Tuesday, 28 June 2016

With Brexit UK may not need any more power stations as electricity demand falls still further

One largely unintended consequence of 'Brexit' is that the economic uncertainty and reduced economic growth are likely to produce a further fall in electricity demand which may mean we do not need any more big power stations other than those already being built.
Lost behind the usual blizzard of insistence that blackouts will result if we don't build more gas and nuclear power plant is the fact that electricity demand has fallen over the last decade. According to Government figures (see DECC energy statistics) electricity demand fell from 406 TWh in 2005 to 359 TWh in 2015. Even since the economy began to grow again after the crash consumption fell from 384 TWh in 2010.

The reasons for the decline are threefold. First electricity prices have remained high. A lot of this is because we are having to import increasing quantities of natural gas from abroad,  and that gas is more expensive than what we have enjoyed coming from the now depleting North Sea fields. Grid costs have increased and green levies such as the carbon floor price have put prices up. Second, energy efficiency policies (including energy efficiency standards introduced by the EU) have repressed demand, and thirdly economic growth these days is much less energy intensive than it used to be (even in the 1980s) because of a switch from industrial production to services.

But now Brexit seems likely to reduce economic growth to at best a few points of a per cent in the near and perhaps more prolonged future. Consensus Economics, for example, has predicted UK economic growth to be down to 0.4 per cent in 2017. Any rate of economic growth below 2 per cent per annum seems likely to see falling electricity demand on the basis of recent experience.  In addition, as Cornwall Energy Associates have pointed out, electricity prices are going to keep on rising. Ok, perhaps by not as much as an increase in the longer term as if we had Hinkley C (which seems now even more likely to be cancelled), but they will still rise.

If you put all of the factors together electricity demand seems likely to fall, perhaps quite substantially. Aurora energy have already been projecting (before Brexit) that our new power station requirements for the medium term would be modest.

The Government has yet to make good use of its levers to make the electricity system more flexible. The National Grid has been criticised by the House of Commons Energy and Climate Change Select Committee for alleged conflicts of interests which deter it from making optimum use of demand side response and other demand reduction techniques. There is only a snails pace response by the Government to encourage the more widespread adoption of electricity storage techniques. In addition to that the National Grid already has, through the 'Supplementary Balancing Reserve' the means to take-up supply from power stations that might otherwise be closed down.

In the 2030s we are likely to see an increasing demand for electricity to power electric cars. Yet such demand has great potential to fit into an electricity regime increasingly dominated by fluctuating renewable energy sources. ''Grid to vehicle' and 'vehicle to grid' electricity systems will act as a crucial means of matching demand to supply.

I do also disagree with arguments suggesting that the alternative to Hinkley C is gas fired power plant in the quest for decarbonisation of our electricity supply. It is not. It is renewable energy, and the Government is ignoring vast resources of cheap onshore wind and solar power, in addition to the resources of offshore wind. All of these options are going to be a lot cleaner, cheaper and certainly much more deliverable than new nuclear power.

Monday, 27 June 2016

UKIP set for major boost as Johnson forced into humiliating u-turn on freedom of movement

As predicted in earlier posts on this blog the UK is heading for the worst of all worlds compared to retaining full membership of the EU. Boris Johnson, in a staggering u-turn, has effectively accepted a 'Norweigian' solution whereby we are bound by the EU's rules (including free movement of labour) except that the UK will have no say in making the rules to which we will be subject! See http://www.bbc.co.uk/news/uk-politics-36637037

But at least the British experience will dissuade others from trying the same!

Of course the protection of the economy and the rights of free movement of people are important, vital, objectives, and indeed this concession may take some of the sting out of the Scottish Government's challenge (see previous post). However papering over the cracks torn in the national fabric created by an unnecessary and ill-fought referendum will now be achieved at a terrible political cost. Besides the evisceration of UK influence in and outside the EU, UKIP will be given a major boost as that they will now claim that they have been sold out by Boris Johnson and others in the new Government.

