Like the ancient Roman-era pottery works of the South of France, the UK is becoming increasingly specialised in the arena of 'Financial Services'. Unfortunatley when the Roman empire collapsed there was no longer any mechanism to allow the transaction of pottery and we may find that in future there is no longer any need for our specialised financial services... This is the definition of the saying 'double whammy'...

Lessons from Roman Pottery:
http://thearchdruidreport.blogspot.com/2008/04/specialization-trap.html

Nick.

There is currently a 2GW connector to France, I believe.
I have no information on their contractual obligations, as even France may not be keen to export electricity on a cold winter's day - has anyone better information?
On a brighter note, these prices for gas should make nuclear costs unchallengibly competitive, in spite of rising construction costs.
Of course, the British government has done everything possible to make it difficult to get started on a nuclear revival, as they have turned down a bid for the nuclear sites from EDF, who could undoubtedly have done the job, and now propose to have different consortium;s building at different locations, with all the waste and delay inherent in that approach.
The record time for a build is around 4 years, in the far East - it looks like our establishment intend to add a nought to that.

Thank you for a very informative, if somewhat depressing, article.

Just for absolute clarity, your figures for oil do include that used for transport?

We are not going to get there anytime soon, and a massive shortfall is now certain, but has anyone got some back of the envelope figures for how much electricity generating capacity would be needed in the UK under the assumption that all heating was by this means, but air-source heat pumps were used with an average efficiency of 2.5, as higher efficiencies rely on new build?
If the presently most inefficient grade F and E houses were brought up to a more reasonable standard of insulation, what would then be the requirement?

As you point out in the post I am replying too, in the UK we could certainly do with a 'New Angel!' :-)

A 2006 paper says Ireland imports over 85% of its gas from the UK. The balance coming from Kinsale Head (depleted?) and Corrib (not producing yet?). The paper talks of two years of planning and three years of construction. Which suggests if all goes smoothly it could be open for 2012, good for 400 million cf/d, 40% of Irish demand:

More information on the Hess LNG backed Shannon LNG development here:
http://www.shannonlngplanning.ie/

Seems it's still at the planning stage, application submitted last year . They've drawn some really nice pictures on an LNG import facility, that'll help.

If things like debt, trade balance and economic sustainability bother you then you should get a good nights sleep tonight - it may be your last.

LOL

But sadly contains more truth to it than most would care to admit.

Euan

Imagine you had got hold of Gordon for half an hour, had spent 10 minutes showing graphs and explaining the bind we were in, and he had accepted it all and asked "so what do we do?"

What would your answer be?

In the short term, as far as I can see the major problem is a cold snap across Europe. Not only does the price soar, the amount available to the UK is curtailed and difficult decisions have to be made. It looks to me as if the immediate action is to limit electricity generation, shedding high loads so domestic supplies can be maintained. There is no way domestic supply can be cut, its just not workable. So its an electricity problem, not a gas one.

Of course this does nothing about the run up in costs (we can see where that 40% energy rise quote came from), but Gordon as an accountant doesn't really care about that, he considers it to be the great god of the marketplace and won't interfere.

In the long term there is a need either for a secure supply of gas, or a swift move away for both power generation and home heating. Neither seems to have an obvious answer - nuclear stations take too long to build and what are the alternatives for winter home heating?

Politicians want answers with their problems, what would yours be?

Kære Rune,

Tak for et godt stykke arbejde.

I often wonder if there really is a difference between the 'Anglo-Saxon' mindset and the outlook and attitudes formed around the culture of Rhineland in central Europe? Is it something to do with higher level of co-operation and planning, or is it possibly connected to the creation of higher level of concensus about the fundamental structure and direction of society; contrasted with the Anglo-Saxon model, where an ideological minority is given the power to rule over the majority and push through a narrower social/economic agenda?

Whilst Britain and the United States seem so heavily burdened with the baggage of inequality and class, the 'Rhineland model' appears to emphasize the collective interests of the 'volk' to a far higher degree.

