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The Energy Situation in Britain

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Energy prices have risen to extremely high levels in recent years, as more and more countries worry about securing their future energy supply. Britain is lucky, with its large oil and gas reserves in the North Sea. However, production from the North Sea is declining and Britain will have to make some difficult decisions about energy sources in the future. Electricity demand has risen significantly and is about 60 per cent higher than 30 years ago.

‘Hundreds of thousands of homes across the UK came within hours of power cuts after the National Grid issued an emergency call for electricity companies to reduce demand on one of the coldest days of the year. The companies were preparing to cut power or dim the lights on Thursday by lowering the voltage, after the grid issued a warning of a possible problem between 4.30pm and 6.30pm. Power generators were told to make more power available to the system, while distribution companies were informed that if no more power were made available they might have to cut some customers off temporarily. The highly unusual shortage comes as fears mount over the security of Britain’s energy supplies.’

The Times, 31st December 2005

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small globe iconIntroduction

After having been a net exporter of energy for the past two decades, Britain is about to become a large net importer. The country is rapidly running out of the significant reserves of oil and gas that made it a leading producer over the last three decades. In 2005 Britain became a net importer of natural gas and is expected to lose its self-sufficiency in oil by 2009. To add to this, the British coal industry has continued its considerable decline in recent decades. By 2020 Britain will be importing about three quarters of its primary energy needs. There are growing fears that energy could become a political weapon.

Many of the country’s coal and nuclear power stations have been in service for a long time and will need to be closed in the next decade or so, requiring substantial new investment to maintain the country’s generating capacity. Many parts of the energy distribution network are also ageing and in need of considerable investment. New development will be costly and will involve some difficult governmental decisions.

  • The primary role of government in terms of energy is to ensure continuity of supply.
  • The government is also under considerable pressure, internationally and nationally, to reduce the amount of pollution caused by energy production and consumption.
  • It has also set the country the optimistic target of reducing greenhouse emissions by 60 per cent by 2050.

These interconnected priorities will clearly have a considerable impact on the energy choices Britain makes now and in the future.

small globe iconSources of British energy

Figures 1 and 2 show how Britain’s share of energy consumption by source has changed since 1990. The main changes are:

  • a modest decline in the share of petroleum
  • a very considerable rise in the relative importance of gas
  • an equally significant decline in the share of coal.

The contribution of nuclear power and other sources of energy (mainly hydroelectric power) changed little during this period.

Oil and gas

The North Sea is classed as one of the world’s great energy provinces. However, it is thought that Britain has already taken between half and three quarters of the oil and gas within its territorial waters. Much of the remaining North Sea reserves are in small and remote fields that are more expensive and more difficult to access than those fields already in production. British oil production peaked at the end of the 1990s, and it has now fallen by about 30 per cent to around 2 million barrels a day. By 2010 it could be down to 1.2 million barrels a day. During the same period it has been estimated that natural gas production will fall from 9,400 million cubic feet to about 6,000 million cubic feet.

Figure 3 shows Britain’s oil balance from 1997, while Figure 4 illustrates the decline in the average size of British oil and gas fields commencing production since the mid-1960s. The trend in Figure 4 is very significant indeed.

Figure 5 illustrates the sources of Britain’s gas supply, with more than 90 per cent coming from the North Sea. Approximately 10 per cent is imported via the European gas network. Only 2 per cent of Britain’s gas supply comes from Russia, a figure well below that of many mainland European countries. The importation of liquefied natural gas (LNG) to a plant on the Isle of Grain began in 2005.

Clearly, gas imports will rise in the future. There is no other choice, as gas is projected to account for an increasing share of electricity generation (Figure 6). This is primarily because gas is the least polluting and most flexible of the fossil fuels.

The government is trying to encourage development of the remaining reserves in the North Sea by various means.

1. One way is a policy under which oil fields left fallow by their owners may be given to other companies with plans to develop them.

2. Also, as many of the largest fields decline in production and become less profitable to the large oil companies, smaller companies are taking their place. Smaller companies are generally satisfied with smaller profits than the ‘majors’ and have been greatly encouraged in their efforts by the very high price of oil over the last few years.

New techniques are being developed to extract more oil than previously possible from North Sea oil fields on both the British and Norwegian sectors. An example applies to the Miller oil field 240 kilometres northeast of Peterhead in Scotland. Production from the Miller oil field peaked in 1995 and was due to shut down by 2007. However, by injecting carbon dioxide from a mainland power station into the oil field (Figure 7) it has been estimated that an additional 40 million barrels of oil could be extracted. This would increase the life of the Miller field by 15 to 20 years.

Nuclear power

Figure 8 shows the current distribution of Britain’s nuclear power plants. No other source of energy creates such heated discussion as nuclear power. The biggest issue, although not the only one, is the huge cost and possible environmental consequences of radioactive waste disposal. Until the middle of 2005 it seemed unlikely that Britain would consider building a new generation of nuclear power plants. In fact, the 2003 Energy White Paper described nuclear power as ‘an unattractive option’. However, with falling energy production in the North Sea and concerns about possible supply disruptions on imported energy, nuclear energy appears to be back on the agenda. The government is faced with the difficult decision of either allowing the industry to run down gradually as old plants have to be closed or to build new plants. A significant problem is that it takes at least ten years to plan and build a nuclear reactor.

Environmental organisations such as Greenpeace are absolutely opposed to nuclear power. Their main objections are:

  • the risk of a major accident spreading radioactivity into the atmosphere and hydrosphere
  • the production of radioactive waste which will remain in a potentially dangerous state for centuries.

The proponents of nuclear power argue that it is the only way that Britain can avoid electricity shortages and meet its climate change obligations at a reasonable cost. A recent report by the investment bank UBS calculated that nuclear electricity is cheaper than gas as long as oil is above $28 a barrel (natural gas prices are closely linked to the price of oil).

Without the construction of new power plants, the share of nuclear-generated electricity will decline from 23 per cent in 2005 to 7 per cent by 2020. Nine of the country’s twelve nuclear plants are due to be closed in the next ten years.












Figure 1. Britain's energy consumption by source, 1990 and 2004.
Figure 1.
Britain's energy consumption by source, 1990 and 2004.
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Figure 2. Sources of energy—percentage of total.
Figure 2.
Sources of energy—percentage
of total.
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Figure 3. How Britain became a net oil importer.
Figure 3.
How Britain became a net oil importer.
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Figure 4. Average size of British oil and gas fields commencing production.
Figure 4.
Average size of British
oil and gas fields commencing production.
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Figure 5. Where Britain's gas comes from.
Figure 5.
Where Britain's
gas comes from.
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Figure 6. British electricity generation by source.
Figure 6.
British electricity generation by source.
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Figure 7. A new way to extract oil from an oilfield.
Figure 7.
A new way to extract oil from an oilfield.
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Figure 8. Distribution of British nuclear power plants.
Figure 8.
Distribution of British nuclear power plants.
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