing advice given and received between officials and their counsel.

I can tell you, it puts the wind up civil servants and ministers - one of the reasons they have been trying to get the courts to be stricter over what gets heard under JR (as predicted here years ago).

Now of course we know that Whitehall etc have long found ways to live with FOI, so as not to have it cramp their style.  But it still does, to some extent.  Even so, FOI and JR notwithstanding, Whitehall and others still frequently dissemble, nay sometimes lie through their teeth, in official pronouncements.

So - just how much more comprehensive will be the scope of Duty of Candour following the passage of the Hillsborough Law?  And how will we be able to invoke it against the bastards?

ND

Drax: criminal charges a possibility

Not before time, the FCA is investigating Drax: 

... covering the period January 2022 to March 2024 relating to certain historical statements regarding Drax's biomass sourcing and the compliance of Drax's 2021, 2022 and 2023 Annual Reports with the Listing Rules and Disclosure Guidance and Transparency Rules.

Needless to say, this hasn't done anything for its share price.

During the period under investigation, Drax was found guilty of misreporting by the pusillanimous Ofgem which let it off with a £25m fine.  In the context of literally billions Drax has received in subsidies, that's a bad joke.  And Ofgem's entire approach was pathetic, they had more than enough to throw the book at it.  But it means the FCA has a fairly robust platform from which to commence its own work, 

What's it all about?  Au fond, the issue is that Drax gets subsidised thus because it says it is saving the planet by burning trees for electricity - and it isn't.  The entire business model is built on a lie.  Living a lie is never good for integrity, personal or corporate.   In lay terms the FCA will be looking at something rather different to Ofgem which was, notwithstanding the proven misreporting, limited to whether Drax technically qualified for its subsidies.  In essence, their finding was, "even though they don't provide accurate info, we can't be sure Drax is in breach - so we'll carry on paying".  Pretty lame. 

The FCA will be looking at whether Drax has misled investors / shareholders / the market.  Here, as in the States, this can be a criminal offence.  When I was an FCA-authorised player (well, FSA in those days) it was "up to 2 years, and/or an unlimited fine" for executives involved.  In the USA, they actually do bang people up for this - see this earlier blog story.  

Who knows where the FCA will come down?  My own two-penn'orth is that (a) Drax's dissembling about its supposed CO2-reducing impact, & exactly what trees they burn, is probably of only peripheral concern to the FCA; (b) the Risk Disclosures in successive Drax annual reports look distinctly questionable.  They know how perilously they are placed via-a-vis regulatory risk, but it's not clear to me that comes across in the ARs (see for yourselves).  They've also spoken with forked tongue over whether they would be a going concern without subsidies at all.   And being already proven as prone to, err, *mis-speaking* - some entertaining stuff came out at an Employment Tribunal earlier this year - won't help Drax's cause.

My guess is that the CEO's future could be under scrutiny when the Board gets round to thinking about how they've got where they are.  But Miliband still depends on Drax to keep the lights on in 2030 - friends in high places.  That's just about their only plea in mitigation.  And it wouldn't stop a handful of execs being made an example of.  We shall see.

Popcorn, please ...

ND