Of course Johnson is trying to make out that somehow Britain will increase controls over migration into this country. This surely must be cloud cuckoo land. The idea that the EU is now going to give into British demands now that they are not in the EU to a greater extent than if we are members is itself nonsense. To imagine that the EU are now going to concede to the Swiss in their arguments with the Swiss over immigration controls and anybody else order to agree terms with the UK is the most fanciful of all proposition. The EU are not about to change the whole basis of the original  Maastricht Treaty in 1992 for the sake of some trade deal with the British.

'Open Europe' have given a simple explanation of Norway and Switzerland's position at http://openeurope.org.uk/intelligence/immigration-and-justice/norway-and-switzerland/

But now we face the whirlwind of rising xenophobia. UKIP represents the 'respectable' face of this movement, while in the wings the English Defence League and other far right movements harass people perceived be a 'foreigner'. But as we go into the General Election UKIP will now be presenting itself as the 'guardian' of the Leave vote. Many right wing Tories will be torn between supporting them and the Tory leadership. The result looks like the UK is turning in a very short period from being a tolerant country to just another state with a rising tide of racism and xenophobia.
As UKIP's influence expands, so does their influence over policies, such as green issues, over which they have little real support among the population, but which damage society and the environment.

The terrible irony is that one of, perhaps the main, architect of this situation, Boris Johnson, is set to take over the leadership of the country!

I hate to say 'I told you so' but check out what I wrote near the end of March at http://realfeed-intariffs.blogspot.co.uk/2016/03/how-brexit-could-make-ukip-largest.html
UKIP is successfully hijacking the support of many poorer sections of the population on the basis of the age-old technique of 'blame the foreigner'.

A few days ago I was reading a good popular account of British history written by the archaeologist David Miles (The Tribes of Britain, Phoenix, 2006) and on page 340, he describes conditions in England in the late 17th century. That period saw the arrival in the UK of many 'Hugenot' people fleeing persecution in France.  He wrote on page 340:

'The arrival of Hugenot workers did not meet with universal approval. People complained that they worked too cheaply, drove up the rents and the prices of timber and coal, polluted rivers, ate strange food - such as garlic, snails, oxtail soup and root vegetables. The number of refugees was exaggerated. Popular prejudice blamed them for the Great Fire of London in 1666, and illogically assumed that they were papist agents of the powerful french state'.

So what's new today?

Well, a new twist is that the power and influence of Germany is increasing, ironically, precisely at a period when the Germans want to be part of a democratic Europe. In effect they are being forced to take a leadership position they do not want.
We read about how there are a stream of countries lining up to have referenda about leaving the EU. Well, usually far right parties are saying that - will they get into power? Will any other EU political leader do a Cameron? Maybe not after the growing chaos and ludicrousness that is represented by the British example.

But there would be a growing absurdity if this happened. Like the UK, they would leave, then come to a trade agreement with the EU that would mean they would have to accept EU rules over which they had no control. Imagine it, an increasing number of countries leaving the EU and economic decision-making to Germany!

It's ludicrous, I know.

The reality is that Europe is now so interconnected that it is extremely difficult for one country, even as big as the UK to simply walk away. But, now we have three important countries, Norway, the UK and Switzerland who have decided to give away their effective sovereignty over wide ranges of policy areas to a body over which which they have no control leaving a reluctant Germany to make decisions on their behalf!

Germany - the sovereign power in Europe by default!

Sunday, 26 June 2016

Are we heading for constitutional crisis as Sturgeon threatens to 'veto' Brexit

We can see in the headlines that Nicola Sturgeon is threatening to 'veto' Brexit on the grounds that consent from the Scottish Parliament is required to stop Scotland being subject to EU laws. See http://www.bbc.co.uk/news/uk-scotland-scotland-politics-36633244 Are we heading for a full blown constitutional crisis with Scotland simply refusing to withdraw from the EU?

