Select Committee on European Union Written Evidence


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 Middle East.

  The objective of security for our electricity supplies has always assumed primary importance in our planning—and 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:

      Nuclear

40 per cent-50 per cent (similar to the percentage over the last 10 years in Scotland).

      Gas

A maximum of 30 per cent imported

About 10 per cent UK production.

      Coal

10 per cent at least partly UK production.

      Other

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


 
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