Winter of discontent?

C&I Issue 11, 2021

Neil Eisberg | Editor

As world leaders gathered in Glasgow, Scotland, for COP26, countries were already backtracking on their announced proposals, changing their proposals or making even more extravagant announcements to support their posturing. Meanwhile, gas prices continued to surge prompting, at least in the UK, dire warnings regarding industry shutdowns and widespread energy poverty.

Initially, the UK Government did little to provide anything in the way of comfort as the country looked set to head into a new winter of discontent. Energy intensive users like steel, paper, ceramics and of course chemicals, where gas is a feedstock as well as an energy source, have highlighted the possibility of factory shutdowns, with resulting job losses, and have been seeking financial assistance from the government.

In a surprisingly rapid response, despite some harsh words between the Business Secretary Kwasi Kwarteng and the Treasury, with the backing of Downing Street, proposals were being drawn up to help industry meet gas prices four times higher than in 2020, through loans. The loans, repayable when the gas price returns to more normal levels, could extend over the winter and amount to hundreds of millions of pounds.

There have also been suggestions of a threat of public unrest over the possible imposition of a new levy on already expensive household gas prices, by passing over the spiraling subsidy costs of renewable energy and loading in costs from the drive to hydrogen and electric cars, bringing back memories of the so-called poll tax demonstrations in 1989/90.

In its response to these levy proposals from the UK Department for Business Energy & Industrial Strategy (BEIS), the Global Warming Policy Forum (GWPF) has said such a proposed tax on domestic gas heating ‘would almost certainly trigger a social and political disaster’.

GWPF Director Benny Peiser said: ‘The Energy Minister’s plan to hit households with massive new taxes on heating at a time of sky-high gas prices while millions of families are struggling to keep their homes warm is adding insult to injury. It is not just cruel and amoral but a political suicide note.’

The UK Government has also reportedly put a block on proposed natural gas expansion In the North Sea, despite natural gas forming part of its own plans for achieving net-zero carbon by 2050. Natural gas, although not the best route, is the potential source for 80% of the hydrogen the government is also banking on for marine transport, heavy goods vehicles and even domestic heating, as well as helping to offset gas imports.

The Offshore Petroleum Regulator for Environment & Decommissioning (OPRED) has refused permission for Royal Dutch Shell to further develop the Jackdaw field. This expansion could have supplied up to 10% of the UK’s annual natural gas consumption, equivalent to about 15% of consumption by UK households.

At the time of writing, the UK government had yet to make a statement. It is unclear why the proposal was rejected but the GWPF suggests the UK Government was reluctant to be seen consenting to such a development in the run up to COP26. As GWPF energy editor, John Constable expressed it: ‘Refusing permission for national gas production in the middle of a gas import crisis is a bizarre decision and seems to be driven by the short-term optics of COP26 rather than public interest and a rational approach to low-cost decarbonisation.’

Perhaps the most alarming pre-COP26 announcement by the UK Government is the bringing forward of the commitment to a fully decarbonised power system from 2050 to 2035. BEIS says home-grown green technologies such as offshore wind and nuclear energy, complemented by hydrogen, solar, onshore wind and carbon capture and storage (CCS), will support this transition away from fossil fuels.

Given the current state of UK nuclear energy strategy, and the time it takes to build nuclear capacity, let alone gain approval for construction, and the stop-start governmental policy on CCS, this looks like an impossible target – another example of pre-COP26 kite flying perhaps!

Meanwhile, Reuters news agency has reported that China has ordered its mines in Inner Mongolia to increase their output by over 50%, around 100m t or about 3% of the country’s total consumption of so-called thermal coal. This move, said to be in preparation for the winter months, follows energy shortages that have impacted Chinese manufacturing sectors.

On the other side of the equation, however, China’s President Xi Jinping has also said the country will ‘strenuously develop sustainable energy and accelerate the planning and construction of wind and solar projects in the desert areas on a large scale’. China is reported to have already begun construction of a 100GW solar and wind energy project.

Finally, in something of an about face, the European Union is being called upon by France and a group of Central and Eastern European countries, including Finland and the Czech Republic, to put nuclear power on its list of climate-friendly investments.

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