The crisis in the Ukraine is disturbing for many reasons, not least the prospect of renewed Russian expansionism and the potential violations of international law.
But it also calls into question the UK’s energy policy over the last forty years, during which we have become more and more dependent upon gas and coal imports from Eastern Europe, in particular Russia.
The stark truth is that, with the decline of the UK’s coal industry, Russia is by far and away our biggest coal supplier. We now import circa 20 million tonnes of coal every year from Russia to fuel our coal-fired power stations, from a total of circa 45 million tonnes of imports.
The gas situation is more complex. The UK remains heavily dependent on gas, particularly for domestic heat, with the vast majority of supply coming from imports. However, the complex network of gas pipelines across Europe make it difficult to pin down the country of origin. Some analysts argue that Russia supplies circa 15% of the UK’s gas, whilst others suggest that none of our gas originates from Moscow’s state-owned energy companies.
It is however undeniable that our dependency on imports leave us vulnerable to fluctuations in the international spot price for gas which, in turn, is directly affected by the diplomatic situation.
Moscow has proved in the past to be more than willing to use energy as a stick to get what it wants. In 2006, gas supplies to the Ukraine were cut off. In 2009, supplies to both the Ukraine and Western Europe were disrupted. The source of the renewed tensions between the two countries is complex, but the Ukraine’s reliance on Russian gas is, once again, a contributory factor.
Whilst all this has been going on, in the UK we haven’t been helping ourselves. Renewable energy, specifically wind, remains in its infancy, particularly compared to Continental Europe. Domestic microgeneration, such as solar panels,continues to be hampered by the high unit cost of the equipment.
Nuclear power therefore remains central to the UK’s energy strategy, but the sale of British Energy to the French firm, EDF , left us without any capability to build and run our own nuclear power stations.
Whilst the Exchequer got £4.4 billion in 2008 for its stake in British Energy it failed to wring a binding commitment from EDF to build any nuclear reactors. In the end, EDF could only be persuaded to build the new reactor at Hinkley Point in Somerset if a minimum price was guaranteed for the electricity generated, due to shareholder concerns over the enormous upfront construction costs. This minimum, known as the ‘strike price’, will be covered by increases in consumer bills.
The truth is the failings of successive governments to develop a long term energy strategy has left the UK at the mercy of both international relations and markets. We have come a long way from when coal, mined in the UK, was the lifeblood of the economy. The price we now pay for energy is dictated by foreign governments and international commodity exchanges.