Spiking natural gas exports prove that renewables, not gas, give us energy security, says David Toke
The recent revelation that exports of natural gas from the UK have actually increased during the gas price crisis provides strong evidence that producing more natural gas from British sources does nothing to help protect British energy security. By contrast, sourcing energy from British-based renewable energy under fixed price long term contracts will dramatically reduce the bills consumers have to pay compared to reliance on fossil fuels. This demonstrates how regulated renewable energy is a much surer bet to protect UK energy security – and of course the planet – compared to the often completely untaxed oil and gas companies.
In a series of tweets revealing his research into official statistics on natural gas production and exports, Richard Black of the Energy and Climate Intelligence Unit showed how, during the last quarter of 2021, exports of gas produced in the North Sea spiked. This is just at the same time as the current notorious global gas price spike which has driven millions of Britons to the breadline. UK exports of natural gas are much higher than in previous years, including years before the pandemic slowdown in 2020.
Indeed, exports of natural gas in the last quarter of 2021 were nearly double what they were in either 2018 or 2019. “And as any company would,” commented Black, “they’re selling it for the best price they can get. Which happens to be, for large volumes of it, by sending it through the pipeline into Belgium and the Netherlands… This is utterly normal corporate behaviour, and completely to be expected. But it sure knocks a massive hole in the argument that Britain needs ‘its own’ gas production for energy security.”
Compare this to the information from the Low Carbon Contracts Company, which administers the contracts that are given to renewable energy generators, that shows renewable energy is producing lost savings for energy consumers. Under that mechanism (called contracts for difference, or CfDs), with contracts issued from 2015 onwards, renewable energy generators get paid a fixed amount that is net of the wholesale electricity price.
What that means is that in times when electricity prices are very high (as they are now), the cost to the consumer is negative and large amounts of monies are paid back into the system rather than paid out to pay energy generators as is usually the case. In the final quarter of 2021, the saving the consumer was getting was said to be £468 million. This level of saving has not always been the case with renewable energy financing because the earlier renewable energy schemes were financed under a so-called ‘market-based’ system. Under this ‘Renewables Obligation’ (installed in the neoliberal Blairite years), the generators earn large profits if the wholesale market electricity price is a lot more than their costs.
In fact, the savings to the consumer from renewable energy will only increase still further as more CfD-funded schemes come online, the only issue being how much savings there will be – that being determined by how much gas prices remain above the costs of offshore wind, onshore wind and solar farms. Some level of savings is likely to be permanent.
We hear a lot of nonsense about how the UK has to produce more oil and gas to protect energy security. It does not, at least not under the globalised world of energy trading that we are in. Steady growth in demand for liquified natural gas (LNG) in China over recent years acts to suck in available gas supplies and increase global LNG prices. But fixed price contracts for renewable energy will provide energy security for the UK energy consumers. Because however the electricity from renewables is traded, the consumer is protected because they will only be liable for the fixed price.
In fact, the CfD system was introduced because it was thought this was a way of financing nuclear power. But the contract price for Hinkley C, which gives EDF more than twice the amount per MWh than is paid under the CfD contracts recently awarded to offshore wind schemes, was seen to be embarrassingly high. So, of course, the rules have been changed for nuclear power now and the consumers will just have to fund an unlimited nuclear black hole for the next nuclear plant, Sizewell C, likely to start at around £1,000 per energy consumer.
Notions of energy security are constructed by the dominant energy corporations of the time who declare that they know the countries’ interests best. They don’t – they only know their interests best. An independent ‘environmentalist’ view says that it is investment in renewable energy and energy efficiency that is the way to go, not giving handouts to the big energy companies, which is what is happening now with the temporary loans being handed out to the energy suppliers.