Oct 232013
 October 23, 2013  Posted by at 10:13 am Energy

Lately, after I’ve written yet another article that focuses on Britain, I pledge to myself that it’ll be the last one for a long while. Only to find that I need to do more, simply because what comes out of Albion is both so nuts and so indicative of what will soon happen in many other places that I can’t afford to not use it as a cautionary tale for people presently living in these ‘other places’. It’s simply about telling people: look at what they do, and then make sure you don’t do the same thing.

Of course, it’s been clear for a long time that Britain would face, at some point in the not too distant future, very serious energy issues. It has very little left in the way of domestic energy resources, and it’s situated at the very end of a very long pipeline that delivers Russian gas to Europe. However, the way the present government deals with these issues is guaranteed to make matters much worse for the population down the line than it perhaps could have been.

Now, I don’t live in Britain, so I can smile a little when I read about the next in a long line of government “initiatives”, but there’s not going to be anything funny about it for those who are going to have to live with the consequences.

But first, let’s do some pattern recognition and return for a moment to Downing Street 10’s housing policies, in the shape of its Help-to-Buy scheme, which I addressed 2 weeks ago in Gordon Gecko Moved To London. The government swore there would be no bubble.


U.K. Prime Minister David Cameron defended his decision to bring forward the Help-to-Buy program by three months, saying there were “very robust” controls in place to prevent a housing bubble.

House prices rose at their fastest rate for more than three years in the three months to September, the Halifax said today, adding to fears the Government’s Help To Buy scheme could create a price bubble. Halifax said prices rose nationally by 6.2% in the period against a year earlier.

The Bank of England has repeatedly said that it will intervene if its sees real signs of a housing bubble starting, and has been given greater powers by the Treasury to do so. Governor Mark Carney said last night that the Bank now had a “range of tools” it could use to ensure that the housing market “isn’t in a boom and then bust phase”.


And what do we see 2 weeks later?


London house prices jump by £50,000 in a month


London’s booming housing market is rising at an unsustainable rate, the UK’s largest property website warned on Monday, with the average asking price of a home in the capital surging by more than £50,000 last month. Such is the acceleration in the capital’s property market, according to Rightmove, that many buyers will need help from deep-pocketed parents despite the expansion of George Osborne’s Help to Buy scheme.

Rightmove said the average asking price in London rose to £544,232 in October from £493,748 the previous month – an increase of more than 10%. Across England and Wales, the rise over the month was a more modest 2.8% to £252,418. [..]


In the present economic situation, 6.2% a year is already a bubble, and 10% a month is beyond what that word expresses. Cameron and BOE governor Mark Carney should be panicking by now. But if they are, they’re not saying. As for pattern recognition, I noticed that this bubble is very different from what happens in Holland, which is about as close as you can get to a neighboring country:


Dutch house prices fall 4% in September


House prices were down 4.1% in September compared with a year ago, which takes them back to the level of early 2003, Holland’s national statistics office CBS said on Monday. Compared with August 2008, when the market was at its height, house prices have fallen 20% …


The reason I bring Holland into the picture is that what happens in housing also happens in energy. In Holland, energy prices are set to drop, largely due to lower transportation costs (for gas and electricity) for infrastructure owners/managers:


Lower energy rates from 2014 to 2016 will save Dutch consumers and industries €2.1 billion. Energy bills for consumers will fall by 4-5%.


And then compare that to Britain, where energy bills have already risen £100 a year since Cameron took power in 2010:


Cameron won’t stand up to Britain’s ‘big six’ on energy


Since the last general election, the average household’s annual energy bill has increased by over £300. At the same time, Britain’s big six energy companies have enjoyed a £3.3 billion uplift in profits …


And that appears to be just the beginning:


UK energy bills soar above £1,500 for the first time as Npower unveils 10.4% increase


Npower are the third energy giant to announce an inflation-busting winter price rise for millions of households. Campaigners said the German-owned supplier was putting “profits before people’s lives” as it revealed gas rates would rise by 11.1% from December 1, with electricity increasing by 9.3%. Dual-fuel bills will rise by 10.4% or nearly £140 to £1,491, but in four regions of the UK, London, Southern, South Wales and parts of Scotland, average “pay on receipt” bills will top £1,500 for the first time – an all-time high.

