The long-term solution to energy security is clear – we need more gas17 Aug 2022 09:38
The calls for nationalisation have been growing louder on the faulty logic that the energy market isn’t working properly. But complaining that prices go up when demand greatly exceeds supply is a bit like executing the messenger who brings news of a battlefield defeat.
All the more so when it was the political generals whose tactics have proved so disastrous. Over decades, politicians have effectively moved towards just-in-time energy provision. As with optimised supply chains in the business world, this worked very well right up until it didn’t.
The UK, in common with many other European countries, adopted a policy of buying its gas at “spot” – ie current – prices rather than signing long-term contracts. It also saved money on the infrastructure that would have provided a buffer in times of stress. Centrica’s Rough gas storage facility, for example, failed to win Government backing when it got too expensive to run in times of plenty and was closed down.
It should be a source of national shame that while Norway and the Netherlands were increasing exploration and production of natural gas in the North Sea, the UK government delayed approval of 18 fields. Just last December, Shell pulled out of developing the Cambo field following protests from climate activists, opposition from the Scottish First Minister Nicola Sturgeon and a conspicuous lack of public support from Westminster. That Cambo is now back on the table is a sign of how times have changed.
UK politicians bought into the view that they could rely on a diversity of supply pipelines from Norway, increased investment in renewables and liquid natural gas shipments from around the world. What they didn’t reckon with was the perfect storm of a global pandemic gumming up global supply chains, a huge bounceback in demand and one of the world’s biggest energy producers invading its neighbour.
Longer term, the UK needs to increase energy supply and security by signing long-term contracts for LNG, rebuilding storage capacity, insulating the nation’s homes and increasing North Sea production. Even longer term it must further encourage investment in renewables, create the legal framework to allow fracking and build new nuclear plants.
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