It really is shocking how little longterm planning there has been for Britain's energy future by successive governments, so my criticism isn't politically partisan. The British way seems strange to me. Some people say that we just 'muddle through' and things have a tendancy to work out in the end. I've never subscribed to this attitude, probably because my father was prime example of the belief in efficiency and planning inherent in the Rhineland culture of central Europe, in fairness one should probably include the people of the Danube as well.

On the other hand this is a rather old-fashioned way of looking at the differences between peoples, and can be pushed to extremes; however there do seem to be differences in the way 'Anglo-Saxons' think and organize themselves, compared to, for example, the Germans. Is it just a coincidence that there national side in football is so successful? Perhaps their measurable success is symbolic and indicative of deeper cultural differences?

What's tragic is that Britain has arguably wasted and squandered a fantastic enegry legacy of collosal value and worth for relatively little longterm benefit. Thirty years ago I argued that the the bounty, or windfall, from the North Sea, should be sctrictly controlled and conserved for the future. The revenues should used sparingly and directed at specific areas of the economy and society where they could do the most longterm good; like public transport, education and health, and should mostly not be used to finance a temporary consumer boom or even asocial tax cuts.

I always thought that the North Sea oil and gas finds were a once in lifetime miracle, a kind of lifeline, for a small, crowded, island with very few resources appart from the genius of its people. Instead of consumer party, invest the revenues wisely in educating the people and planning for the kind of Britain that would emerge on the other side of the oil boom and the dash for gas.

Of course this led me into direct confrontation with the narrow and shortsighted, dogmatic and intensely destructive, class-war politics of the right-wing Thatcherite minority counter-revolution. When I tried to push a totally different agenda, a consevationist agenda and insisted on talking about the necessity of planning and thinking about what would happen when the oil and gas ran out; I was greeted with open hostility bordering on contempt. The very idea of planning seemed to be regarded as close to heresy, let the market take care of all that, the market knows best.

We are no seeing the consequences of allowing 'the market' to decide and rule over us, and the future is bleak and uncertain. We've slaughtered and eaten the fatted calf, and now what? What happens in the lean years to come?

But it's probably wrong to suggest that there was no real planning, there was, only it was planning for exploitation and channeling the benefits of the North Sea to serve the interests of a minority of the population, with enough 'crumbs' from the table going to others to keep them quiet and passive. What happens now, when the party is over and the table looks increasingly bare, is another story.

In order for the market to provide, our utilities need to change the way they purchase gas on long term contracts. Currently all long term contracts are "index-priced" using the Heren Day-Ahead gas price. European contracts are priced with a direct tie to oil prices (the Troll Formula used to price gas delivered from the field of the same name and more recently other similar style formulas allowing for the pricing of Russian gas).

The UK is literally at the end of the pipeline for Russian gas, and though we are directly attached to Norwegian fields like Ormen Lange, the Norwegians can (and do) move that gas to higher priced continental European markets using the existing infrastructure of the Sleipner field. Until we find a new pricing model that clearly prices our demand at a higher level than continental European price formulas, we will remain the market of last resort. Even in the case of higher prices for UK gas, we have seen (in Ukraine so far, but no doubt elsewhere in the not too distant future) that pipeline gas can be siphoned off by countries through whom the pipes transition - so logistically we have a problem beyond price. We need to pay up to ensure Norwegian supply where we at least have a direct pipeline link.

On the LNG front we have plenty of regasification capacity: Isle of Grain, Dragon and South Hook (both in Milford Haven) and the Teeside Excelerrate facility. However, LNG is now a global commodity and we are going to have to outbid not just our neighbours in continental Europe, but also some or all of Japan, South Korea, Taiwan, China, Dubai, India and the USA to secure supply. There is too much regasification capacity and not enough liquefaction for LNG, and we are nowhere close to competitive in our pricing. I would be surprised if the UK has imported more than 3 LNG cargoes in the past 12 months.

If we get caught short in a cold winter, 100 pence/therm is going to look cheap - I think we are going to have to pay in excess of 300 pence/therm to get hold of whatever marginal LNG cargoes may be available.

The situation is really quite scary and our government and utilities are doing NOTHING about it, despite BERR making abundantly clear the scale of the problem.

.....domestic customers are never disconnected unless it's totally unavoidable (due to need for individual gas engineers' visits before reconnection for safety purposes).