Ann Robinson, director of consumer policy at price comparison website uSwitch, warned the country was now at a “tipping point” where millions of cash-strapped households will turn the heating off this winter. “We carried out a survey last year where 35% said once bills reach £1,500 they’ll turn the heating off completely. We are now there and it’s serious. Can you imagine what will happen? “So many people will simply turn their heating off because they’re scared about the bills they are going to face and that is going to cause real health problems.”

Clare Welton of the Fuel Poverty Action Group said: “We can see from the wave of price rises that switching from one Big Six energy supplier to another is not the solution to fuel poverty. “As yet more households are pushed into fuel poverty we need to acknowledge the problem is the Big Six themselves: they will never prioritise people’s lives over their profits.” Npower chief Paul Massara said that while wholesale energy costs were up just 3%, the expected cost of meeting the Government’s green schemes was up 31%.


Still, of course the enterprising Cameron team have their answers ready. We have talked about their dramatically misdirected attempts at shale a lot already, for instance in The Second UK Dash for Gas – A Faustian Bargain, Shale Is A Pipedream Sold To Greater Fools and London Is Fracking, And I Live By The River .

Let’s leave it at this: shale oil is the wrong wager at the wrong time. Britain, like all other countries considering shale, should look closely at what happens in Poland and the US, study depletion rates at the Bakken play, and then agree to wait 5 years or so before they start handing out drilling permissions. A 5 year wait is not going to kill them, and if by 2018 US shale oil turns out to be a winning bet, and those depletion rate numbers are proven wrong, they can go ahead a lot more confident of the outcome, and they won’t have wasted billions of pounds on a mirage.

But Cameron and his guys have bets going on more horses in the energy dash, and if there is one common thread to be found here, it seems to be one that touches on the kind of megalomania which dictates that short term -political – gains are considered more important than what any of this will mean to the British people over time. As far as I can see, it’s either that or Cameron et al are really dumb. Which I don’t think they are. What you see is that their priorities are simply not in line with the best interest of the British people, and they don’t care about that. They seek short term popularity and when they have that, it’s used it to hand over large amounts of public money to private industries, preferably with long term binding contracts that will still have to be paid off when they themselves are long gone.


This next project shows that better than anything:


David Cameron hails nuclear power plant deal as big day for Britain


David Cameron has hailed the UK government agreement with French-owned EDF to build the first new British nuclear power station in 20 years, saying it was a very big day for Britain and would kickstart a new generation of nuclear power in the UK. The energy secretary, Ed Davey, claimed it was a great deal for consumers and would result in energy bills falling by more than £75 by 2030. He added: “If we don’t make these essential investments … we’re going to see the lights going out.”

With the deal between the UK government and EDF announced on Monday morning, Cameron said: “This is a very big day for our country: the first time we’ve built a new nuclear power station for a very long time.” He said the deal would be the first of many “kick-starting again this industry, providing thousands of jobs and providing long-term, safe and secure supplies of electricity far into the future”.

The new reactors, which will cost £14bn, are due to start operating in 2023 if built on time and will run for 35 years. They will be capable of producing 7% of the UK’s electricity – equivalent to the amount used by 5m homes.


The first hole was punched into that beautiful picture literally before the ink on the paper was dry. It should be impossible to have a government minister, when presenting a £14 billion plan, claim it will save people £75 on their energy bills, only to withdraw that within minutes, but it’s apparently not experienced that way in the UK: he’s still there.


New nuclear may not cut bills, energy secretary admits


Ed Davey admitted he “can’t guarantee” his claim earlier on Monday that building a series of new nuclear power stations could “reduce bills by more than £75 a year in 2030”. His department has admitted this figure is based on a comparison with the estimated costs of hitting green targets by building wind farms and as-yet-unproven ‘carbon capture and storage’ technology.

