Some contributors asked me to say more about our growing import dependence. The UK has been a net importer of electricity since the second quarter of 2010. In the last century we had a policy of security of supply and national self sufficiency. The latest government quarterly report for the third quarter of 2021 stated that the net imports of 7.6TWh for that period was the “highest value ever”. Imports reached 8.4 TWh whilst exports were 0.8 TWh. Our main exports are to Ireland which took 0.8TWh over the three months. The biggest single source of imported power is France, followed by the Netherlands. One of the reasons for the increase in imports was the poor performance of wind power.

Scotland which usually supplies substantial power into England from its large windfarms supplied 50% less in the third quarter. Scottish wind farms are given priority to supply when they are up and running, taking precedence over England based gas plants in accordance with the decarbonisation policy.

Fuel imports from the EU rose by 50% in the third quarter  on a small base and imports from the rest of the world rose by 34% on a larger base. The UK also exported some fuel to the EU over that time period.

There is no evidence to support the proposition that the UK has a good business exporting wind based energy to the continent at scale when the wind blows well. The French system is usually well supplied by nuclear power, whilst continental wind farms also tend to do well when the wind is blowing across northern  Europe as a whole. The danger is when there is plenty of wind market prices for surplus power are often low.

So the questions to ask  are

1. Why have we allowed ourselves to become so dependent on imported electricity from Europe, when the continent is short of gas and oil, wishing to close down its coal activities and dependent on Russian gas? What are the prospects for French nuclear given the age of the fleet and the high replacement costs and delays in construction?
2. How central is security of supply in policy formation?
3. What is the relative cost of wind power and gas generated electricity given the need for more back up power for wind provision and adjusting for priority access to customers afforded to wind power?
4.  When could we become a serious exporter of electricity making a profit from the transaction in  the way some argue we could?

The latest quarterly government figures for energy output and use relate to the third quarter of 2021. It is true this was a poor quarter for wind and solar output of electricity, but it is worthwhile looking at what happened as this was an actual outturn after huge investment in renewables. Whilst it  was unfortunate that the wind did not blow much and the sun did not shine much, it was also quite a mild period meaning the system was not fully stretched by high demand which would have been met from fossil fuels.

The Business Department Report says “Output from wind, solar and hydro was low due to prevailing weather conditions” . “Unfavourable weather conditions meant that renewable generation fell to 24.3TWh, the lowest value in four years… Wind was particularly affected , down 30% on the same period last year”

The renewables figure they cite for output includes a substantial contribution from biomass or wood pellet. Wind only delivered 15.1% of our total electricity for the quarter, solar 6.2%, with hydro at just 1%. This makes a total of 22.3% from renewables for the whole three month period , under one quarter of our needs. This should put into context the claims of those who say wind is now providing  the answer.

All three remaining  coal power stations had to be brought into use, with a 155% increase in coal based power on a low base. Overall coal imports rose 18%.

The policy furthered the trend of making us more and more dependent on imports. In the case of coal most is  now imported. 48% of the imports came from Russia. Primary oils demand rose by 14% largely  met from imports.  Domestic gas production was down by 11% also increasing dependence on foreign energy.

In 2021 the UK ran down its stocks of oil following a change in the stockholding protocol in January. The policy of closing gas storage is now being mirrored with the run down of oil stocks, further undermining our energy resilience as a country.

The Business Department needs to turn its attention to replacing more of these imports with UK energy. The National Security Council should be concerned about our growing reliance on the goodwill of foreigners when Europe as a whole is short of energy and when Russia intends to use its dominant positions in  gas and coal as part of its diplomatic leverage.

The road to net zero is meant to be a thirty year commitment. The three leaders or main players in favour of the whole speeded up plan were the EU, the USA and the UK at COP 26. The USA and the EU have already pulled back substantially from what they said and promised at the summit.

The ink was hardly dry on the compromise conclusions before an increasingly unpopular President decided he needed to take action to cut US petrol and diesel prices which were becoming inconvenient to motorists and business alike. He pledged to sell some of the US strategic oil reserve to help get the oil price down. More importantly he had words with his allies the Saudis to get OPEC to pump some more.No thoughts here to use higher prices to force more people and businesses off fossil fuels.

