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Energy policy of the United Kingdom

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United Kingdom
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[edit] Overview

Under the Conservatives during the 1980s and 1990s, Government policy was one of market liberalisation linked to the privatisation of state controlled energy companies.

As a consequence, Government no longer has the ability to directly control the energy markets. Regulation is now carried out through the Office of Gas and Electricity Markets (OFGEM), while energy policy is largely limited to influencing the operation of the market. Such influence is exerted through taxation (such as North Sea Oil Tax [1]), subsidy (such as the Renewables Obligation), incentives, planning controls, market entry restrictions (for example the costs associated with connecting to the National Grid), the underwriting of liabilities (such as those carried by the Nuclear Decommissioning Authority), grants, and funding for research.

An accomplishment of this liberalisation and privatisation has been a marked decrease in energy intensity, the measure of energy consumed per unit of GDP output. Another achievement has been substantial reduction of the population in energy poverty. A third goal attained has been continuing its tradition of energy supply reliability (measured as distribution and delivery on the electric and natural gas grids); in fact, the United Kingdom is second in Europe to the Netherlands in reliability features.

[edit] Primary energy sources

Image:DounreayJM.jpg

Historically a country emphasizing its coal, nuclear and off-shore natural gas production, the United Kingdom is currently in transition to become a net energy importer.

In the year 2005 the percentage of energy derived from major sources was as follows: natural gas (40), oil (33), coal (17), nuclear (8), renewable (2).

[edit] Coal

Coal usage can be expected to decline steadily because of eroding cost advantages and pressure to reduce sulphur and carbon (carbon dioxide) emissions, notwithstanding ongoing subsidy policies designed to retain jobs in the coal mining industry.

The 2002 Energy Review concluded that the option of new investment in clean coal technology (through carbon sequestration) needed to be kept open, and that practical measures should be taken to do this [2].

[edit] Gas

The major expansion of energy supply is planned to be natural gas. While domestic production from the North Sea gas fields continues to diminish, approximately ten billion pounds sterling is being invested (mostly from the private sector) to enhance pipelines and storage of imported natural gas, most of which will derive from Norway. By the year 2021 North Sea oil and natural gas production is predicted to slip 75 percent from 2005 levels to less than one million barrels per day. Oil and coal reserves for all of Europe are among the most tenuous in the developed world. For example Europe's reserves to annual consumption ratio stands at 3.0<ref>Ron Nielsen, The little green handbook, Picador, New York (2006) ISBN 0-312-42581-3</ref>, perilously low by world standards.

[edit] Nuclear Power

Nuclear generation is presently expected to decline with phase-out of older fission plants, so that about half of the nuclear power production will be lost within 10 to 15 years. Some analyses are underway which may delay the decline.

For details of Government policy on nuclear power see Nuclear power in the United Kingdom

[edit] Renewables

The UK Government's goal for renewable energy production is to produce twenty percent of electricity in the UK by the year 2020. The 2002 Energy Review [3] set a target of 10% to be in place by 2010/2011. The target was increased 15% by 2015 and most recently the 2006 Energy Review further set a target of 20% by 2020.

For Scotland, the Scottish Executive has a target of generating 17% to 18% of electricity from renewables by 2010 [4], rising to 40% by 2020 [5]. Renewables located in Scotland count towards both the Scottish target and to the overall target for the UK.

[edit] Energy end usage

See main article Energy use and conservation in the United Kingdom

Year 2005 UK end use energy percentage is approximately: transport (35); space heating (26); industrial (10); water heating (8) and lighting/small electrics (6). There is a steady increase of fuel usage driven by an increasingly affluent and mobile population, so that fuel use increased by ten percent in the decade ending 2000. This trend is expected to be mitigated by increased percentage of hybrid vehicles.

United Kingdom space and hot water heating consume a disproportionate share of end use compared to the USA and more mild southern European or tropical climates. With regard to building and planning issues affecting energy use, the UK has developed guidance documents to promote energy conservation through local councils, especially as set forth in Part L of the Building Regulations (Conservation of Fuel and power)[6]. The associated document. Part 2B, addresses commercial uses, and is generally complete as to heating issues; the guidance is lacking on lighting issues, except with guidelines for local switching of lighting controls. In particular there are no standards set forth for illumination levels, and over-illumination is one of the most significant unneeded costs of commercial energy use.

[edit] Carbon emissions reduction

Joining over 170 other nations the UK has committed to reduction<ref>’‘Carbon Abatement Technology for Fossil Fuels’‘, UK DTI, 2005</ref> of carbon dioxide emissions, with consequent constraints to its energy policy. The UK produces four percent of the world’s greenhouse gases as of 2003, compared to 40 percent by the USA and 20 percent for the rest of Europe. The long term reduction goal for carbon emissions is 50 percent decrease by the year 2050. A scheme of trading for carbon emission credits has been developed in Europe that will allow some of the reduction to arise from economic transactions.

Road transport emissions reduction has been stimulated since 1999 by the banding of Vehicle Excise Duty according to vehicle fuel efficiency.

