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John Daly

John Daly

Dr. John C.K. Daly is the chief analyst for Oilprice.com, Dr. Daly received his Ph.D. in 1986 from the School of Slavonic and East European…

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UK Embraces Renewable Energy, Albeit Reluctantly - As Long As it Pays for Itself

According to Britain’s Oil & Gas lobby group, while Britain’s oil and gas industry is in sharp decline, it remains fundamental for jobs and the UK economy.

Last year taxes on oil and natural gas production provided 20 percent of Britain’s total corporation taxes received by the Exchequer, with the country’s hydrocarbon sector employing 440,000 people.

The bad news?

Of these nearly half-million British energy workers, 45 percent are in Scotland, where the nationalist Scottish National Party firebrand, SNP first Minister Alex Salmond, is vigorously pushing for a referendum on Scottish independence in autumn 2014.

But, back to Britain’s current energy situation. According to Britain’s Oil & Gas, Westminster is forecasting that even amid vast investment into renewable energy sources, the UK will still need oil and gas for 70 percent of its energy needs by 2020, even though Britain is the third largest natural gas and second largest oil producer in Europe and 19th largest in the world for both oil and natural gas.

Wait, it gets worse.

Oil and natural gas production from Britain’s North Sea offshore fields peaked in 1999, leaving now just 40 percent of the field’s oil and gas reserves remaining, turning Britain into a net importer of hydrocarbons, with supplies coming from a multitude of countries. The SNP is also keeping its eye on the UK’s energy crown jewel – North Sea oil and gas. An integral element underwriting the SNP’s future economic policies, Scotland would receive a 90 percent geographical share of North Sea oil and gas fields based on a division under international maritime law of the UK's territorial waters after independence, allowing Edinburgh to claim 81 percent of the UK’s current oil and gas receipts, recently worth between $10 - $19.34 billion annually, depending on the estimates one reads.

Consider what the British government would lose should Scotland depart. Last year North Sea production provided 49 percent of Britain’s primary energy demand (68 percent of its oil needs and 58 percent of its natural gas). In 2011 overall production was 656 million barrels equivalent, an average of 1.8 million boe per day, which nonetheless was a 19 percent decrease from 2010 production rates.

Accordingly, renewable energy is looming larger and larger in Westminster’s portfolio. But the Tories are seeking to slash subsidies to the country’s wind energy producers by slashing onshore wind subsidies by 25 percent instead of the 10 percent reduction originally proposed by the Department of Energy and Climate Change.

But the British government’s rather sluggish commitment to renewable energy up to now has its critics. Steve Sharratt from Bio Group, which operates a network of facilities producing renewable energy from food waste observed, “If Portugal can increase its reliance on green electricity from 17 percent to 45 percent in just five years, our own leaders have little excuse for our measly 3 percent. Their new target is to have 60 percent renewables or energy production by 2020 and they are well on track. If they can, why can’t we in the UK?” The Wind power lobby group Renewable UK has announced that it is considering a judicial challenge if the Treasury slashes onshore wind subsidies.

However one analyses the fact, it would seem that the British government is facing some hard energy choices over the next two years. Even if the SNP’s Scottish independence referendum is defeated, the fact remains that North Sea oil production is in decline. As a result, the UK can either face rising energy import bills, or it can begin to develop other indigenous energy sources, including renewable.

In such a situation, voting to slash wind power energy is a short-sighted policy at best, as the wind will continue to blow after North Sea oil runs out – or is under the purview of an independent Scotland.

By. John C.K. Daly of Oilprice.com

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Leave a comment
  • RolftheGanger on July 13 2012 said:
    The article accepts the UK Government downward revision in good faith. However predictions depend on the assumptions made.

    One of the UK Government assumptions is that they need to manipulate expectations to try to dampen demand for self government or full financial autonomy from Scotland.

    In the 1970s a previous UK Government suppressed publication of the McCrone Report and in similar fashion issued greatly reduced predictions of oil production and revenues from the North Sea.

    No wonder 71% of Scots do not trust Westminster, whereas more than that trust the SNP Government. Once trust is destroyed, a relationship is ended. The confirmation will come in a solid majority Yes vote in 2014.
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    Stanley Meyer was one of the most important inventors since Nicola Tesla. He was the first inventor to advance High Efficiency Electrolysis Technology to it’s perfection, including running a car completely on tap water. This is based on the original wet cell design that started it all (it is not the Hybrid Cell Design plans).

    Learn How to Easily Replicate Hydrogen Hybrid Technology, used for over 50 Years by The Military, NASA, Scientists, Universities and recently Car Makers such as Honda, BMW and Lexus… Guaranteed! For over 50 years international institutions, universities, engineering associations and independent testing labs have been compiling documentation and test results proving that small amounts of hydrogen added to the internal combustion engine significantly reduces toxic emissions, increases engine performance and provides a more complete burn of the fuel resulting in better gas mileage.

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