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Dave Summers

Dave Summers

David (Dave) Summers is a Curators' Professor Emeritus of Mining Engineering at Missouri University of Science and Technology (he retired in 2010). He directed the…

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The Declining State of the UK Energy Sector

The Declining State of the UK Energy Sector

Today the British Government are announcing the construction of the first new nuclear-powered electricity generating station in 20-years. The new plant, which will replace plants that will close will go up at Hinkley Point, and will be constructed by a French firm, with significant Chinese investment, and with a promised subsidy from the Government. It won’t, however, start producing electricity until 2023, and even then only if everything goes well.
Euan Mearns has been pointing out some of the problems that the country faces as it closes existing power stations in order to meet environmental directives from the EU. The long-term supply of power at an affordable price is being increasingly challenged as the margin between demand and available supply shrinks. The leader of the Labor Party is promising that prices will be fixed by edict, an action that is unlikely to encourage investment at a time when it is clearly needed to help provide additional plants to replace the lost capacity.

The information on the new power station construction highlights the problems that the county will increasingly face. Although it is relatively quick and straightforward to close a plant (and then to demolish it), funding, permitting and constructing a new plant will, in this case, take ten years. In the interim it will likely prove increasingly challenging to find an adequately priced source of power for the 7% of the British market that will be supplied from the new facility.

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Power generation requires both that a power station exists to transform fuel into electricity, and also that there is a steady supply of that fuel (or energy source in the case of the renewable generators that rely on wind, the sun or water). The ten-year time frame for construction of the new plant means that it will not appear in the energy equation until there has been a considerable change in the available supplies of the different power sources needed to keep the electricity flowing. In the meanwhile it would appear that the UK will increasingly rely on diesel generators to provide more than just back-up power.

It is a time-scale that will see a continued decline in domestically produced oil and natural gas in the UK, and with domestically produced coal-fired power still viewed negatively, the country will be forced to increasingly rely on imports from the rest of the world to provide the fuel needed. But in that time frame the evidence that oil supply is finite is going to become much more visible to the general public. A steady growth in demand of around 1 mbd for oil cannot be sustained over the next ten years, since there are an inadequate number of new prospective fields capable of providing that increment, especially when the need to replace an annual decline of around 4.5 to 5 mbd in existing production is also factored into the equation. (Remember, in that time-frame, that current fields such as the Bakken and the off-shore Brazilian fields now coming on line will have moved well into post-peak production).

Oil-fired power, whether through use of major power plants, or through the more widespread use of diesel generators, will become an increasingly impractical part of the answer. The anticipated solution is expected to be through the more widespread use of natural gas.

The advent of large volumes of shale gas, and easier access to some of the large fields in Asia continues to radically change the potential supply sources and prices that will be charged for a fuel that can arrive either through pipeline or by LNG tanker. Yet, as the large conventional fields such as those in Turkmenistan are tapped to feed the growing Chinese market, the supply to the rest of the world will have to come from the more expensive shale gas and from regions more expensive to develop. Well costs are now quoted routinely at around the $10 million mark, and can only be anticipated to continue to rise. As the global market for natural gas at a higher price provides an incentive for increasing levels of exports from the United States, the current glut in supply will disappear and prices will to more closely follow those on the global market. This could well stop the migration of industry from the more energy-expensive parts of Europe to the USA, but it is unlikely that US prices will reach those of Europe, and so although overall prices will rise the relative ratio of prices will not change and that drift will likely continue.

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But putting too much expectation on natural gas to become the energy savior of the world is unwise, given the very rapid decline in yield from existing wells, and the consequent need to continually drill new ones to sustain supply. Further the potential supply from some anticipated reserves has been reduced, as exploration shows that limits to both what is there and what can be reasonably recovered. (The Polish experience is a good example of this). This is likely to become increasingly clear over the next decade, as global natural gas reserves are asked to carry a significantly greater portion of global energy demand. Natural gas-fired power plants are cheaper and faster to produce than nuclear plants, and coal-fired plants can be converted to gas use. (The power plant at Missouri S&T, for example, although fired by coal and wood, was fitted with gas burners that were, for most of its operational life not used).

But there are limits to the practical volumes of natural gas that can be supplied, at reasonable cost. As these bounds start to appear over the next decade the questions that will arise will start to focus on what can be used to replace it. To date renewable sources have not provided the panacea that was heralded to occur as they were eased into the market place. The economic subsidies used to encourage more widespread use of solar and wind have become less acceptable to Governments and their budgets, and it seems unlikely that the subsidies can continue to be used to foster future growth at greater levels of scale.

Domestically produced coal-fired power will likely continue to be a major part of energy production in the less well-developed nations, simply because it will provide a viable way of providing power at an acceptable financial cost. Whether the vehement denunciations of its use in more advanced countries, as a source of greenhouse gases, is still dominant in ten years, particularly if global temperatures continue to remain relatively stable, is more a political rather than an energy source debate. But the decisions on what to build post-Hinkley Point will have to be made soon, and the choice may be more limited than is yet to be recognized.

By. Dave Summers

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