Well, probably not in that sense, but the upshot is likely to be in a sort of quid-pro-quo that the Scottish Government's desire for a another independence referendum will be granted before the UK leaves the EU.
As is argued in a legalistic explanation which you can see at: https://waitingfortax.com/2016/06/25/can-the-scottish-parliament-block-brexit/ (and thanks to Paul Cairney for pointing this commentary out), it is the case that for 'normal' legislation the consent of the Scottish Parliament would be needed if Westminster wishes to amend the 1998 Scotland Act. And this Scotland Act specifies that Scotland is subject to EU law.

The apparent downside for the First Minister's strategy is that Brexit is hardly 'normal'! In practice Westminster could amend the 1998 Scotland Act and assume, with some confidence, that the judiciary would uphold Westminster's version of the law. Despite what some of the more excited supporters of Scottish independence may be tempted to suggest, the Scottish Government is not going to make a unilateral declaration of independence under these circumstances.

But then I strongly suspect Nicola Sturgeon realises the likely legal outcomes but is highlighting this issue as part of the pursuit of a strategy to induce the Westminster Government to grant a further 'indyref'. Failure by Westminster to give this concession, and an attempt to disarm the SNP Government by staging, and winning, a new referendum on Scottish independence, is likely to have increasingly problemmatic political consequences. Indeed as tempers rose in the years leading up to the 'Brexit' legislation being passed by Westminster the stage could be set for mass demonstrations, especially one timed for the day that Westminster passed the amendment of the 1998 Scotland Act. Thousands of demonstrating Scots arriving at Westminster..........etc etc

No, the most likely outcome is that Westminster will agree to another indyref to take the sting out of this. The problem for the Westminster Government in dealing with this is that now the ranks of nationalist voters are being supplemented by former unionists who are changing their tune after  their votes to remain in the EU have been frustrated. And there are some quite surprising shifts taking place.
For the moment the Scottish Government's storyline is to keep Scotland in the EU, as well as preparing the way for another referendum on independence. In this they will have the support of the Scottish Greens, giving the strategy a majority in the Scottish Parliament. Even the Scottish Liberal Democrats appear to be showing some sympathy with this and Kezia Dugdale is sounding pretty ambivalent.

Whatever people may say, however, Scotland can't stay part of the EU and part of the UK if the UK leaves the EU. Apart from anything else, the EU will not entertain an application from just a part of another country. Scotland will have to leave the UK first, and then apply to join the EU. But in that case the EU is likely to be a lot more helpful to Scotland than they were in 2014. Many in the EU would want to reward Scotland. Meanwhile many in the EU want to punish  the UK with poor trade terms in order to stop other countries (eg the Swiss) picking and choosing rights such as immigration controls.
The Institute for Fiscal Studies  say there would be big economic penalties for Scotland in leaving the UK. Certainly public finances may suffer very substantially as long as oil prices stay relatively low. But in the current uncertain economic circumstances facing the UK (or reduced UK), such arguments may not carry as much weight as you would think, especially with bravado from Holyrood being spread about possibilities for Edinburgh replacing London as an EU financial centre etc. Besides, how seriously did the people who voted to leave the UK in our recent EU referendum take the predictions of economic disaster? Identity politics seem to be ruling the roost in today's world, like it or not.

Of course it is possible that this strategy could be undermined if Marine Le Pen won the French Presidency next year and talked about 'Frexit'. But it doesn't look like she'll win at the moment. It is beginning to look like it will be a struggle for a divided 'rest of UK' and a weakened unionist position within Scotland to hold the unionist line in another indyref which is may occur as early as a year or 18 months time. Yes, the break-up of the UK is looking now like a very plausible proposition. In that way then, we are heading for constitutional crisis.

Sunday, 19 June 2016

So seriously, how will leaving the EU affect green energy.....

I'm of course for 'in', but I thought I'd try and put the green energy implications of a 'leave' decision in perspective in as balanced a way as I can manage......Technically speaking of course there's nothing to stop the UK pursuing a sustainable energy strategy outside of the EU, but I suppose the summary is that it would help considerably if we stayed in if (especially) we take broader political factors into account. I shall discuss this later on in this post.

