Memorandum by Sir Donald Miller FRSE FREng
UK GOVERNMENT AND EUROPEAN POLICY
While the European Union undoubtedly has a role
to play in encouraging and facilitating the construction of pan-European
pipelines and delivery systems and possibly also the sharing of
storage facilities to cater for short-term emergencies, it should
be recognised that the provision of secure and economically priced
energy supplies will remain largely the domain of individual governments.
An economic and reliable electricity supply in particular is now
so much at the centre of modern life that no government would
survive the consequences of a significant failure in this area.
This alone would be sufficient to ensure that policy in this area
should be right at the forefront of Government thinking were it
not for the fact that the time-scale of say 15-20 years for major
changes in energy policy to take effect is long compared with
most governments' horizons.
The danger is that in the meantime skills and
resources will be allowed to whither; this is in fact the major
reason for the sometimes indifferent United Kingdom performance
in the past in power plant manufacture and construction, when
particularly in the nuclear business, we have been faced with
a series of stop-go programmes. The inaction of our present Government
and its simplistic belief "that the market will provide"
is presently the biggest hazard to our future energy supplies.
The reality is that while the market has an important role to
play, it will only operate satisfactorily when there is a surplus
of low cost energy available or where the demand is very price
sensitive. But energy demand is notoriously price insensitive,
consumers would rather defer other expenditure in order to stay
warm. The electricity supply will always be a very imperfect market
with Government holding the ring, setting the rules and largely
determining the rewards. And if, in the wake of Ministerial inaction,
we are to be dependent for 80 per cent to 90 per cent of our electricity
supplies on imported gas, it is very unlikely to be cheap. Indeed
it will be the market that ensures that all our gas, no matter
from where it is sourced or how many pipelines it is delivered
over, will be priced at that of the last or most expensive unit
and that it will be piped many thousands of miles from The Russian
Federal Republics or shipped as high cost liquified gas from the
The objective of security for our electricity
supplies has always assumed primary importance in our planningand
even then with a good diversity of energy sources we have more
than once suffered extended supply interruptions and/or price
instabilities from domestic or market causes. The hazards of relying
on massive imports of gas, with its much less flexible supply
chain compared with oil and its exposure to foreign political
instability and international terrorism are many times that which
we have faced in the past and need to be a primary consideration
in planning for our future energy supplies.
So where is this low cost and reliable energy
to come from? Certainly not renewables, with their massive subsidies
for a limited and uncertain production. Other imports, as from
the French nuclear stations can never be more than balancing factors
in the market. It is however worth noting that the French (as
well as the Finns) are presently in the process of ordering the
first of a new generation of power plant in advance of need so
that they will be in a position to embark on a commercial ordering
programme of proven plant just as soon as it is needed. In the
United Kingdom the BNFL/Westinghouse naturally cooled PWR design
offers even better economics and reliability.
While no doubt it is possible to carry out sophisticated
analysis of the various risks inherent in importing very large
quantities of gas long distances from less stable regions of the
world, it is inevitable that whatever conditions are assumed,
the reality will at some stage be very different . The only sure
defence is to spread the risks with a variety of energy sources
and whilst one would naturally aim to refine this mix from time
to time in the light of developing situations and information
I would have thought that at the present time it would not be
far wrong to aim for something on the lines of the following for
15 years ahead:
40 per cent-50 per cent (similar to the percentage
over the last 10 years in Scotland).
A maximum of 30 per cent imported
About 10 per cent UK production.
10 per cent at least partly UK production.
A maximum of 10 per cent.
Clearly if this is to be achieved we shall need
meaningful Government action as a matter of urgency.
25 February 2004