Eleven unexpected factors causing UK gas shortages and soaring prices revealed
Boris Johnson’s response to the gas crisis was typical bluster – even comparing it to Gulliver breaking free from its ropes in the land of Lilliput as the global economy recovers from Covid.
But there are far more complex reasons behind the gas shortages and skyrocketing prices – and not in part because of the Conservatives’ lack of planning, foresight and investment despite numerous warnings.
And even now, Business Minister Kwasi Kwarteng insists the huge price spike is “not a cause for immediate concern,” in comments that have been compared to the government’s initial lethargic response to the pandemic. of Covid.
Here we take a look at what is really behind the UK energy crisis …
Last winter was colder and lasted longer than normal, draining our natural gas storage even before the global surge in demand.
Storage would typically be filled during the summer months when demand is slow, but other factors such as the effects of the pandemic and declining supplies from Russia have meant that this has not happened to its normal rate in 2021.
At the same time, we have had fewer sunny days and less wind this year, decreasing the contribution of solar and wind to the grid and increasing the demand for natural gas, another factor in the price hike.
NOT ENOUGH STORAGE
Since 2017, when the government closed the Rough gas storage facility in the North Sea off the east coast of England, Britain has not had large gas storage sites. scale and only a limited number of small storage facilities, which means we are increasingly dependent on supplies. from abroad. The facility could hold 70 percent of the UK’s gas reserves – or nine days of gas supply for the whole country. Critics at the time warned that the shutdown could mean “volatile winter gas prices” and become too dependent on imported energy.
But a government spokesperson brushed aside the concerns, saying: “The UK has a wide variety of flexible gas supply sources with domestic production and extensive import capacity.”
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Despite producing clean, low carbon energy at a constant rate, the UK has not invested in nuclear power and our current power plants are nearing end of life.
The UK’s eight operational nuclear power plants produce 20% of our electricity, up from 26% at the peak of 1997, and half of that capacity will be phased out in 2025.
Our remaining nuclear power supply capacity of 8 GW is also increasingly unreliable, currently approaching 5 GW due to outages at two plants.
At the same time, the country can no longer rely on small-scale power producers to fill the electricity gap after the government cut £ 370million in payments to small-scale producers in 2017.
At the time, the Flexible Generation Group, which represents small gas power plants, said the move was a victory for the big six energy companies and would inevitably increase costs for consumers in times of high demand.
Mark Draper, Group President, said: “This move poses a significant challenge to our growing industry and makes it even more difficult for new entrants to the energy market to compete with established players.
CLIMATE CHANGE COMMITMENTS
The UK is one of the first countries to commit to phasing out coal-fired power generation. This means that the few old coal-fired power plants that remain have little capacity.
Last year, coal contributed just 1.6% of the country’s electricity mix, up from 25% five years ago.
But in recent months, coal-fired power plants have been called upon to provide electricity.
Last week, the UK’s Electricity System Operator (ESO) paid up to £ 4,000 per megawatt hour for fossil-fueled power plants to produce short-term electricity, including the plant. West Burton in Nottinghamshire and a coal unit at the Drax site in North Yorkshire.
But Dale Hazelton, head of thermal coal at Wood Mackenzie Ltd, said it was too late to try to revive coal power. He said: “The coal companies just don’t have the supply available, they can’t get the equipment, the manufacturers are supported and they don’t really want to invest.
At the same time, the UK’s commitments to cut greenhouse gas emissions mean its carbon costs are higher than elsewhere in Europe, pushing electricity prices even higher.
After Brexit, the government decided to set up its own emissions trading system, with 5% less allowances for companies that exceeded their annual tax emission compared to the EU system.
MAINTENANCE AND DELAY
Just when more needed to be supplied, the UK’s own gas production has been considerably lower this year due to a busy maintenance schedule and delays in new projects.
They included several North Sea gas platforms that shut down to perform essential repair and maintenance work that had been interrupted during the pandemic.
As a result, UK gas production during the year up to September 10 was 20.2 bcm, down 5.7 bcm from 25.9 bcm in the same period of the year last.
New fields that could have helped fill the gap have also been delayed.
The new Tolmount deposited in the southern North Sea, which was due to open at the end of July, is now only expected to be put into service at the end of the year after the discovery of equipment problems.
Russia has sent less gas to Europe, with exports this year falling to about a fifth of pre-pandemic levels, despite the rebound in demand.
While some believe the country has limited its overseas supply in order to top up its own storage, others believe it is trying to pressure the European government to approve its controversial Nord Stream 2 pipeline.
The system, which passes under the Baltic Sea from Russia to Germany, was completed earlier this month but has been fiercely opposed by the United States and Eastern European countries over fears that the pipeline increases Russian influence in Europe.
As gas reserves in European countries dwindle, Putin’s spokesman recently stressed that if the new gas pipeline can be connected to the grid as soon as possible, the supply will be assured and the price will drop.
Last week, 40 MEPs called for an investigation into the role of Russian state-owned company Gasprom in soaring natural gas costs.
Getty Images / iStockphoto)
A fire last week forced the shutdown of one of Britain’s most important power cables, importing electricity from France.
The fire at the National Grid site in Sellindge, Kent, on Wednesday destroyed one of only two electrical interconnections that allow the flow of electricity between France and Britain and cut off imports of electricity via the 2 million magwatt cable until March of next year.
The disaster could not have come at a worse time, with news pushing UK electricity prices up by nearly 19% at one point.
Tom Marzec-Manser, senior European gas analyst at ICIS, said that following the fire Britain “must generate 1 GW of additional electricity nationally”.
“Given the lack of options, that means running even more gas production, even at these sky-high (price) levels.”
A STORM IN TEXAS
One of Europe’s largest natural gas suppliers had to shut down production last week after being damaged by Tropical Storm Nicolas.
Freeport LNG, which exports 15 million t / year of liquid natural gas, said it was unable to say when service will resume after the storm made landfall on the Texas coast near the small island where the terminal is located. , resulting in the closure of the three production units.
The blackout came at the worst possible time, with shipments to Europe accounting for nearly 40% of LNG exports.
The Covid-19 pandemic has contributed to the “perfect storm” that has sent energy prices soaring. The weak global demand for gas due to the lockdowns led investors to stop gas production and caused prices to fall.
Now, as the blockages are lifted and the global economy reopens, there is a boom in demand, especially in Asian countries.
And just when there isn’t enough gas for everyone, Europe is about to enter winter, when the demand for gas is the highest, especially from countries like the United Kingdom. United who rely heavily on gas to heat homes.
In 2016, Boris Johnson and Michael Gove promised that “fuel bills would be cheaper for everyone” if the British supported Brexit.
While the gas crisis is not entirely attributable to Britain’s departure from the EU, campaigners say we will suffer the brunt of it due to our departure from the EU’s internal energy market, a borderless network of gas and electricity transfers between member states that helps keep prices in the EU down.
They argue that this is why electricity prices in the UK are now the most expensive in Europe, up to £ 400 Mw / h in Britain, compared to around £ 135 Mw / h in the EU.