This is an interesting and scary part. During a conference break I came in talk with a professional from Aberdeen (NO I am not talking about you Euan) who told me that a study had been conducted to study amongst other things how long it would take to bring the households back on line if there had been a major gas supply disruption affecting many households (specific numbers was not discussed, but I understood it to be more like some hundred thousands or in the region of millions).

The answer he provided threw me completley off, he referred to the study and the need for engineering visits would make the complete reconnection take 3-4 years.
This was based on present engineering capacities to conduct such visits.

Rune

We need to discuss rock bottom PRACTICAL solutions here. In practical terms people need to keep warm and cook.
Assuming an escalating domestic gas price we need to figure out the elasticity on that.

For a start energy density of modern housing can be radically reduced. Uncomfortable, yes, but not deadly. I found this very interesting table :

Degree celsius
Internal temperatures: External temperature
CentrallyNon-centrally
heated heated
homes homes Average
1970 13.8 11.3 12.1 5.8
1971 14.5 12.0 12.9 6.7
1972 14.3 11.8 12.7 6.4
1973 14.1 11.6 12.7 6.1
1974 14.8 12.3 13.4 6.7
1975 14.3 11.8 13.0 6.4
1976 13.6 11.1 12.4 5.8
1977 14.6 12.1 13.5 6.6
1978 14.7 12.2 13.6 6.4
1979 13.9 11.4 12.8 5.1

1980 14.4 11.9 13.4 5.8
1981 13.9 11.4 12.8 5.1
1982 14.6 12.1 13.6 5.8
1983 14.9 12.4 14.1 6.2
1984 14.4 11.9 13.6 5.8
1985 14.0 11.5 13.3 4.8
1986 14.8 12.3 14.1 5.2
1987 14.4 11.9 13.8 4.9
1988 15.5 13.0 14.9 6.2
1989 15.8 13.3 15.2 6.9

1990 16.7 14.2 16.2 7.6
1991 15.9 13.4 15.4 6.0
1992 16.0 13.5 15.5 6.1
1993 16.2 13.7 15.8 6.1
1994 16.9 14.4 16.5 7.2
1995 16.4 13.9 16.1 6.9
1996 17.1 14.6 16.8 5.7
1997 17.4 14.9 17.1 7.3
1998 17.9 15.4 17.6 7.5
1999 17.5 15.0 17.3 7.2

2000 17.9 15.4 17.6 7.1
2001 18.1 15.6 17.9 6.6
2002 19.3 16.8 19.0 7.7
2003 18.4 15.9 18.2 6.7

Source: Building Research Establishment

Our homes are very much over-heated compared to yesteryear. Yet insulation standards are very much higher. Loft insulation and double glazing were virtually unheard of. We can easily go back to even 1970 heating levels. I grew up in that time and remember chilly times at bedtime but not being uncomfortable.

It looks like the future is electrical and passive solar in one way or another. Unfortunately the grid won't be bale to switch fast enough it seems so that leaves conservation or micro-generation for the domestic ( or industrial ) gas consumer.

OK, we've already installed a programmable thermostat with TRVs and turned it all down to the minimum feasible whilst wearing wooly jumpers. Insulation and passive solar look like very easy and cheap wins for the majority of houses. 250mm loft insulation, cylinder jacket and draught proofing give the quickest payback on £2-300 spend. Followed by cavity wall insulation, thick curtains, radiator foil, underfloor insulation for suspended flooring, flueless gas fire, condensing boiler, Heat Recovery Loft ventilator etc.
I am looking at a simple passive solar DIY solution for the loft. The underside of the tiles heats up plenty even in winter and this can be collected at the apex and ducted straight down into the landing with an inline fan. I'm tacking cheap foil stuff under the rafters such that there is a gap into the loft at the bottom of each channel and a plenum chamber at the ridge with the duct pulling that air down into the house when it exceeds the house temp. Total cost £150 or so and should yield several 1000 kwH effective heat. The great thing is this works best for older high thermal mass houses.
Later you can add a HRV unit to pull heat back from the kitchen and bathroom extracts.
There are more efficient commercial variations on this ( http://www.nuaire.co.uk/Product/Renewables/Solar_Air_Heating/Sunwarm_Tile ) but cost a lot more and defeat the object. I guess if you had the money a PV panel set cooled by water which is then stored on a daily cycle would be a useful way to maximise the gain.
Also add dark water containers to south facing rooms to store daytime solar gain and release overnight.

