Robert McIlveen is a Research Fellow in Policy Exchange's Energy and Environment Unit.
As we approach the end of winter, fears about energy security will start to recede. Yet we need to think long and hard about our energy supplies over the coming decade. As our aged nuclear power stations reach the end of their lives and older coal-fired power stations are closed under pollution control (to cut emissions of sulphur dioxide and oxides of nitrogen, not carbon dioxide), gas fired power plants are likely to pick up the strain up to 2020. Ministers reassure us there will a golden future of new nuclear and plentiful renewables – a combination which has significant problems in its own right – yet fail to tell us how we will get there, and omitting the rather alarming gap somewhere between 2015 and 2025.
The increase in gas-fired electricity generation has its own knock-on effects. North Sea reserves are beginning to tail off, and the UK has already become a net importer of gas. This is a fundamental shift for UK energy markets, which were established in the 1980s and 90s at a time of over-provision of power stations and secure and reliable domestic supplies of gas from the North Sea.
How to react to the changing circumstances is the subject of our latest research note launched today - Running on Empty: Coming to Terms with UK Gas Dependence. Britain’s liberalised market has delivered very competitive prices, but has now got to adapt to the challenge of tight global and regional markets and declining UK production. To that end, the Government has a diplomatic role to play.
We are not arguing for wholesale Government involvement in the energy trade. But we are arguing that the Foreign and Commonwealth Office needs to up its game when it comes to energy. At present, the American, German and French diplomatic missions in places such as Ashgabat or Doha have much better expertise, as well as simply more diplomats devoted to securing supplies for their markets.
The UK’s privatised, liberal market in energy has worked well over the last two decades, with prices lower than in most of Europe. But there is a downside: when a French or Chinese company wants to import gas, they have their government’s full backing – this is important because most gas exporting companies are very closely entwined with their governments. If British diplomats are unable to support companies wanting to import to the UK in a similar manner, our energy security may come at a higher price than it would otherwise.
The FCO has developed expertise in climate change in recent years, with a team of around 70 diplomats working on it full-time. The FCO needs to take energy security seriously, and to that end should ensure that it has enough expertise, both in London and in crucial embassies, to deliver – if it can do it for climate change, it can do it for gas.