Peter Franklin is an Associate Editor of UnHerd.
With household bills set to soar — and the threat of an even deeper energy crisis if Russia invades Ukraine — is it time for a change of priorities?
Instead of going all out to decarbonise our economy by 2050, shouldn’t we prioritize the British consumer instead? That’s certainly the opinion of the Net Zero Scrutiny Group of backbench Conservative MPs.
According to the telegraph, they’ve got allies — front bench allies. A front page story from earlier this month claims that “senior Cabinet ministers believe there should be a rethink of the Government’s net zero plans.”
The identity of these ministers isn’t revealed, but there is one name we can probably rule out: Kwasi Kwarteng’s. Last week, the Secretary of State for Business, Energy and Industrial Strategy made a big announcement, which is that the Government is accelerating the deployment of renewable power.
Every two years there’s an auction in which developers bid to build wind turbines, solar panels and other sources of green electricity. But from next year these will take place annually. Far slowing down on net zero, the Government intends to go twice as fast.
So though they’ve succeeded in getting their message out, the eco-sceptics have once again failed to persuade. And there’s a reason for that: their arguments don’t add up.
Net zero is all about reducing our use of fossil fuels. So how can it be held responsible for a crisis caused by a worldwide surge in fossil fuel prices?
Well, there is one possible line of attack, which is to claim that the emphasis on decarbonization has distracted us from the other priorities like ensuring the affordability and security of our energy supplies. Specifically, if we’d done more to develop our domestic natural gas resources, then we wouldn’t be paying through the nose for imported supplies.
Well, it’s a theory – but net zero hasn’t nothing to do with it. This country pumped money into import infrastructure (e.g. LNG terminals and pipelines) instead of boosting domestic production because that’s what the market wanted. When international gas prices were low, it was cheaper and easier. But it wasn’t greener. In fact, importing gas is more carbon intensive than producing it at home because of the energy consumed by shipping and processing.
Ah, but what about the UK’s shale gas industry? Wasn’t that kiboshed for environmental reasons? Britain has abundant shale formations from which gas and oil could be extracted by a process called hydraulic fracturing, or ‘fracking’ for short. Sadly, things haven’t gone well. Returning to this issue for the Mail on SundayAndrew Neil claims that ministers were “cowed into submission by the propaganda of the green lobby”.
But, as I pointed out the last time around, what actually happened was that the Oil and Gas Authority called a halt after earthquakes were recorded at the UK’s only active fracking site near Blackpool. Neil describes this series of unfortunate events as the “mildest of earth tremors” which “barely registered on the Richter scale.”
In fact, the heaviest of them registered at 2.9 — which, by definition, is not the “mildest” of tremors. People felt their houses shake.
Neil thinks we’re far too intolerant of these things. He may be right. But if rampant seismophobia is holding our country back, then what are pro-fracking politicians doing to challenge this irrational prejudice? Perhaps the MPs of the Net Zero Scrutiny Group could declare their constituencies to be ‘earthquake-friendly zones’.
What would have happened if we had kept calm and carried on fracking? Would we be swimming in shale gas by now, the envy of less happy lands? I’m afraid not. It took decades for the industry to become a major player in the US and Canada. There is no credible scenario in which the much younger UK industry could have made a detectable difference to the current energy crisis.
Furthermore, even if this country were producing large amounts of natural gas, our energy bills would still be going through the roof. We know this for a fact because this country does produce large amounts of natural gas. This is from the North Sea, not fracking; and though it’s not as much as we used to produce, it’s still enough to cover roughly half what we consume.
The reason why this makes little difference to British gas prices is that, these days, we’re joined up to the European gas market — which is linked, via the LNG tanker trade, to Asian gas markets. That’s why gas exports from the UK have increased during the energy crisis — our producers are simply chasing the best price for their product.
Pro-frackers in this country love to point to America, with its successful shale sector and much lower natural gas prices. The bit they don’t mention is that gas exports from the US are constrained by government policy and the limited capacity of the country’s LNG terminals. As a result, US consumers aren’t competing against consumers elsewhere.
If we wanted to create the same conditions in Britain then we’d have to stop our domestic producers from selling abroad. That would mean imposing export controls or even nationalizing the oil and gas industry. Would the free marketeers of the Net Zero Scrutiny Group be up for that?
Luckily there is one market that is working well for British consumers. The auctions I mentioned earlier have succeeded in driving down the cost of new wind and solar power. They work by using a mechanism called a Contract for Difference or CFD. Providers bid to supply electricity at a fixed price, known as the strike price.
If the market price for electricity is lower than the strike price, then the Government (and ultimately the consumer) pays the difference. If, on the other hand, the market price exceeds the strike price, then the provider returns the excess to the Government.
Because gas prices drive the electricity market, that’s exactly what’s happening at the moment. Which means that, in effect, renewable power providers are subsidizing the consumer, not the other way around.
Anyone who cares about household bills should welcome this fact. So instead of obsessing about failed technologies, let’s celebrate the industries where this country is succeeding.