Average carbon emissions fell from 192 to 172 grams/mile between 1995 and 2004^{[citation needed]}. Aviation fuel is not regulated under the Kyoto Protocol, so that if the UK is successful in carbon emission reduction, aviation will constitute 25 percent of UK generated greenhouse gases by the year 2030.

The UK government has one project in the planning stage for natural gas fed power generation with carbon capture by seawater. This facility is contemplated at Peterhead, Scotland, a relatively remote exposure to the North Sea.

[edit] Renewable energy

Although renewable energy sources have not played a major role in the UK historically, there is potential for significant use of tidal power and wind energy (both on-shore and off-shore) as recognized by formal UK policies, including the Energy White Paper and directives to councils[7] in the form of PPS 22. The Renewables Obligation acts as the central mechanism for support of renewable sources of electricity in the UK, and should provide subsidies approaching one billion pounds sterling per annum by 2010. A number of other grants and smaller support mechanisms aim to support less established renewables. In addition, renewables have been exempted from the Climate Change Levy that affects all other energy sources.

The established goals for UK renewable sources are ten percent of electricity generation by 2010 and twenty percent by 2020. The amount of renewable generation added in the year 2004 was 250 megawatts and 500 megawatts in 2005. There is also a program established for micro-generation (facilities of less than 100 kilowatts usually situated in a building) as well as a solar voltaic program. By comparison both Germany and Japan have photovoltaic (solar cell) programs much larger than the installed base in the UK. Hydroelectric energy is not a viable option for most of the UK due to terrain and lack of force of rivers.

The government has established a goal of five percent of the total transport fuel that must be from renewable sources (e.g. ethanol, biofuel) by the year 2010 under the Renewable Transport Fuel Obligation. This goal may be ambitious, without the necessary infrastructure and paucity of research on appropriate UK crops, but import from France might be a realistic option (based upon the French wine lake).

In 2005 British Sugar announced that it will build the UK's first ethanol biofuel production facility, using British grown sugar beet as the feed stock. The plant in Norfolk will produce 55,000 metric tonnes of ethanol annually when it is completed in the first quarter of 2007[8]. However it has been argued that even using all the UK's set-aside land to grow biofuel crops would provide for less than seven percent of the UK's present transport fuel usage[9].

[edit] Energy poverty

Reducing occurrence of energy poverty (defined as households paying over ten percent of income for heating costs) is one of the four basic goals of UK energy policy. In the prior decade substantial progress has been made on this goal, but primarily due to government subsidies to the poor rather than through fundamental change of home design or improved energy pricing.. The following national programs have been specifically instrumental in such progress: Winter Fuel Payment, Child Tax Credit and Pension Credit. Some benefits have resulted from the Warm Front Scheme in England, the Central Heating Program in Scotland and the Home Energy Efficiency Scheme in Wales. These latter programs provide economic incentives for physical improvement in insulation, etc.

[edit] 2006 Energy Review

The UK Government published its White Paper on Energy (“Our Energy Future – creating a Low Carbon Economy”) in 2003, establishing a formal energy policy for the UK for the first time in 20 years. Essentially, the White Paper recognised that a limitation of carbon dioxide (CO2 – the main gas contributing to global climate change) was going to be necessary. It committed the UK to working towards a 60% reduction in carbon dioxide emissions by 2050, and identified business opportunities in so doing: a recurrent theme throughout the document was “cleaner, smarter energy”. It also claimed to be based on four pillars: the environment, energy reliability, affordable energy for the poorest and competitive markets.

However the White Paper focused more on analysing the issues than in providing detailed policy responses. Some detail began to filter through in a series of follow-on documents, including an Energy Efficiency Implementation Plan (April 2004) and the DTI Microgeneration Strategy "Our Energy Challenge" (March 2006). Nonetheless, most of the policies were a continuation of business as usual, with emphasis on market-led solutions and an expectation that consumers act rationally, for example in installing energy efficiency measures to make running cost savings.

However, in November 2005 it was announced that the Government, under DTI leadership, would undertake a full scale Energy Review, and over 500 organisations and individuals made detailed submissions as part of this review. Officially, the review was to take stock of the outcomes to date of the White Paper, which a particular focus on cutting carbon (emissions of which remained stubbornly high) and to look in more detail at security of supply, as the UK’s oil and gas production from the North Sea had peaked, and Russia was seen as being a high-risk supplier of gas.

Unofficially, it was widely felt that the real reason behind the review was to allow nuclear power back into the energy debate, as it had been sidelined in the 2003 White Paper. That document had said “This white paper does not contain specific proposals for building new nuclear power stations. However we do not rule out the possibility that at some point in the future new nuclear build might be necessary if we are to meet our carbon targets. Before any decision to proceed with the building of new nuclear power stations, there will need to be the fullest public consultation and the publication of a further white paper setting out our proposals.” The Energy Review was therefore to be this public consultation; a further White Paper is promised for early 2007.