Mr Davey declined to say how the costs of new nuclear plants would compare with building gas plants instead, and admitted it would be “absurd” to say savings could be guaranteed.

EDF, the French energy giant, will be guaranteed a price of £92.50 for ever megawatt-hour of power it generates from the Somerset plant for 35 years – implying total revenues of more than £80bn. If the market price – currently about half that level – remains lower than the guaranteed price, EDF will receive “top-up” subsidy, paid for by levies on all consumer energy bills.


In another piece, we get some more of this train of truthiness:


Ministers made it clear that future governments would be locked into the contract, set to run until 2058, or face large penalties to compensate EDF. [..] Davey said the money to be paid to EDF – twice the current wholesale price of electricity – represented fair value.


That takes the grand prize: the same energy minister caught lying about citizens’ energy bills just about the very moment the words left his lips, in the very next moment claims to know that the price those same citizens will have to fork over to a foreign company to keep their lights on 35 years from now, represents “fair value”. He has no idea, isn’t that clear enough, he’s just moving his lips. How insane does this have to get before this guy is sentenced to spend the rest of his days on the isle of Elba? Or does he escape that fate only because his boss is even worse?


More details about the nuke financing:


Britain and French energy giant to build new nuclear plant in U.K.


The overall costs would be £16-billion in 2012 terms (about $26-billion U.S.) with consumers and taxpayers covering most of the bill. EDF will be guaranteed a price of between £89.5 and £92 per megawatt hour for 35 years, depending on whether it later goes ahead with another plant called Sizewell C that might reduce costs. The British government will guarantee 65% of the upfront cost of the Hinkley Point C reactors.


Note that the cost just went up from £14 billion to £16 billion, and that’s just what’s projected. Turns out, it’s just the beginning too:


Energy academics said on Monday that the deal was a gamble, but estimated the cost would be at least £80 billion over the life of the two new reactors to be built in Somerset, or roughly £3.5 million a day for each reactor at current rates. The cost will depend on how energy prices move over the next 30 years.


From £16 billion to at least £80 billion. That may be for two reactors, but it’s still quite a leap. Besides, nuclear plants that get built on budget? Never happens. Any bookie could tell you that at the end of the day it’ll be at the very least £100 billion, so make that £5 million a day every day for the next 35 years, minimum. And since, as we know, there is no way to safely store nuclear waste, those costs could easily come out double that 35 years from now and still leave a huge radioactive threat hanging over our heads. But even that, in my view, pales compared to this stunner:


Chinese companies to buy big stake in next generation of British nuclear power


George Osborne, the Chancellor, has announced that the UK will allow Chinese companies to take a stake in British nuclear power plants. The decision could lead to China taking a future majority stake – and even be allowed to own up to 100% – in the development of the next generation of British nuclear power.

Mr Osborne said the nuclear deal with China demonstrated both the openness of the British market and would act as a boon to the taxpayer. He said: “Today is another demonstration of the next big step in the relationship between Britain and China – the world’s oldest civil nuclear power and the world’s fastest growing civil nuclear power.


Chinese companies could take control of UK nuclear power plants


Chinese companies will be allowed to take full ownership of nuclear power stations in Britain … [..] Chancellor George Osborne signed a “memorandum of understanding on civil nuclear collaboration” with his Chinese counterpart Ma Kai during his trip to Beijing that went further than many expected.

The Government is expected to give the Hinkley project the green light early next week after finally agreeing a deal on the “strike price” – the amount the consumer will pay for electricity from the plant over a 35-year contract. It is expected to be fixed at around £92-£93 per megawatt hour – about twice the current wholesale price. The Government is also expected to use part of its £40bn infrastructure guarantee scheme to underpin the Hinkley project – possibly insulating investors from any delays in the supply chain.


So you have Chinese and French companies build – and own! – Britain’s future energy supplies (the expertise is no longer domestically available). How does that make you feel? Think it’s a good idea to hand over control of your energy needs to anyone but your own people? How about your drinking water? Or the air you breathe?