People will have a good amount of leeway until the point where they really NEED alternative primary energy sources.
Then we can look at :

communal residential wind solutions - several houses in a group clubbing together for a 30kW turbine which needs space and height to work but can pay back very quickly in the right area.
GSHP - again can be communal.
ASHP systems.

I think one thing which will be feasible is seasonal heat storage, store summer heat and release in winter. There is a German firm marketing a phase change kit which stores 4000kwH in 12m3 or about enough to run a tight insulated 100m2 house.
With a 50m3 store, 50m2 collectors, water cooled 3kw PV array, borehole GSHP and 2.5kw micro turbine and backup generator my energy needs are fully met and secured for a fixed capital outlay.

Maybe one day we will get the mythical $1 watt PV in which case we can run entirely off water cooled PV and small heat stores but that's a while off.

Rune, the way I understand it, the Norwegian system of sliding scales was more aimed at rationing capacity than at rationing energy (which would be the case for natural gas). In Norway the sliding scale system used, gave a certain low tariff as long as consumption was within a certain paid-for capacity e.g. 1.5-3 KW. If consumption went over the capacity limit, then all the energy consumed during this period of high capacity-utilization would cost 5 times more than the low tariff.
On a personal note, I can remember my grandmother's old electric stove: It had a particular "lump" which could be folded down onto the hot plate. The way I understand it the "lump" was a heat magazine which could be charged up using only a limited load and then used to cook without exceeding the capacity limit in the contract with the utility-company.

In Norway the only reason for such a system was contraints in the grid. To my knowledge generating capacity has been ample since WWII. The exception is the cold winter days when the load continues to creep dangerously close to available capacity. If electric heating can be replaced in Norway, then it would free up a lot of capacity for export.

The problem of any system of sliding scales, is determining who is using too much. For example, a single person may live in a flat. Even if he is wasting a lot of energy, it is not certain that he will end up in one of the higher priced tiers. At the same time, a family of ten occupying the same flat, may very well end up in one of the higher priced tiers even if their per capita energy consumption is lower.

Maybe they could add ethanol to our tap water in winter...??

Oh dear,

phoned the power company today to change onto the fixed price tarriff advertised on the internet, only to discover that its expired, the deadline for sign up was end of february.

Oh, well looks like I'll have to await the prospective price rised like everyone else.

Crap

Andy

Holy cow. Here in the U.S. the current rate for us is still something like $.10/kWH. Which explains why it is so tough to get people to conserve over here..

I vaguely recall reading about a rate increase for us though, but it wasn't as severe as what you are facing.

I liked the strategically placed pieces of paper towel. I realize that those have been put there to protect your privacy/personal details, but for a while I stared at the picture and wondered if the electricity company had attached those pieces deliberately to help you clean yourself up after you pooped your pants, seeing your electricity bill double overnight. (rofl).

Surely the sensible response is to switch to Ecotricity. It may not save you money but at least you'll know that your money will be used to increase our wind generation capacity.

As of 11:30 today, values as follows: Nov08 98.20 p/th, Dec08 104.55, Jan09 108.10, Feb09 106.20, Mar09 103.50.

The peak winter months have been above 100.00 p/th fr a good two or three weeks already.

Heren Dayahead.

The knock-on effect in the economy of increased energy costs is going to be substantial, and unfortunately, we've only just begun. Many retailers are loathe to increase their prices and are absorbing rising prices internally, hoping, and are not passing on increases to their customers. This is usual at the start of a recession, yet it's arguably only a temporary respite as costs rise it's impossible to 'subsidize' prices over the long term.

Currently the ground is being prepared by the major energy suppliers for a massive increase in the price of electricity and gas this coming winter, there has been talk of an average rise of seventy percent! This will have substantial consequences if implemented. Obviously the poor will suffer disproportionately as will those on fixed incomes and pensioners. Vulnerable people will begin to die of hyperthermia and related illnesses. And of course, this is only the beginning, the outline of the shape of things to come.

