This is a long video - much longer than the @skynews explainers I usually make.
But it's about a very big and consequential question - one that deserves consideration:
Is Net Zero and environmental policy responsible for the current energy crisis?
This is my attempt at an answer:
Predictably there are quite a lot of people out there insisting the current rise in prices has nothing to do with net zero policy.
Predictably there are a lot of people out there insisting it’s all or mostly to do with net zero policy.
Predictably, they’re both wrong.
🧵
Let's begin with the big picture, and for the time being let's just look at where we get our electricity from (this being only a fraction of total ENERGY use). In the UK we've reduced our reliance on coal to v low levels. This is an impact of environmental policy.
And it is excellent news.
Yes: gas is still a fossil fuel which emits a lot of carbon (and methane escape is a big issue too).
But it emits 44% less carbon than coal. Moving from coal to gas will help reduce carbon emissions a LOT. This was phase 1 of the UK's net zero roadmap
The thing to note is that across the world other countries are now doing likewise, shifting from coal to gas. Most obviously China. Just look at how their imports of coal have now been overtaken by imports of liquefied natural gas. This is a seismic shift...
If China shifted all its coal power stations to gas we'd instantly be on track to keep global warming below 2 degrees C. So this is a big deal.
But the upshot is a LOT of demand for natural gas across the world. But supply hasn't necessarily kept up (chart from @energy_said):
Now there's a LOT going on with gas prices, not least Russia/Ukraine & covid (which also helps explain lower supply).
But still: the switch from coal to gas as a major energy source - itself linked to net zero policy - is one of the explanations. It's naive to pretend otherwise.
So yes: net zero is part of the explanation for higher energy prices.
But teasing out how much of a part it's playing is impossible. My hunch: less of a factor than eg Russia/Covid.
Btw this isn't a fringe view. Here's the @bankofengland governor on it:
High gas prices will be a big issue for the UK until we've worked out a secure, sustainable form of energy storage, since it helps power the network when the wind isn't blowing hard.
This matters.
Just look at where our power came from over two days in a single week in jan:
High gas prices matter because we are very reliant on gas to heat our homes. And those high international gas prices are the main thing pushing up our bills this year. Look: wholesale prices are by far the biggest cost post the increase in the energy cap:
How about the bit of the bill explicitly linked to "environmental and social" costs: "policy costs"?
It's not big but nor is it trivial, about 8% of bills.
Is this linked to net zero?
Yes and no. Some is used for other purposes. But yes some is used to fund renewables. However...
There's a twist to this tale too, which is that most of the environmental costs in our bills are going not towards NEW wind turbines etc but to pay off the legacy costs of renewables from years gone by.
This gives me an excuse to reproduce one of my favourite ever charts...
This chart shows you how expensive coal/gas/wind/solar are per MWh over their lifetimes. Subsidy-free.
The higher the bars, the more expensive.
Just LOOK at how much the cost of renewables has come down 2009-2021!
The environmental costs in our bills reflect the fact that renewables USED to be very expensive. They're not any more, looked at through this prism.
But there are two important provisos: 1. this doesn't take account of the cost of backup for intermittency (back to that gas issue)
2. These charts, striking as they are, are good at illustrating the LONG-TERM cost of these energy sources. What they don't show v well is that the cost of wind/solar is nearly all UP FRONT.
Cost of gas/coal is spread out as it's fuel as well as building the power station.
In some sense that doesn't matter, provided those building renewables can get the finance they need to build their wind turbines. But it brings us to another issue, one I think more profound than anything we've yet covered.
We are reducing our reliance on fossil fuels. In order to replace that energy with green energy we will have to build a LOT of new stuff.
Consider: a dollar invested in oil/gas/coal adds roughly 25-35 TWh of annual new energy supplies.
A dollar invested in wind/solar: 1 TWh
Here's another way of looking at it. Here rather than spreading out the cost of different energy sources over their lifetime we're JUST looking at the initial Capex costs to provide an equivalent amount of energy for a year. Suddenly renewables look v expensive vs fossil fuels.
You see the issue here. Both of these are valid prisms to consider the cost differentials. The lifetime cost gives you a sense of long term cost. But it's sometimes worth pondering the UP-FRONT cost too. In part because this matters pragmatically to companies/countries.
If we are really SERIOUS about net zero then all of the above would imply that we should be spending some serious $$$.
Staggering sums.
For a taste of what this means, consider these numbers from the @IEA's pathway to net zero.
This is beyond FDR/the New Deal. It's truly massive.
But here's the thing. Look at our investment in primary energy, which includes both fossil fuel and green energy, and if anything we're going backwards. It's stagnated since 2015. Far from ramping up, it's ramping down vs the previous trend. This is disquieting.
Put this all together and one is left with a slightly worrying question: what if the current energy crisis is just a glimpse of what happens when you make BIG promises about changing the energy supply without actually backing up those promises with investment?