The Energy Challenge: The Energy Review Report 2006

In the event, the Energy Review Report 2006 came out as a broader and more balanced document than critics (in advance) had expected. It started by reiterating the Government’s four long-term goals for energy policy:

• To put the UK on a path to cut carbon dioxide emissions by some 60% by about 2050, with real progress by 2020;

• To maintain reliable energy supplies;

• To promote competitive markets in the UK and beyond, helping to raise the rate of sustainable economic growth and to improve productivity; and

To ensure that every home is adequately and affordably heated.

It then identified two major long-term energy challenges:

• Tackling climate change, along with other nations, as global carbon emissions from human activity continue to grow; and

• Delivering secure, clean energy at affordable prices, as we become increasingly dependent on imports for our energy needs.

The Review took an internationalist response, stressing that the world’s economies need to get on a path to being significantly less carbon-intensive, and noting rising global demand, especially from countries such as India and China. This means using less energy in products and services and changing the way energy is produced so that more of it comes from low-carbon sources. It also identified the need for a fairer distribution of energy around the world, and identified that many resources, especially of fossil fuels which are concentrated in just a few countries.

It placed its main concerns and proposals into three groups:

Saving Energy

The starting point for reducing carbon emissions is to save energy. The challenge is to secure the heat, light and energy we need in homes and businesses in a way that cuts the amount of oil, gas and electricity used and the carbon dioxide emitted. Actions proposed include:

• Increasing information, eg. through Home Information Packs

• Raising basic standards, removing inefficient goods from the market

• Making best use of the EU Emissions Trading Scheme and Climate Change Levy

• Making the Government estate carbon neutral by 2012

• Increasing the focus on energy efficient transport

Cleaner Energy

Cost-effective ways of using less energy will help move towards the carbon reduction goal. But on their own they will not provide the solution to the challenges faced: there is also a need to make the energy used cleaner. Under this head, the Government considered:

• more distributed energy generation including low-carbon heat

• more use of community based systems, including CHP

• a strong commitment to carbon pricing in the UK, through improving the operation of the EU Emissions Trading Scheme

• a strengthened commitment to the Renewables Obligation

• proposals for reform of the planning regime for electricity projects

• a clear statement of our position on new nuclear build

• support for carbon capture and storage

• developing alternative fuels for transport

The Energy Security Challenge

The challenges of reducing carbon emissions and ensuring security of supply are closely linked. Security of supply requires that we have good access to available fuel supplies, the infrastructure in place to transport them to centres of demand and effective markets so that supply meets demand in the most efficient way. Many of the measures already described for tackling carbon emissions also contribute to the healthy diversity of energy sources that is necessary for meeting the energy security challenge.

There are two main security of supply challenges for the UK:

• Managing increased dependence on oil and gas imports, especially in the light of the global distribution of energy reserves and growing international demand; and

• Ensuring that the market delivers substantial and timely investment in electricity generating capacity and networks so that households and businesses have the electricity they need at affordable prices.

The Government’s response is to continue to open up markets and to work internationally to develop strong relationships with suppliers, developing liberalised markets.

So where does nuclear power fit in within this debate? Although it is mentioned a lot more in the Review compared to the White Paper (441 times, compared to 55 to be exact), the Government does not prose building new stations itself. Instead, it will leave it to the market, although it will ease some of the planning constraints (which it also aims to do for renewables) and look into providing a design authorisation procedure. However, as with many other aspects of the Energy Review Response, the document is not likely to be the last word on the subject, as there are plans for further consultation, and the establishment of further reviews and studies in issues such as identifying suitable sites, and managing the costs of decommissioning and long term waste management.

[edit] Issues not thoroughly addressed by UK policy

Despite some successes and stated goals, there are some issues that are incompletely addressed by UK policy. The principal such items are:

Loss of energy independence. Rather than creating an aggressive plan to lessen the impending loss of energy independence, the UK policy succumbs to that outcome, with resultant risks to future supplies and costs.

Lack of strong national policy on transport fuel efficiency. While the city of London and other local councils have given incentives to hybrid vehicles, the national policy does not provide any real stimulus to highly fuel efficient vehicles. In fact, the government has done so little to inform the public about fuel efficient options that a survey released<ref>BBC News, Eco-friendly car unveiled, March 28 2006</ref> in March, 2006: "Some of the 1200 people surveyed ... thought ‘hybrid’ meant two cars welded together. Others thought hybrids had to be plugged in at night."

Lack of emphasis of energy conservation by reducing over-illumination, especially in commercial buildings.

[edit] See also

[edit] References

[edit] External links

[edit] In the media

September 6, 2006, New Builder, Extra Funding For Scottish Renewables
July 25, 2006, epolitix.com, House of Lords committee reject European Commission bid for role in energy policy
June 29, 2006, BBC, Government promises carbon cuts
June 05, 2006, epolitix.com, Alistair Darling: Electricity profits should be linked to efficiency
September 26, 2005, BBC, UK needs yearly climate updates

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