An energy crisis is coming, but I’d rather be on Brexit in Britain than in the EU
The fact that the British are relying on European energy interconnectors in such circumstances shows a touching confidence in paper contracts. The UK imports little Russian gas but it is less reassuring than it sounds. It is part of the integrated nexus of Europe, and cross-Channel prices are moving at almost the same rate. In one crucial respect, the UK is in worse shape: it allowed the closure of the Rough storage site, to save pennies and against vehement warnings, leaving this country bare with a few days of winter backup.
The government made a bet that the UK could always and easily obtain liquefied natural gas on the world market. But that country now finds itself in a bidding war for scarce LNG supplies with China, which is armed with $ 3.2 trillion in foreign exchange reserves and ordered authorities to secure energy for the survival of the country. diet. The spot price in Asia has just hit the once unthinkable level of $ 32 per MBBtu, if you can get it.
If the government has not already created an “energy war room” with emergency powers, it should do so without delay. My fear is that we are drifting into something akin to the Covid debacle of February 2020, when officials professed gleeful confidence in their contingency plans (for an influenza pandemic), heroically ignoring what the virus was already doing. in Italy.
Britain has advantages. Half of its gas comes from an internal supply on the continental shelf, unlike dependent Europe. Its service economy has a lower energy intensity ratio than that of Germany.
He has useful friends. The Emir of Qatar has diverted LNG shipments to the United Kingdom after a friendly conversation with Boris Johnson, the result of close ties in defense, culture and royalty. The Qataris refused a similar request from Brussels due to an antitrust dispute over sales contracts. Can we discern a Brexit dividend?
Offshore wind is working as it should and has dented the exorbitant bill for imported gas. Renewables accounted for 32% of UK electricity over the past week. Be thankful for the little mercies. Drax has 1.3 gigawatts of reserve coal capacity which could be increased rapidly.
The UK could follow Japan and convert some gas plants to oil, which are currently trading at half the price of spot LNG ($ 180 equivalent). In extremis, he could reserve LNG cargoes and keep tankers at anchor as emergency storage. The government could extend the life of the Hunterston B nuclear power plant by a few months until we get through the worst.
Clive Moffatt, an energy security expert, said it was already too late. “There is no short-term solution to this. The network will have to shut down industrial gas users. This is the only way to keep hospitals open and homes heated, ”he said. But if I had to choose, I would rather be in Boris’s Britain this winter, than in Ursula’s Europe.