by John Knox
Scotland seems to be sailing towards a low-carbon future at a crackling pace…..at least for its energy supplies. But it’s also becoming clear that energy costs – of whatever type – are going to rise over the next few decades and we will finally have to be serious about energy conservation. The target of a 12 per cent reduction by 2020 will seem pathetic by the time we get there.
The First Minister Alex Salmond has announced a new and more challenging target for the renewables industry – 50 per cent of our electricity by 2015, five years ahead of the previous schedule. In 2011, we were already at 35 per cent. And it was certainly a bumper year for investment in renewables, with announcements totalling £2.3billion.
Less than a third of our electricity is now generated by coal, less than a third by nuclear power and only 10 per cent comes from gas. Curiously, gas-fired power stations are among the cheapest forms of generation – only existing hydro power is cheaper. But gas from the North Sea will not last much longer (20 years at most) and, without expensive carbon capture technology, it is highly polluting.
The next cheapest form is a matter of debate – not to say confusion, over-optimism, distortion, tendentious figure adjustments, partial analysis and a good deal of political manipulation. The government’s Committee on Climate Change backs off a definitive answer, preferring just to give us a series of assumptions and scenarios.
The Department of Energy’s latest estimates, based on a study by Parsons Brinckerhoff, puts nuclear power as the next cheapest to gas. But the range of costs is wide, £80 to 105 per megawatt-hour. It puts on-shore wind next at between £80 and 110, then coal-with-carbon-capture at £100-155 and off-shore wind at £150-210. Tidal energy is almost off the scale at up to £390 per megawatt hour.
Another study, by Mott MacDonald, again ranks gas as the cheapest. It puts on-shore wind as next, then nuclear, then coal with carbon capture, then off-shore wind and finally solar, tide and wave power.
The US energy department rates gas as the cheapest, then hydro, then on-shore wind, then advanced coal, then nuclear, then solar power and finally the most expensive, off-shore wind. French estimates, provided by the state nuclear company EDF, naturally place nuclear as the cheapest form of energy, excepting only hydro, then gas, on-shore wind and solar.
On the other hand, the conservation organisation, WWF, puts the cost of nuclear power at £165 per megawatt-hour, four times the EDF estimate and way more expensive than on-shore wind or off-shore wind.
The point is that there are too many variables to make a true cost comparison possible. It is all a leap of faith. Pro-nuclear campaigners hope there will be no cost overruns and delays, as there have been at the only two nuclear power stations being built in Europe, in France and in Finland. They hope too there will be no catastrophic accidents or problems with waste storage…or at least they hope the government will pick up the insurance costs.
Green energy campaigners hope the costs of renewable power will come down as more windmills are built and solar, tide and wind technology improves. For inspiration, they point to one Saturday in May this year when half of Germany’s midday electricity demand was met from solar power alone – the equivalent of 20 nuclear power stations.
Scotland, as Alex Salmond never ceases to point out, is blessed with an abundance of renewable energy, a quarter of Europe’s wind and tidal potential, 10 per cent of its wave power. So it is probably wise for us to concentrate on these forms of energy. But it is all happening in unchartered financial waters.
One way out of the energy dilemma, is to say we need a “mix” of energy supplies. The trouble here is that investment in one form of energy means less money going to an alternative. OECD figures, for instance, show that in 2010, the British gas, oil and coal-fired power stations received a subsidy of £3.63 billion, while off-shore and off-shore wind projects received just £700 million.
The UK government’s renewables obligation legislation requires power companies to devote 15 per cent of their investment to green energy. But there is no preferred source, so companies are left to decide for themselves whether to invest in wind or tide or nuclear etc. Scottish and Southern Energy for instance has just got planning approval from Highland Council for a £800m hydro storage scheme at Corie Glas north of Fort William. But it is also investing in wind, marine and biomass energy. EDF is currently planning to build a new nuclear power station at Hinkley Point – if it can get the right guaranteed price for its electricity from the government – but it is also investing in a wind farm off Teeside.
The extra cost on our fuel bills for this compulsory investment is, on average, £50 a year. It’s small part of the total household bill, of around £1200, a cost which has doubled in the last six years.
I don’t suppose there is anyone in the world who thinks this cost will come down. The traditional sources of oil in the Middle East are becoming less stable. Easy-to-reach oil in the shallow seas has passed its peak – we are now exploring in the expensive waters of the Arctic. Shale oil, which the Americans think will solve their energy problems, is even more expensive. Country after country are turning their backs on nuclear power – Japan, Germany, Italy, Scotland – as being too dangerous or too expensive. No one has yet proved that carbon capture technology is viable on a large scale.
Solar, geo-thermal, tidal and wave power are still in their infancy, at least for large, centralised systems. And although their costs may well come down as the technology advances, no one expects they will usher in an age of cheap energy.
The answer, of course, lies in not using so much energy. And as sixty per cent of it in Britain is used in our homes, there is plenty of scope for economy. Even without turning the heat off and wearing more clothes, there are many marginal savings to be made. Loft insulation can save up to 20 per cent of heating costs. An efficient boiler can save another 25 per cent. Turning the heating down by 1 degree can save another 8 per cent. Automatic switch-off devices can save another 2 per cent.
Until energy prices rise further, we will not take such savings seriously. According to the latest house conditions survey in Scotland, only 5 per cent of homes in the private sector and 9 per cent in the public sector, have full loft insulation (ie 300mm). Only 11 per cent of solid walls are insulated. Only 2 per cent of homes are rated “excellent” on general home energy standards.
It is true that energy consumption in Scotland has been falling in recent years, it’s down 9.6 per cent since 2005. But a lot of this was due to the recession. Even the target of a 12 per cent fall by 2020 cannot be guaranteed. After all, the second largest consumer of energy, transport, shows virtually no sign of change over the last five years – despite the recession. Air transport has actually been increasing at 7 per cent a year. So until fuel prices go up – and airlines are required to pay fuel duty like the rest of us – we will still be heading for an energy crisis by 2020.
There is a school of thought that we should just let this happen and meet the problem of energy shortage when we get to it. But rather like it’s environmental brother, climate change, it would be wiser to confront it sooner rather than later. Fuel prices should be allowed to rise. That means there should be no cut in fuel duties, no subsides for energy companies to keep prices down. And instead, we should all be coming to terms with the new age of high energy costs.