Also chiming in on the debate is George Monbiot, who has some nice details, but who also unfortunately appears to have lost a few marbles along the way, plus a lot of his credibility, and shows why again in this piece:


The farce of the Hinkley C nuclear reactor will haunt Britain for decades


Seven years ago, I collected all the available cost estimates for nuclear power. The US Nuclear Energy Institute suggested a penny a kilowatt hour. The Royal Academy of Engineering confidently predicted 2.3p. The British government announced that in 2020 the price would be between 3 and 4p. The New Economics Foundation guessed that it could be anywhere between 3.4 and 8.3p; 8.3 pence was so far beyond what anyone else forecast that I treated it as scarcely credible. It falls a penny short of the price now agreed by the British government.

I still support nuclear power. I believe that to abandon our primary source of low carbon energy during a climate change crisis would be madness. It would mean replacing atomic plants with something much worse. We should, of course, cut our profligate demand for power as much as possible. But if transport and heating are to be powered by low-carbon electricity, total demand is likely to rise even with the most parsimonious use of energy.

… the biggest onshore wind schemes could supply only a fraction of the low-carbon power a nuclear plant can produce. [..] Offshore wind has greater potential, but using it to displace most of our fossil fuel generation is a tough call, even when it’s balanced with a nuclear power baseload. Without that you would explore the limits of feasibility. If every square metre of roof and suitable wall in the UK were covered with solar panels, they would produce 9% of the energy currently provided by fossil fuels.

The harsh reality is that less nuclear means more gas and coal. It astonishes me to see people fretting about continuing leaks at Fukushima, which present a tiny health risk even to the Japanese, while ignoring the carcinogenic pollutants being sprayed across our own country. But none of this means that we should accept nuclear power at any cost. And at Hinkley Point the cost is too high.


What astonishes me is that a seemingly smart guy like Monbiot has made that turn towards cheerleading nuclear energy because of fossil fuel pollution, while he knows very well that there are no solutions for nuclear waste storage. None.


Nils Pratley warned in the Guardian last week that “if Hinkley Point’s entire output is tied to the rate of inflation for 40 years, we could be staring at a truly astronomical cost by the end of the contract.” The City analyst he consulted reassured him that “the government surely can’t be that dumb”. Oh yes? Payment to the operators, the government now tells us, will be “fully indexed to the consumer prices index”.

A fundamental principle of all development is that we should know how the story ends. In this case no one has the faintest idea. Cumbria – the only local authority which seemed prepared to accept a dump for the nuclear waste from past and future schemes – rejected the proposal in January. No one should commission a mess without a plan for clearing it up.


And here he seems to acknowledge the waste conundrum. Alas, it serves only as a prelude to a new hobby horse:


The clunky third-generation power station chosen for Hinkley C already looks outdated, beside the promise of integral fast reactors and liquid fluoride thorium reactors. While other power stations are consuming nuclear waste, Hinkley will be producing it.

An estimate endorsed by the chief scientific adviser at the government’s Energy Department suggests that, if integral fast reactors were deployed, the UK’s stockpile of nuclear waste could be used to generate enough low-carbon energy to meet all UK demand for 500 years. These reactors would keep recycling the waste until hardly any remained: solving three huge problems – energy supply, nuclear waste and climate change – at once. Thorium reactors use an element that’s already extracted in large quantities as an unwanted byproduct of other mining industries. They recycle their own waste, leaving almost nothing behind.


You really want to build your energy policy on technologies that are merely “promising”, but also essentially and entirely unproven? You think that’s smart? There are no fast breeders and/or thorium reactors active in the world today on any productive scale. They are nothing but religious icons in the church of techno happy: you have to believe that “we” will be able to solve issues that nobody has been able to, and certainly not for lack of trying, for 70 years. What does that tell you? It’s like saying let God deal with it. That whole last paragraph is nonsensical hot air, and if “the chief scientific adviser at the government’s Energy Department” really says such things, he should be urged to look for alternative employment. Urgently.


