Too much electricity in the summer and too little in the winter. Fifty-year-old coal plants being paid tens of millions of pounds to stay on because replacements aren’t being built. Electricity prices more than double those in the US. Panic measures to buy in more and more foreign electricity.
These acute failures in British energy policy go to the heart of the EU referendum debate. How can a country once heralded for its energy market liberalisation, its balanced electricity generating grid and comparatively low prices face such a crisis? What has gone wrong and why?
In advance of the EU referendum this week, it is important to understand and detail the extent to which Brussels’ diktat, with Whitehall acquiescence, has fundamentally undermined British energy security and blurred the investment case for long-overdue new power stations.
Last month, the Commons Energy Select Committee asked me to give oral evidence on the implications of a Brexit for the energy sector. My message was clear: a vote to leave can help restore policy integrity to a sector in deep trouble.
EU policies have done real damage to our security of supply. They have forced the premature closure of coal and oil-fired power stations before their replacements are ready. This issue is the main reason for Britain’s looming energy crunch.
To date, the EU’s various power station directives have forced the UK to close a staggering 16,000 MW of capacity. These coal and oil fired power stations had generated reliable electricity since the 1960s and 70s. The closures represent nearly a third of baseload UK electricity generating capacity. The EU’s Industrial Emissions Directive will force the shutdown of remaining coal plants before new and cleaner gas-fired power stations (known as CCGTs) are ready.
In a Commons Written Answer last month, the Government admitted only one new gas-fired plant was under construction near Manchester – this plant will generate just 900MW of electricity when it is finished. These statistics illustrate the gravity of the situation: the EU has forced us to close power plants early and not enough replacements are ready or forthcoming.
More expensive, weather-dependent wind turbines, solar panels and undersea cables to import foreign electricity aren’t the answer. We need new policies in the national interest and fast. The Government has had to resort to spending tens of millions of pounds of taxpayers’ money to subsidise under-sentence coal plants so that they will stay on and generate electricity this winter.
National Grid has admitted that its plans to avoid blackouts, known as “black start” payments, have spiralled from £35m to £150m. This is money to ageing coal plants and small diesel powered back-up generators. The coal plants had already decided to close, but their owners are now understandably happy to take public money to stay on. All these panic subsidies do is depress the investment case to build urgently-needed new gas plants, which the Government accepts are long overdue.
It must radically and quickly change the rules of its capacity market to get the new plants built and keep existing gas plants running. Another panic measure is to sweat the undersea electricity cables between Britain, France and Holland and build more. In another Commons answer, ministers have admitted foreign electricity imports have risen by 30pc in just two years.
However, this, again, hurts the investment case for new gas plants at home as imports don’t have to pay British carbon taxes as the electricity is generated overseas. Importantly, the electricity can also flow the other way to meet rising European demand. Britain has been legally obliged to use 33pc of electricity from renewable sources by 2020, following agreement at a 2007 EU summit.
Billions of pounds of public money raised from consumers’ electricity bills have been spent to subsidise the wind and solar sectors to try and reach this target. This summer, for the first time, National Grid has warned the UK may have to restrict the amount of renewable electricity it produces as wind farms and solar panels are now producing too much electricity at the wrong time.
This news emerged as the widely respected former chief scientific advisor to DECC, Professor Sir David Mackay, said in his final interview before his untimely death that wind and solar technologies were an “appalling delusion” for the UK.
Prof Mackay said they could not deliver reliable electricity supplies in the winter. Contrary to claims from some in the Remain campaign that the EU has boosted energy security, the opposite can be shown to be true. It has created regressive policies marked by a mixture of emergency subsidies, expensive, draconian targets and short- term fixes.
Investors don’t know where to go, especially those keen to build new gas-fired power stations. A clear new policy steer is now essential. Britain now has some of the highest gas and electricity bills in the world. Brussels drives up prices in two ways: by setting high renewable targets as already discussed and through direct legislation.
As a result, a medium-sized business in the EU pays 20pc more for energy than an equivalent firm in China, 65pc more than in India, and nearly 100pc more than those in the US. There can be no rebalancing of the UK economy if this is allowed to continue. Energy policy has been in the grip of EU lawmakers and a subservient Whitehall for far too long.
David Cameron was right in 2013 when he said: “Regulations or targets force EU member states away from their least cost decarbonisation pathway.” A vote to leave the EU this week can end this corrosive situation and deliver an energy policy accountable to Parliament and those paying the bills.
It will allow Britain to take back control of a critical national economic interest. The stakes could not be higher.