Memorandum submitted by the Chemical Industries
Association
The Chemical Industries Association welcomes
the Committee's decision to launch the above inquiry. We believe
that the security of supply aspect of the energy debate in the
UK, as highlighted by the phrase "Keeping the lights on"
in the title of your inquiry, should not be lost in the arguments
over climate change.
We leave it to better qualified specialists
to provide responses to the detailed technical and economic questions
you pose, but have some general comments from the perspective
of our industry as consumers both of energy and of hydrocarbon
resources as feedstocks. The latter are used in the manufacture
of petrochemical intermediates which are themselves used to make
products as diverse as dyestuffs, plastics, adhesives, paints,
pharmaceuticals, detergents, cosmetics and toiletries.
1. Although the formal notice of the Committee's
inquiry makes no reference to gas, other than indirectly by mentioning
"CCGT" as one of several large scale generation technologies,
we believe that the role of gas is critical to any assessment
of future generation options. In order to avoid having to contemplate
the replacement of nuclear capacity, the Energy White Paper proposes
such a heavy dependence on gas for our future energy needs that
it carries enormous risks for our fuel security, quite apart from
limiting scope for reducing CO2 emissions. High and
volatile UK gas prices are already putting UK industry at a huge
competitive disadvantage. We are projected to become ever more
reliant on imports, either via long pipelines from which others
will be seeking to draw supplies, or by using expensive specialised
ships and unloading terminals for transporting liquefied natural
gas over considerable distances. The liquefaction process is itself
energy intensive. Moreover, to use such a flexible and versatile
resource for such a large proportion (already 40%) of our electricity
generation, when alternatives are available, seems wasteful in
the extreme. We believe that hydrocarbons should preferentially
first be used to make products, which after being recycled as
many times as possible, can ultimately be incinerated for energy
recovery. The same is true of biomass: growing, harvesting and
immediate burning of such materials (other than waste) is an extremely
inefficient means of converting solar energy, while denying first
use of renewable sources of molecules for products.
2. Most renewable energy sources, whether
wind, wave, tide or solar, provide irregular supplies. The last
three have known cyclical variations within a day, month or year,
and can to some extent be balanced. Wind, however, has no predictable
behaviour. Although variability can be minimised by networking
very large numbers of geographically dispersed installations,
this means higher grid costs and even then the amount of power
which can be guaranteed available at any given time (at least
from within the UK) is but a tiny fraction of nominal aggregate
capacity. The grid needs to be able to call upon dependable generation
capacity immediately when required, in order to assure system
integrity and certainty of supply. We believe that the Committee
should investigate the feasibility and cost of providing complementary
means of storage or other back-up capacity for such inherently
variable renewable sources. A combination of wind and associated
hydrogen generation and fuel cells might work, but it seems inevitable
that other forms of standby capacity will also be required.
3. Our industry's raw materials are mainly
commodities bought at global prices, while its primary products
are similarly sold into global markets. The cost of the conversion
process depends principally on the cost of energy, since the technology
which determines the efficiency of large scale chemical production
processes is generally available to all the main competitors.
The competitive position of companies is therefore closely tied
to relative energy costs. At later processing stages where products
become more specialised there is some ability to protect margins
through differentiation, but the viability of the UK's producers
of primary products remains an essential foundation. We ask, therefore,
that the Committee keeps the need to ensure competitively priced
energy for UK industrial users as a prime consideration throughout
its deliberations.
5 September 2005
|
