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David Cameron's Energy Strategy Faces Tough Challenges
By Global Risk Insights - Aug 20, 2013, 5:29 PM CDT
In early August, UK Energy and Business Minister Michael Fallon opened the second largest offshore wind farm in the world. The Greater Gabbard wind farm, off the coast of Sussex, is worth £1.3 billion and can supply half a million UK households with clean electric energy. This is another step towards the new UK government strategy to diversify its energy sources, giving emphasis to offshore wind, nuclear power and shale gas.
How sustainable is the government's energy strategy in terms of price and public acceptance? Despite enormous benefits from clean energy, it still cannot substitute carbon and nuclear. For one, wind power is still a very costly business. Only last year, wind turbine owners received £1.2 billion through consumer subsidies, which accounts for about £100.000 per 12,000 employed in the wind power industry. Moreover, despite an enormous rise in the capacity of renewables, the UK's energy consumption is still 70 percent reliant on carbon fuels. Much of British energy will inevitably have to come from other sources.
The U.S. Energy Information Administration has reported in March that coal is back with a 32 percent increase in the UK's 2012 electricity generation. This is primarily due to the high prices of gas, but also as a consequence of the U.S. shale gas revolution that slashed the price of natural gas in the US and made abundant, unused coal available for export. The coal is actually so cheap that it threatens UK's pollution targets, according to Lord Smith, head of the UK Environment Agency. The UK needs to cut its carbon footprint by at least 80 percent by 2050, in line with the ambitious 2008 Climate Change Act.
This will make David Cameron's job even harder. He needs to find a solution for the reduction of UK's carbon footprint, rising energy prices and, with the North Sea oil and gas reserves dwindling, resolve how to preserve Britain's energy independence. His emphasis on wind, nuclear and shale is thus a pragmatic mix of policies that should satisfy all three goals.
Wind is increasingly more present in the UK's energy network, but with only 11 percent of total electric energy output in 2012, it clearly cannot satisfy Britain's energy needs in the short run. Shale gas will be a tough bite for the government, with a very uncertain outcome considering the mounting opposition to hydraulic fracturing (also known as fracking) and the current government's failed attempts to portray shale gas as a transitional cleaner substitute for coal and oil. Nuclear power is perhaps the quickest and most efficient short-term solution for the ageing energy network. However, most of the UK's nuclear plants will be out of service by 2023, and the plans to replace them are still not entirely clear. What is most certain is that any investment into nuclear power will have to be heavily subsidized by the taxpayer, and this will most certainly raise some eyebrows with Conservative voters. It seems that David Cameron has some tough choices to make, none of which are a safe bet.
By. Ante Batovic
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