Also alarmed by the huge surge in European gas prices for home heating and industrial use, he decided to keep US gas prices way below European stressed levels. He issued 3091 drilling permits for more gas, and is auctioning 80 million acres of the Gulf of Mexico for oil and gas exploration. He is now happy by implication that his predecessor Mr Trump  had provided a big boost to US gas output and is dining out on that success and boosting it further with his drill baby drill policy. The Greens see this as tearing up his good intentions and promises at COP 26.It is the reason US gas prices are so much lower than Europe’s.

It took the EU a bit longer after COP 26. Faced with a disastrous shortage of gas, a sometime shortage of wind power, and closures of coal and nuclear generating stations, the EU has decided to make a major pivot back to fossil fuels in the form of gas. They have now decided to buy up as much gas as they can in world markets to keep the factories turning and the lights on.They have also decided to designate gas as a green fuel which makes an important difference.

The US and EU pledges made for COP 26 did not make it unscathed to Christmas. China artfully avoided getting on the road to net zero anytime soon.

The U.K. should respond to the decision of two of the three largest generators of CO 2 in the world to change course like this. As the U.K. is still running on EU rules transposed into U.K. law this is one occasion when we should follow the EU lead and re designate gas. Unlike the EU we should not tie ourselves more to their shortage of domestic energy and gas but should use our independence to extract more of our own gas alongside imports from Norway to make our supplies of this recently greened fuel more secure. China of course, the world’s largest CO 2 generator by far, was happy to see the west pledged to net zero whilst making clear China plans to increase its CO 2 output for most of the rest of this decade.

Germany is closing all its nuclear stations within a year and all its coal stations this decade. France has several older nuclear plants temporarily closed. This will worsen the EU’s energy shortage.  The U.K. cannot rely on imports from the EU. We  need to rely more on ourselves and have enough gas to heat our homes and to power U.K. industry.

– https://www.dailymail.co.uk/debate/article-10361185/Britain-energy-self-sufficient-vital-keeping-lights-on.html

Not many people disagree with my argument that all the time we need to burn or use gas as a feedstock it makes more sense to use gas from nearby from our own gasfields than to transport it miles across the oceans of the world in an LNG carrier or to draw on continental supplies that also depend on Russia.

I do get asked how realistic this is, given the way the North Sea is running down. It is true that recent years have not seen the same huge discoveries the drillers discovered in the earlier years of the development of this great resource. It would be wrong  to say there is  no new gas to find or to produce. Recent years have seen important discoveries made. The Jackdaw field is a substantial find which is ready to develop, with gas pipes running nearby and the Shearwater platform with available capacity to process the raw output.

There is a potential upgrade of Goddard in the southern North Sea, and development of Lancaster as an extension to Hurricane. There are the Glengorm and Glendronach finds west of Shetlands. In total the Oil and Gas Authority tells us over the last three years the industry found an additional 500m barrels of oil equivalent between oil, gas and gas liquids. That was with much reduced drilling.

On top of this is the more contentious issue of the Bowland shales in northern England. So little drilling has been allowed there that estimates of how much gas is available range from a very useful  2.7 trillion cm to a massive and game changing 37.6tcm.

The Conservative Manifesto promised “to introduce new measures to reduce (energy) bills”. Encouraging and permitting more exploration and development wells in the North Sea would  be a way of helping do this, which would also create plenty of new well paid UK jobs and save all those LNG carbon generating miles of travel.

In 2022 the government needs to put the pandemic behind it. It needs to return to its Manifesto promises of lower taxes, the successful implementation of Brexit and prosperity for the many through levelling up. Indeed, the three go together and are mutually reinforcing.

Lower tax rates on earning and venturing are essential to success. The Chancellor needs to sweep away the Maastricht austerity rules that we had to follow in the EU and which he has allowed back in using  slightly different language. He needs to grasp that the way to get the deficit down and control the debts is to promote faster growth with the help of lower tax rates. Set the UK corporation tax rate at the new world base of 15% and the investment and activity will flood in as it has to Ireland with a lower rate than ours. Set the tax on jobs,  National Insurance,  at a lower rate to stimulate employment. Cancel the new features of IR 35 which  penalise or prevent people working for themselves.

Now out of the EU the Chancellor should revise VAT to tailor it to UK policy aims. He should abolish VAT on boiler controls, draught excluder, insulation materials and other green products, The government is trying to encourage people to improve energy efficiency and change their ways of heating homes, so they should not be taxed for doing so. He should remove VAT from domestic fuel for the time being to assist with reducing the cost of living pressures.