This is a question more than an answer. But there are some hints in the data that what we're going through might not just be a post-Covid blip. And might be a deeper crisis. A crisis of words vs actions. For an illustration of the issue, consider two more charts...
This is a useful illustration of how we might get to net zero.
Imagine the bar is global carbon emissions.
The segments show how we remove them.
7% via behavioural change
46% by deploying tech we already have (eg solar/wind)
But 47% is STUFF WE HAVEN'T MADE YET
In which case you'd really hope govts & companies around the world were spending big-time on R&D to invent the stuff to get rid of that red chunk of carbon. Except... they're not.
This is just govt R&D on energy (much harder to track private spend). But the trend is... depressing
Is net zero responsible for higher energy prices? A bit, but maybe not in the way you might think.
If anything, the lesson from the data is that if we're really serious about eliminating carbon emissions we're not spending anywhere near enough yet.
Video:
For those who prefer their news & analysis in textual form (I believe there are still some of those out there), here’s a long read on this topic: Has net zero/environmental policy contributed to the current energy crisis? news.sky.com/story/energy-c…
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Do you think, on balance, that the young have been selfish or selfless in their conduct during the pandemic?
Still plenty of time left in this admittedly unscientific poll, but already the answer is pretty clear.
And frankly, that’s the way I would have voted too.
Nearly every piece of statistical evidence suggests the young have been remarkably SELFLESS during the pandemic.
Clearly they didn’t face the same health risks as the elderly during the pandemic, but most young people followed the lockdown strictures and rules.
Even when lockdowns end they remained remarkably committed and considerate.
This is an @ONS survey abt behaviour POST lockdowns:
🚨NEW 🚨
Bank of England says UK households must brace themselves for the biggest annual fall in their standard of living since comparable records began three decades ago, as it:
- Raises interest rates to 0.5%
- Says inflation will surpass 7%
- Slashes GDP forecast
According to the Bank’s calculations, real post-tax labour income - perhaps the best measure of standards of living since it accounts for the rising tax burden as well as inflation and earnings - will fall by 2% in 2022
Biggest fall since comparable records began in 1990
The MPC voted 5-4 in favour of raising interest rates from 0.25% to 0.5%. But those four dissenting members wanted a hike to 0.75%.
So households will have to contend with higher borrowing costs as well as higher taxes, energy, goods and services prices.
Landmark day in the cost of living crisis:
- Ofgem to confirm energy bills will go up by £hundreds from Apr
- @bankofengland expected to raise interest rates further
- New forecasts showing inflation to hit highest level since early ‘90s
- Chancellor to step in with £££ measures
According to my calculations, the rise in the energy price cap to around £2k will push up the energy bill burden (eg share of average household spending going on heat/power) to the highest level since the late 1980s:
If they go up further later this yr, as is widely expected, the energy bill burden gets to the highest level since at least the 1970s. Possibly even earlier. Eg in terms of the immediate domestic impact this could be worse than any modern energy crisis
NEW: UK benchmark inflation rate rises to highest level since 1992. Consumer Prices Index hit 5.4% in Dec, up from 5.1% in Nov and way above @bankofengland 2% target ons.gov.uk/economy/inflat…
Two questions: first, how high will CPI get in the coming months? @bankofengland said 6% but many economists think 7%.
Second, how soon does BoE raise int rates again? Could be as soon as next meeting in Feb (prob up from 0.25% to 0.5% so still v v low by historical standards)
The point here (and this can't be emphasised enough) is that this 30yr high in inflation is happening BEFORE the impact of a record increase in energy bills which, as I ran through in this thread last night, will squeeze households even further
THREAD: Could the current energy crisis be even worse than the 1970s oil price shock? Given the legendary status of that event it might seem like a preposterous question. But we’ve crunched the numbers on this and they’re not pretty…
Before we get to the data it’s perhaps worth splitting up the 1970s comparison into two parts: first, the financial impact on households.
Second, the impact on the wider economy: shutdowns, three days weeks and so on. Let’s deal with household finances first.
It so happens the UK has an excellent set of statistics on what the “average” household spends its money on each year. £588 a week Everything from restaurants, culture, food/drink, mortgage payments, council tax, income tax and, of course energy bills: a quick guided tour here:
Back in 2014 the UK population was projected to be closing in on 75m by 2040.
Latest projections, released today, suggest we’ll have barely more than 70m people by then.
This is a big change.
Some will argue it’s good news. Others bad.
Either way, it’s enormously consequential.
According to the latest official population projections, the UK’s total fertility rate is now 1.59 (long term average of children per woman).
Down from 1.78 in 2018. BIG drop taking it down from comfortably above the OECD avg to below it (tho OECD avg will prob also fall too).
Blimey.
While overall UK population is projected to rise for the foreseeable future, @ONS projections say the Scottish population has now nearly peaked and will be falling quite rapidly by the middle of the century.
Whether this turns out to be right or not, it’s quite a chart.