Fascinating first report

This month we are due to see the first report from Lord Chris Smith, the Environment Agency’s former chairman, into the risks and benefits of shale gas.

His unofficial Task Force on Shale Gas describes itself as “independent”, Smith has promised he will act “independently and transparently.” He would never, he maintains, “ be part of this important initiative if my independence was in any way compromised.”

However, the Task Force is funded entirely by six companies each with a considerable financial interest in exploiting the resource. Its secretariat is provided by Edelman PR, which also works for Caudrilla.

I gather that initial work is considering the impact of noise, as well as “wider economic and climate issues.” It will be fascinating to see whether Smith will be prepared even to nibble at, let alone bite, the hand that feeds him.

The biggest winners

It is very clear the biggest winners, of the government’s £1bn worth of pre-Christmas presents to incumbent electricity generators, were those who have never vaguely considered ever removing capacity from the market in the first place.

In essence, each is now going to be paid an extra £19 a kilowatt for power they would absolutely certainly be providing anyhow. Just in case a theoretical ‘stress event’ in the winter of 2019 might have stretched the Grid’s capacity just too far for a short while.

The classic beneficiary is the Dinorwig pumped storage plant in Snowdonia. The role of Dinorwig is to buy electricity when it is least in demand, and so at its cheapest (5am). Then use it to pump water up hill, and sell it at the peak time – effectively 5pm). That is precisely what this ‘short term operating reserve’ plant was originally designed to do. And has been doing every day since June 1984 when first commissioned. But now Dinorwig’s owners, Gaz de France Suez, should be able to increase their annual profits by at least 35%. Without changing their daily business practice one iota.

This entire scam has been the result of various unscrupulous generators endlessly ‘warning’ about supply crunches, orchestrating breathless ‘lights going out’ scare stories from the tabloid papers, and scaring the ever-gullible Energy Department into setting up that phony “capacity market” auction. Dealing with a perceived generation shortage that simply never existed.

Apeing US policy

Given how slavishly the present government seems to seek to ape US energy policy (witness the Conservatives’ love-affair with shale gas), you might have thought that the US experience on nuclear power’s anticipated renaissance might also be giving pause for thought at Number Ten.

Take the public concession just made by America’s Nuclear Regulatory Commission Chairman Allison Macfarlane. Addressing the highly prestigious National Press Club, she admitted her agency had simply never prepared for a future where, instead of overseeing new nuclear plants, it is reckoning with older plants retiring ahead of schedule.

“The predicted ‘nuclear renaissance’ did not materialise,” Macfarlane said. “It’s time for the NRC to develop regulations specific to the decommissioning of nuclear power plants, and to structure public expectations of the process.”

When later this year the Wylfa Magnox on Anglesey comes out of service, Britain will have turned a similar corner. There will then be more nuclear power stations being decommissioned than generating electricity. At some point the penny will drop here regarding the true future for nuclear power.

Failure to meet obligations

Over recent weeks the regulator Ofgem has fined no less than six different electricity-generating companies for failing to deliver a government-mandated programme to install solid wall insulation in low-income households. Called the Community Energy Saving Programme, it was launched by then prime minister Gordon Brown in September 2008. And was due to be completed by January 2013.

Some, like EOn, got started immediately and finished their quotas well ahead of time, at reasonable cost. Others delayed, as in RWE’s case, and found their costs mounting towards the end as they rushed to complete their legal requirements on time. But a third lot – including British Gas, SSE and ScottishPower – simply failed to complete their obligations at all.

After interminable due process and statutory consultations, Ofgem is now levying penalties worth in total £56m. They require each offending company to provide “consumer redress”. You might have thought that, as the entire objective of Brown’s scheme was to install insulation in low-income homes, that is how absolutely all of this penalty money should be spent. Not a bit of it. Ofgem seem actively to be encouraging British Gas to hand the money over quite deliberately to charities like NEA and Warm Zones that provide energy advice and debt assistance to disadvantaged households. But not necessarily spending money on installing actual insulation into solid walled properties. Even though 95% of homes in the UK with solid walls have yet to have them insulated.

Concentrating on “softer” measures like welfare advice suits the penalised companies. As one of the offenders, SSE, has admitted in evidence to the House of Commons, every time a home is properly insulated, the household spends £400 less with them each year. The last thing they wish to see is more homes that are well insulated.

Noticeably insulation is set to be installed by 2030 in practically all 8 million homes with solid walls. Not so, say the Grid. According to figure 15 of its most recent set of scenarios, probably only 13% of eligible homes will be fully insulated even by that time. Bearing in mind that households remain larger users of energy than business, reversing such pessimism may yet give future Grid scenario planners even more room to project future consumption levels downward. See if I am not right.