The government should take action to restore full GB/Northern Ireland trade, as the Protocol allows. They may need to legislate in the UK to instruct our customs and excise officials to allow free passage of goods from GB to NI where those goods have a clear end customer and destination in the UK. The UK is losing a lot of business and therefore tax revenue from the deliberate diversion of trade to the Republic against the express letter of the Protocol. If we had been doing this the EU and its supporters would be accusing us of “breaking the law!.

The government should make more rapid progress to restore our fishing grounds to UK vessels . They should ban over 100 metre industrial trawlers that are doing too much damage to stocks and the marine environment.

The government should take stronger action, including legislation,  to break the businesses of people traffickers and smugglers across the Channel. The UK is spending far too much on rescuing and housing in hotels people who are  not genuine asylum seekers.

The government should set out a new subsidy scheme for UK farming which encourages more UK food production, The CAP did a lot of damage to UK agriculture., We need a system which is much more supportive.

The UK government should repeal the EU ports legislation and substitute UK rules that promote thriving ports. They need to be faster and more adventurous with the freedoms for Freeports.

The UK should legislate for its own data, intellectual property and innovation  regimes . This is an innovative and enterprising country where some EU rules hold us back.

The government’s levelling up agenda is crucial. It is not going to be  achieved by a few more trams, better town halls and some extra powers for local and devolved government. It will be achieved by government backing people’s personal journeys, removing some of the impediments to success. Excellence in education, more freedom in training, lower taxes on small business, more help with owning a home and a business are what is needed.

It is strange watching a government advance towards a predictable crisis without it taking any of the obvious actions to avert the worst and tackle the underlying problems.

Yesterday a think tank put a figure on the hit to average incomes from tax rises and energy bills next spring. They said it would be £1200 per household. The government did not deny or correct the figure.  They said they were spending £4bn on  helping people with the cost of living.

Both these disputants might be right. The problem with the government’s response is it does not tell the person on average earnings facing the £1200 hit how much of the £4bn they will receive, nor whether this will be additional money or money they are already collectively receiving. It is not an effective counter to any individual complaint to say that the government is spending extra billions on  the problem. People want the problem resolved and want to to know how it affects them. Taxpayers do not welcome the knowledge that spending has gone up a lot if there is no evidence  that the spending is doing good and stopping the problems.

I have been urging the government to take this cost of living crisis more seriously. Much of it can be tackled  by government actions. The Treasury needs to cancel its tax rises which will be  damaging. Ironically if they help slow the economy too much they might even end up raising less money for the Treasury than not putting the rates up. The sooner they confess their error the better.

The Business department should  heed advice on the need to expand domestic gas and electricity supply urgently. It  needs to cancel plans to close the remaining coal power stations until we have reliable replacements. It  needs to give permission  for Jackdaw, Cambo and other oil and gas deposits in the UK . It needs to speed up the small nuclear reactor proposals and consider commissioning new gas capacity for this decade and next. More subsidies and shuffling around who pays the bills for dear imported energy does not solve the problem.

Many commentators tell us the Business Secretary is a free marketeer who thinks the private sector and free enterprise is often the best answer to supplying things like energy.

Yesterday the Business Secretary met the wrong people to solve the energy crisis. He met the companies caught up in a nightmare of controls which threaten their solvency but lead inexorably to large consumer price rises after a delay.

He needs to meet the primary energy producers, the companies that produce gas and generate electricity in the U.K. The basic problem we face is we produce too little  energy for our needs. This makes us dependent on very expensive imports, on the goodwill of Mr Putin and the ability of an energy short Western Europe to help us.

Many of the taxes, subsidies and controls on energy production have been imposed in pursuit of net zero. The policy is an abject failure in its own terms, because it forces us to import plenty of gas from abroad adding transport CO2 to the total, and to import electricity that makes the continent burn more coal for power to meet their overall needs.

The government needs to cut its interventions and to licence more U.K. base energy delivery. More electricity needs to be generated here with cost and availability having more of a role in allowing its use.Proper costing of wind needs to allow for the costs of back up or in due course the costs of storage in batteries or through green hydrogen.

In the short term the government’s only options are to transfer some of the extra  energy cost from consumers to taxpayers by yet more subsidy to companies, or to beef up benefits to people on lower incomes so they can afford the surge in bills. Every day’s delay in producing and investing more in domestic energy is another increase in bills and in total costs to consumers/ taxpayers. A general subsidy to companies would be yet another undesirable increase in public spending to dodge sorting out the underlying problem.