Note, where I talk about the 'single market' I also mean the EU's internal market'. I use the terms interchangeably.

Let's break this down into sections

Energy Prices

I can't actually see much direct effect on energy prices if we leave or remain. Energy markets tend to set their own prices levels independent of governance arrangements and such markets tend to be global or regional.
Leave have talked about removing the 5 per cent VAT on energy. This would increase carbon emissions. In practical terms the prospect of removing this tax seems unlikely since you'd either have to increase taxation somewhere else (equally unpopular no doubt) or cut back state spending (more 'austerity').

There would be nothing to stop the UK remaining a member of the EU-ETS - after all, Iceland is a member.

Regulation of energy markets

Now this is an area where the EU has a major impact, and regulation needs to be talked about in different boxes. First there is the overriding regime of the internal market, which, the UK has been driving in the direction of more liberalisation.
But this liberalisation is bounded by complex sets of rules administered by bodies such as the European Network of Transmission System Operators (one for Electricity, ENTSO-E) and one for gas (ENTSO-G). As in the case of some small non-internal market states (like Serbia) The UK would still be members of these bodies, but its role in governance would be reduced. These are obscure, but important bodies since they define a lot of important technical rules and identities. They implement EU rules, and so it follows that if we leave the EU the UK will have much less influence on the rules. On the other hand the general direction of policy favours greater and more transparent energy trading within Europe and this trajectory is unlikely to change. But it would not be so easy for the UK to ensure that the technical changes are to its liking compared to the  present.

Energy efficiency standards

Much controversy about alleged Brussels meddling with our kettles etc is in fact about efforts to improve the energy efficiency of appliances we use. In general, then, to achieve energy efficiency, it serves us to have a European identity rather than just a British one. Outside of the EU and its internal market British manufactured products may become divided into two types: one for the EU market with higher energy efficiency, and one for the British market where the appliances are cheaper to buy but which cost more to run, and which produce more carbon emissions.

Renewable Energy

The EU has certainly had a very big impact on the UK through the 2009 Renewable Energy Directive. There is no mandatory post 2020 EU Renewable Directive, so the impact will be less in the future. However, it is the UK Government,essentially, that controls the regulatory and incentive regime for renewable energy at present, so little would, in a technical sense, change from the present arrangements in this area.

Nuclear Power

Despite the much publicised battle over 'state aid' for Hinkley C, whereby the UK has to get special permission from the European Commission to give 'state aid', the impact would be relatively small. Delays in giving state aid clearance are hardly an important factor in in the non-delivery of nuclear power in the UK (see other posts!). Moreover, it is the UK Treasury that is proving (understandably) reluctant to dole out the multi-billion £s worth of loan guarantees for Hinkley which have been authorised by the EU.

The political context

I would argue that the political context post Brexit will be the crucial determining factor in shaping the UK's energy trajectory, and I believe quite firmly that this would be very damaging for sustainable energy strategies. As I argued in a previous blog UKIP are likely to be big gainers post Brexit. See  http://realfeed-intariffs.blogspot.co.uk/2016/03/how-brexit-could-make-ukip-largest.html
In sum, whilst the majority of the House of Commons would negotiate for continuing membership of the EU's internal market, UKIP would denounce this as a sell-out since this settlement would involve the UK having to continue with current immigration arrangements. Tory right wingers would get sucked along with them no doubt, and a strengthening rightist bloc would emerge within the UK. Indeed, one could argue that even if we left the internal market and then even this failed to have that much impact on immigration, the right would gain further given the central focus of immigration in UK politics.
As the right gains more influence then the pressure for green energy policies is much reduced. This can be seen in other countries - eg Denmark where the renewable energy programme is being cut back after gains by the right wing Danish People's Party.
In short, the technical implications for green energy post-Brexit may be relatively moderate, but it is the contextual political ramifications that are likely to feed back to have substantial deleterious consequences for green energy strategies.