Britains fuel crisis exposes supply risks when transitioning to cleaner energy

September 29, 2021 â€" 8.56am

Climate change is again at the centre of national and global politics ahead of November’s international climate meeting in Glasgow, at the very moment that fossil fuel prices are booming amid new fears of energy insecurity.

On the European continent, natural gas storage facilities are at record lows with winter looming, and prices have soared between three and fivefold in the past year, trading at near record levels after 2020’s COVID-related plunge.

A sign referring to the lack of fuel is placed at the entrance to a petrol station in London on Tuesday.Credit:AP

It has forced fertiliser producers to slash their output, which may yet have an inflationary effect on food prices. Another byproduct is a reduction of carbon dioxide production, a gas which is used to stun animals before they are slaughtered as well as in carbonated beverages, among other common consumer products.

In the UK, the surging gas prices have caused several retail energy retailers to collapse, unable to provide energy to households on long-term contracts profitably when prices in the spot markets have soared.

And the weekend saw a run on fuel that shows no signs of easing, with bowsers dry across England as motorists panic-bought petrol and diesel as if they were loo rolls in a lockdown, forcing Boris Johnson to put the army on standby amid a shortage of tanker drivers.

About 45 per cent of Europe’s natural gas imports come from Russia. Gas is the source of much of Vladmir Putin’s domestic riches and geopolitical influence, both of which are set to deepen after an agreement with the US and Germany to complete the new Nord Stream 2 gas pipeline, which dismayed many American politicians and continental partners, most notably the Ukraine.

The next largest source of imports is Norway (23 per cent), which will increase its exports in response to surging demand.

The continent’s reliance on gas has increased as it has shut coal fired power stations, and failed to replace ageing nuclear plants. Britain is down to its final two coal fired power stations, while Spain shut half of its coal plants last summer, according to the Wall Street Journal.

It has all happened amid the so-called clean energy transition, where older, fossil fuel energy sources have been displaced by wind and solar, a process that is happening in Australia’s east and west coast energy markets too.

But in Europe there is a carbon permit scheme as well. It has not been a particularly windy late-summer/early-autumn, which has seen output from wind farms fall, according to industry publication Energy Intelligence.

“That has helped push up gas prices, making coal-fired generation more competitive and promoting some fuel switching. Because coal emits twice as much carbon as gas when burned, power generation companies have to buy more EU carbon permits, further inflating already-high carbon (and electricity) prices.“

The EU’s climate chief Frans Timmermans says the situation has been made worse because the transition to greener power has been too slow.

“Instead of being paralysed or slowing things down because of the price hike … we should speed things up in the transition to renewable energy.“

Some European leaders are sceptical though, warning of popular revolts against green policies if household bills soar too quickly.

Sound familiar?

It’s the coral reef that has shipwrecked Australian governments for 15 years and these are waters Scott Morrison is keen to avoid.

He looks set to skip Glasgow, blaming a heavy international travel schedule and quarantine requirements, and insists that concrete plans to deliver lower emissions are more important than pledges to targets.

For this, opponents at home will paint him as an international pariah, as indeed may even some friends in Scotland.

“(The UK) will lead by example, keeping the environment on the global agenda and serving as a launch pad for a global green industrial revolution,” Boris Johnson said at the United Nations last week.

Morrison’s signature is on the communique produced by the Quad (US, Australia, India, Japan) last month, which adopts language (“climate crisis” and “ambitious” Glasgow commitments) that has been resisted domestically.

But the reality is that any major progress on global emission in Glasgow requires action from the world’s two largest emitters, China (27 per cent of global CO2) and the United States (15 per cent).

And China, in climate as in the rest of global affairs, is showing an unwillingness to bend to international norms ahead of the conference.

By far the world’s largest burner of coal, including to transform billions of dollars worth of West Australian iron ore into steel, China has committed only to cutting coal consumption beginning in 2026, producing 25 per cent of its energy from non-fossil fuel sources by 2030.

Ironically China is in the grips of its own energy crisis with stockpiles of coal critically low, in part because of President Xi’s ban on imports of Australian coal.

China’s heavy industrial regions have also been impacted by local government orders to hit carbon intensity targets, which have curbed industrial output at a time when global supply chains are already severely disrupted.

As a result of surging demand and an economic bounceback across the region, Newcastle coal futures, the benchmark trading price for Asia, have tripled this year, in the latest sign Xi’s trade war against Australia has been much less punishing than was intended.

Rising Chinese aggression was the underpinning strategic logic for the AUKUS alliance announced this month, though Morrison was quick to stress that nuclear powered submarines did not amount to the development of a domestic nuclear industry.

Australia has one-third of the world’s proven uranium deposits and nuclear power is the world’s largest (though declining) source of low-carbon electricity, yet it seems there remains no appetite from mainstream politics to find a role for nuclear power in the emissions debate.

The nuclear option was politically radioactive (pun intended) after Chernobyl and Fukushima but a new poll shows attitudes may be changing.

An essential poll released yesterday found 50 per cent of Australians were strongly or somewhat supportive of nuclear power compared to 32 per cent strongly or somewhat opposed, with 18 per cent unsure.

In a 2019 report by the International Energy Agency that pointed out the global fleet of nuclear plants is ageing, especially in OECD countries, the main barriers to new reactors were economic: long lead times that required billions of dollars.

But without nuclear in the mix, the transition to clean energy systems would be more difficult and expensive, requiring an additional $1.6 trillion investments over the next two decades and a big clean energy shortfall by 2040 when many existing reactors reach the end of their life.

France, with three quarters of its domestic electricity generated by nuclear plants is perhaps best placed to withstand the current continental energy shock.

Australia is blessed with coal, gas, wind, sun, battery minerals, but also uranium and the country is geologically (and politically) stable. If we are really fair dinkum about a clean energy.

Share this post