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Gold plated standards or gas for home heating? Vote now…

Gold plated standards or gas for home heating? Vote now

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Market Briefing
Published: September 2013
Pages: For full details, please email keithw@cmsinfo.com
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Research from: energy-market-research.info
Sector: Blog

Last week it was ‘announced’ that nine and a half scientists out of ten now believe that the activities of man are a major contributor to global warming.

Also last week the BBC aired an interview with the editor of ‘Nature’ magazine and Professor-turned-presentor Brian Cox, where the former noted that the majority of articles submitted to the journal that reinforced this view were growing in number, whilst those suggesting there was no link remained few and far between.

Coal, of course, remains the primary fuel for electricity generation. China is now the largest user, burning 3.5 billion tonnes in 2012. The problem, of course, is that its longer-term use needs the highly polluting carbon dioxide emissions to be captured. This is do-able, or at least, has been shown to be possible in the laboratory.

However, the West is something of a wounded lion. The cost of bailing out the bankers following the 2008 fiscal meltdown has been at great cost to the governments involved, and as was seen with Syria, the will to police the world by the West has been considerably weakened.

Whilst Syria presents a significant moral challenge for the West, it begs the question whether we will see other – more pragmatic - developments deemed desirable now questioned in the light of fiscal belt tightening.

Is it better only to build something that fully complies with current Health & Safety and emmission standards, or, if we cannot meet the new compliance benchmarks, not build it at all?

The proposed UK extension of the European high-speed rail network from London to Birmingham has seen estimated costs esculate from £33 billion to either £50 bilion or even £82 billion due to the government accepting – almost without question – the requests of numerous lobbying groups for additional tunnelling. The risk, of course, is that the UK will have no ‘hedge’ should cheap air flights no-longer be available in the mid-twenty first century, by which time it will be too late - the the UK really will be an economic backwater in anotherwise high speed Europe. 

This line of thought was prompted by a thought-piece issued by John Westwood of energy analyst firm Douglas-Westwood this week that noted that in July 2013 Shell and SSE had failed to secure EU funding for the Scottish Peterhead power station carbon capture and storage project.

Westwood notes: “In 2007 previous plans had collapsed after BP withdrew from the £1 bilion ($1.6 billion) venture. And now in September 2013 it has been announced that development of full-scale carbon dioxide capture at Norway’s Mongstad oil refinery had been discontinued following increasing costs and delays”.
He poses the question whether CCS is now priced out of the quest for low-carbon energy?

In 2011 the UK’s Committee on Climate Change estimated that electricity generated by coal with CCS would cost twice that of natural gas without CCS and in 2012 America’s EIA reported similar numbers.

So it seems that CCS is only viable with significant subsidy, as indeed, is offshore wind.

But the other key issue is that (unsubsidised) natural gas power plant emits less than half the CO2 of coal-fired plant. It is therefore no surprise that the UK Government aims to replace old coal-fired stations with up to 30 new gas-fired power ones by 2030, with the remainder of power generation needs coming from a mix of nuclear and renewables.

Wetswood therefore poses the question of whether CCS is buried for good, or is there something out there that could economically resurrect it?

But again there is a politcal dimension to this. Gas to fuel this new generation of power stations will come from Russia, which means that like any good monolpoly, it will start to want to price its production accordingly – or offer terms which may not sit comfortably with the western nations wholly dependant on this supply to heat their electorates.

Which ironically brings us back to Syria. Should there a regime change there, then it would be highly likely that Saudi Arabia would seek to break Russia’s monopoly with a gas pipeline through Syria and into Europe via Turkey. Perhaps this is one of the reasons that Putin is so solidly behind the current administration?


Keith Wallace


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