Here’s some July 2013 “wisdom” from the one country seriously trying to built breeders, and do read the details:


First fast breeder reactor almost ready


India’s first commercial fast breeder reactor, the 500 MWe Prototype Fast Breeder Reactor (PFBR), is almost ready and it would go critical by September next year, according to Dr P.R. Vasudeva Rao, Director, Indira Gandhi Centre for Atomic Research (IGCAR).

Talking to reporters here on Thursday after delivering the CSIR-CECRI Foundation Day 2013 lecture, Dr. Rao said 96% of the PFBR construction by the Bharatiya Nabhikiya Vidyut Nigam Limited (BHAVINI) had been completed. After the Atomic Energy Regulatory Board (AERB) certified safety aspects in different power levels, the PFBR would start generating power, he said. “As the AERB was very strict on safety measures it will take several months or a year to complete the process.” [..]

Earlier, delivering a lecture on “Chemistry for Fast Reactors and Associated fuel cycle,” he said fast reactors were important for realising sustainable nuclear energy. The use of plutonium in fast reactor fuels, operation of the fuel at high temperatures, use of liquid sodium as coolant and enriched boron carbide as the control material were examples of features of fast reactors that pose a challenge to the chemists, he said. “The safe operation of reactor, reduction in the generation of nuclear waste and similar objectivities can all be met only through a sustained R&D programme in chemistry exploiting the knowledge base and expertise available in various academic and research institutions,” he said. Future challenges with respect to fast reactors would include the use of pyro-processing schemes for reprocessing the metallic fuels, he added.


Breeders and thorium reactors have been “almost ready” for longer than most of us have been alive. You can’t just talk about them today as if, once more, they’re ready for use, and expect to be taken seriously; India’s go-to-man explains why, even as he becomes no. umpteen to declare HIS plant is “almost ready”. Some of it may go over your head, but anyone can reason that if “operation of the fuel at high temperatures” is a “challenge”, “almost ready” is a very flexible term.


Not that Cameron puts all his eggs (or Monbiot’s marbles, for that matter) in that one basket either, He sees, for instance great growth potential in the melting Arctic. So much so that I strongly suspect if you asked him in private, he would be more than glad to help speed up the process a little, if there’s a profit in it for him and his friends. I’ll deal with that tomorrow in part 2.


And I’ll leave you with a – perhaps deeply philosophical – question: Are we going to be done in by a lack of energy, or by our desperate chase for more of it? When Monbiot says: “ … if transport and heating are to be powered by low-carbon electricity, total demand is likely to rise even with the most parsimonious use of energy.“, my first thought is: that doesn’t sound too smart. Demand may rise, but that doesn’t mean anything if supply does not. If there’s less supply, we’ll be forced to transport less and heat less.

And whether or not that’s disastrous depends to a large extent on how we design our societies. The way things are going right now, it’s obvious disaster will be upon us if we have less energy at our disposal. But if we don’t demand our food to come from 5000 miles away and our clothes from 10,000, and we don’t all need a car to drive us 100 miles every day to get to work and to the mall, then perhaps we can pause the mad dash for more. And not build conventional nukes or chase breeder or thorium pipedreams. The desire for such things is only there because we have this urge to maximize our energy use (ever looked at how that went up in the past 50 years? ever wondered why?), an urge we inherited from our distant ancestors, yeast and amoeba. Doesn’t mean we have to act on that urge. Come to think of it, maybe this is our chance to prove once and for all that we’re smarter than yeast. It’s all about which part of the brain prevails.

Then again, maybe the real problem is that energy is power, and so energy is a power game, and we can’t stop playing. Maybe it’s inevitable that for the shit that floats to the top of our societies, it’s very clear which part of the brain prevails. More tomorrow.



Photo top: Jack Delano Locomotive coupled to caboose January 1943

“”Freight operations on the Indiana Harbor Belt railroad between Chicago, Illinois and Hammond, Indiana”



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