I don't know what the gross prices are for the UK. I just used the price of 68p/therm Rune used, I assumed that was a net price. In Holland 40% of the net price is taxes in the case of natural gas.

About insulation, Im not that informed about it. But as far as I know Holland is pretty progressive in that area. New neighbourhoods (vinexwijken) are not as efficient as was designed to but still more efficient. With nat gasprices twice as high as in UK I think that average dutch households are more efficient than UK's.

The usage question is a good one. I will try to look up some gas consume charts for the Netherlands.

BG Group's supply agreements in the US are not LNG-specific - in other words they can deliver LNG elsewhere and meet their USA supply obligations with pipeline gas.

On the Isle of Grain side of things, the regas capacity is owned by BP and Sonatrach, who have it on a "use it or lose it" basis. If they elect not to use it, the capacity is freely available to any other potential suppliers.

The journey time from Egypt to Savannah is 5 days longer than that to Isle of Grain. At 0.15% of cargo used as fuel per day, this equates to 0.75% saving just from fuel, let alone the price differential between UK NBP and US Henry Hub prices.

I have not calculated the exact potential gain to BG Group, and concede that it would be an irrelevance relative to the billions they earn every year, but I think it is in the region of £500,000.

However, the effect of adding 11 MCM/day to UK supply at a time when daily demand is 217 MCM (ie an incremetnal 5% supply) would probably depress prices to the extent that they would lose more than £500,000 on the lost revenue from their North Sea pipeline gas supplied to the UK. That is why I think they are not optimising the LNG cargo value....

Whilst their oil use may be similar, the way they generate electricity varies a lot, which has implications for their security of supply:
http://business.timesonline.co.uk/tol/business/industry_sectors/natural_...
The man behind the nuclear power shift - Times Online

Moore said Sweden had the lowest per capita CO2 emissions in Europe (6.3 tonnes/capita/year) and France had the second lowest (6.8 tonnes/ person/year). Sweden is 50% hydroelectric and 50% nuclear. France is 80% nuclear, 10% hydroelectric and uses only 10% fossil fuel. Denmark has the highest CO2 per capita at 11.0 tonnes/capita/year “because their mix is 18% wind and 82% fossil fuel. It is clear to see that the more hydroelectric and nuclear in the mix the lower the carbon emissions will be. Wind has a minor role to play and solar is not even worth the investment,”

Apart fro essential minimal levels of diesel needed for agriculture and moving goods etc, the cost of heating and power is probably more important in Europe than oil - the case differs in America.

Russia's geopolitical power seems likely to increase as gas gets scarcer, perhaps to the point where it is more important to keep sweet than to upset America.

US imports low becuase US NG wholesale prices are the lowest in the developed world, hence almost all LNG is going other places: Japan, South Korea, China, Taiwan, Singapore, India, Dubai, South Africa, Spain, Italy, France, Turkey, Belgium, Brazil, Mexico.... pretty much everywhere except the UK actually (as I noted above).

Four LNG cargoes have recently set sail with US destinations, so expect to see a small pick up in imports.

It's more likely to lengthen.
Eventually, probably within the next two years, the penny will drop even for the thickest of the thick, ie our rulers, that we desperately need more energy and that the only way to get it on the scale we need is nuclear, at any rate in the British context.
The problems are severalfold:

Everyone else will have realised it too, and there will be the mother of all bottlenecks in getting critical parts.

There will be a worldwide shortage of personnel - we have spent the last 30 years running down the industry - Britain is going to be hard put to it to train enough staff for regulating the industry, let alone doing anything more ambitious.

All the costs will be much higher due to the high price of energy - see the recent rises in steel costs.

The economy will be disintegrating under the strain of high energy costs so that financing will be difficult.

As against that opposition should evaporate and planning permissions be on a wave-through basis - I would guess that the problem will be gross inattention to the most basic safety considerations rather than the present convoluted and gold-plated obstacle course.

It would though be possible to build reactors underground in towns and pipe off heat in a combined heat and power set-up - but the pipework would take some building.