Certainty — almost as elusive as the Higgs Boson. Finding this fundamental particle could give weight to a sustainable energy policy, but it’s taxing the best government minds, says Jon Herbert.

Ahead of the soon-to-be-released Energy Bill, which must set out a clear road for UK energy provision, senior ministers and Whitehall officials have been wrestling with an intractable problem. Algebra students know that finding the value of x unknowns requires x+1 equations. And that is what the Government does not seem to have.

The knowns and unknowns are these. Energy costs are rising. In recent weeks the six major energy companies have increased their prices by between 6% and nearly 11%. With real incomes falling, price hikes are not appealing to “squeezed middle” or “hard working” family voters.

High prices — according to the principles of supply and demand — are caused by supply scarcities. An obvious answer is to increase supply. This can best be done, The Treasury argues, by being ready to take advantage of a projected worldwide increase in natural gas supplies due to come on-stream in the 2030s.

Fortunately, the UK already has a new gas-fired power station construction programme in hand.

But here the third unknown comes into play. It is difficult to predict the stability of some regions of the world from which future gas would have to be imported. So supply security becomes a big question mark. Environment is the fourth factor — natural gas is a fossil fuel, albeit less carbon intensive than a reliance on oil.

Why not then, argue policy makers around the Department for Energy and Climate Change (DECC), put more emphasis on a new generation of native UK renewable energy sources onshore and offshore? Because they are expensive to build, potentially unsightly and costly to operate, comes the reply.

Circular argument

This is where the nub of the debate lies. Can the UK meet its existing carbon-cutting commitments based on greater energy efficiency, reduced energy demand during recession, no further increase in legally-binding greenhouse gas reduction levels, a complex mix of traditional and new power sources and complete confidence that a boost in natural gas production will be sufficient to take the UK up to and past the mid-century point? The unknowns are beginning to stack up.

By 2050, new economic regimes and efficient new technologies may allow the planet with its rapidly expanding population to cope with whatever the future might throw at them. But relying on serendipity is a considerable gamble.

However, even reaching the mid-century mark could be tricky. One of The Treasury’s fears is that without a realistic approach to medium-term energy supply and use, a hamstrung economy will hamper the revival needed to make sustainability possible.

To make equation-solving even more difficult, Ofgem recently warned that pressure on gas supplies could potentially lead to power shortages as early as 2015. It has been several decades since ordinary UK citizens have had to depend routinely on candle power to light their homes. Welcome back to the mid-20th century!

Anxious investors

But while costs and the certainty of being able to switch power on in homes and businesses is one aim of the forthcoming Bill, a lack of certainty is also worrying another group — the large investors waiting to put money into a new UK energy infrastructure and power-generating capability.

Following David Cameron’s comments at Prime Minister’s Question Time to put all households on the cheapest possible tariff, Ofgem has been trying to end some of the confusion.

However, business leaders have warned that a lack of clarity over what carbon-reduction steps industry will be expected to take up to and beyond the 2030s is threatening business confidence in making the giant investments needed to transform the electricity market.

Some 50 major businesses recently signed a letter to the Chancellor saying that uncertainty is compromising growth, manufacturing and export potential. They include Marks & Spencer, Microsoft, Asda, EDF, PepsiCo, Philips, Sky, the Co-operative and Aviva. Their concern is that while prolonged uncertainty is deterring investors with the wherewithal to put more than £100 billion into a sustainable UK energy infrastructure, ordinary companies are losing out. They cite CBI figures, which estimate that roughly a third of UK 2011-2012 growth came from green business. A lack of clear direction could cost the UK £400 million in lost exports in 2014-2015 alone.

Change in the air

While renewables may be uneconomic in the immediate term, there is a world appetite for green technologies. As with all innovations, they often unlock the door to yet unknown benefits.

An example is recent news of commercially viable “petrol from air” technology. Revolutionary though this might sound, it is a process as old as the trees — literally. Carbon dioxide and water vapour were transformed into “fuel” in prehistoric forests. The energy source needed for synthesis was solar power in the form of sunlight. The result was sugars which eventually became coal, oil and other fossil fuels.

The modern challenge of harvesting atmospheric carbon and water to form hydrocarbons has been persuaded by a number of innovators in recent years. However, the pioneering work carried out by Air Fuel Synthesis on Teesside underlines the need for cost-effective renewables.

The firm’s unique chemical process replaces photosynthesis. However, by substituting green energy from renewables for sunlight, it offers the prospect of making hydrocarbons sustainable — as much carbon is harvested from the atmosphere as returned to the atmosphere.

While this could totally redefine solutions to climate change and the accelerating energy crisis, it does raise questions about the efficiency and assured availability of bulk, low-priced renewable energy.

All at sea

Such speculation probably does little to resolve the debate in Whitehall as to how an energy bill can pragmatically address the UK’s imminent economic and power priorities. But it does emphasis the point that in the longer term, the cost of renewables should probably be seen as a growth opportunity — if the UK can afford it.

Meanwhile, three important renewable energy licenses have been granted for projects off the coast of Northern Ireland. The Crown Estate has concluded business deals with First Flight Wind Ltd, Tidal Ventures and DP Marine Energy Ltd of Ireland with DEME of Belgium.

The projects, due to start in 2016, should see 600MW of wind-generation capacity built off Ardglass in County Down and two separate 100MW tidal turbine arrays at Fair Head and Torr Head off the County Antrim coast.

The result would be nearly a quarter of the province’s power needs generated by green energy in what could be Northern Ireland’s largest infrastructure project. Talks with local stakeholders and environmental assessments will follow soon. Thousands of jobs would be created. There are also expected to be substantial supply chain opportunities.

The Northern Ireland Executive requires 40% of electricity to be sourced from renewable sources by 2020.

In Scotland, First Minister Alex Salmond has launched the Renewable Energy Investment Fund (REIF), a £103 million project designed to attract more private investment to Scottish renewable energy projects.

The fund is intended as a catalyst to leverage private firms into key areas and is the result of a deal with The Treasury on funds from the fossil-fuel levy that was introduced into Scotland in 1996.

Its priorities are wave and tidal energy, plus renewable district heating. The Scottish Government is also expected to invest some £4.3 million into SSE’s (formerly Scottish and Southern Energy plc) offshore wind farm turbine testing facility at Hunterston on the west coast.

Last reviewed 7 November 2012