Spiking natural gas exports prove that renewables give us energy security, not gas

The recent revelation that exports of natural gas from the UK have actually increased during the gas price crisis provides strong evidence that producing more natural gas from British sources does nothing to help protect British energy security. By contrast, sourcing energy from British-based renewable energy under fixed price long term contracts will dramatically reduce the bills consumers have to pay compared to reliance on fossil fuels.

In a series of tweets revealing his research into official statistics on natural gas production and exports, Richard Black of the Energy and Climate Intelligence Unit (ECIU) showed how, during the last quarter of 2021, exports of gas produced in the North Sea spiked. This is just at the same time as the current notorious global gas price spike which has driven millions of Britons to the breadline. UK exports of natural gas are much higher than in previous years, including years before the pandemic slowdown in 2020.

Indeed exports of natural gas in the last quarter of 2021 are nearly double what they were in either 2018 or 2019. Black commented ‘And as any company would, they’re selling it for the best price they can get. Which happens to be, for large volumes of it, by sending it through the pipeline into Belgium and the Netherlands……..This is utterly normal corporate behaviour, and completely to be expected. But it sure knocks a massive hole in the argument that Britain needs ‘its own’ gas production for energy security’.

Compare this to the information from the Low Carbon Contracts Company, which administers the contracts that are given to renewable energy generators, that renewable energy is producing lost of savings for energy consumers. Under that mechanism, (called contracts for difference, or CfDs) under contracts issued from 2015 onwards, renewable energy generators get paid a fixed amount, that is net of the wholesale electricity price.

What that means is that in times when electricity prices are very high (like they are now), the cost to the consumer is negative, and large amounts of monies are paid back into the system rather than paid out to pay energy generators as is usually the case. In the final quarter of 2021 the saving to the consumer was getting was said to be £468 million. This level of saving has not always been the case with renewable energy financing because the earlier renewable energy schemes were financed under a so-called ‘market based’ system. Under this ‘Renewables Obligation’ the generators earn large profits if the wholesale market electricity price is a lot more than their costs. This issue has been discussed in an earlier blog post which you can read here.

In fact the savings to the consumer from renewable energy will only increase still further as more CfD funded schemes come online, the only issue being how much savings there will be, that being determined by how much gas prices remain above the costs of offshore wind, and onshore wind and solar farms. Some level of savings is likely to be permanent.

We hear a lot of nonsense about how we have to produce more oil and gas from the Uk to protect energy security. It does not, at least, not under the globalised world of energy trading that we are in. Steady growth in demand for liquified natural gas (LNG) in China over recent years acts to suck in available gas supplies and increase global LNG prices. But fixed price contracts for renewable energy will provide energy security for the UK energy consumers. Because however the electricity from renewables is traded, the consumer is protected because they will only be liable for the fixed price.

In fact the CfD system was introduced by accident rather than somebody thinking it was good for energy security. At the end of 2010 it was decided that a CfD system was needed for low carbon energy sources because it was thought this was a way of financing nuclear power. But the contract price for Hinkley C, which gives EDF more than twice the amount per MWh than is paid under the CfD contracts recently awarded to offshore wind schemes, was seen to be embarrassingly high. So of course the rules have been changed for nuclear power now and the consumers will just have to fund an unlimited nuclear black hole for the next nuclear plant, Sizewell C, likely to start at around £1000 per energy consumer. This issue is discussed in an earlier blog post here.

But, after 2010, we were left with a system for financing renewables that actually protects consumer interests since (in 2010) it was decided to fund renewables the same way as nuclear (in order to show just how much cheaper nuclear was!!! Ha! Ha! Ha!). The Treasury and the big energy companies (who want more profits) want to change it of course, but the evidence of what is happening now should stop that happening for a while at least.

Of course a big political problem with energy policy is that notions of energy security are constructed by the dominant energy corporations of the time who declare that they know the countries’ interests best. They don’t – they only know their interests best. An independent view, which happens to be found from environmentalists, is likely to be much better at saying what suits consumers. It is investment in renewable energy and energy efficiency, not giving handouts to the big energy companies, something that we are witnessing happening now with the temporary loans being handed out to the energy suppliers.

David Toke