Four ways to secure our energy future post-Brexit

Following the EU exit vote the UK needs to bring an end to unhelpful conflicts between different parts of our future energy mix and ensure continuity of the big picture goals which the EU’s energy union agenda had already set out, says Averil MacDonald.

Energy is one sector of the UK economy most obviously impacted by the leave vote.

The EU had previously started developing a much closer Energy Union, intending to provide “secure, affordable and climate friendly energy”. This Energy Union has five key aims:

• supply security (more efficient use of energy produced within the EU)
• a fully integrated energy market (free flow of energy across borders without technical or regulatory barriers)
• energy efficiency; emission reduction
• and research and innovation (supporting breakthroughs in technology).

I hope that these broad aims of secure, affordable and climate-friendly energy, with an emphasis on home grown energy and innovation for the future, would be agreeable to everyone, whichever side of the EU referendum you were on.

It is clear the UK now has a huge responsibility, as well as an opportunity, to secure our energy supplies for the future.  And we should not underestimate our ability to rise to the challenge as a country.  In the 1960s, the UK was a leading developer of nuclear power; in the 1970s and 1980s offshore oil and gas secured huge quantities of energy and generated vital tax revenues; and, more recently, we have pioneered the development of offshore wind.  We also led the way in reducing carbon emissions and improving air quality by moving from coal to natural gas for heating and again, more recently, from coal to renewable and gas generation of electricity.

Energy developments of all types create jobs and economic and environmental benefits. So the coming days, months and years provide us with opportunities and challenges. I believe there are four key elements to this:

First, we should start by agreeing a common aim: a secure homegrown energy mix that provides jobs, economic benefits and lower emissions, with an emphasis on innovation so that we can once again lead the way. The energy ‘either-or culture’, where we bash ourselves over the head about gas versus renewables and whether nuclear can be built, gets us nowhere. The reality is that we need all three sources, together with improvements in the efficiency with which we use them.

Second, we should recognise that the needs of energy users are paramount and affordable energy for households must be matched by a commitment to our industries. The chemical industry alone employs over 500,000 people making products from gas and oil, and around half of our electricity is produced from gas. In addition, more than eight in ten homes use gas for heating and more than six in ten use gas for cooking. Generating and transmitting enough electricity to satisfy this demand is currently beyond UK capacity and, therefore, alongside renewables and nuclear, oil and gas will continue to play an important role.

Third we should recognise the importance of home-grown energy. Today, we import 50 per cent of our gas, and this is forecast to increase to 75 per cent in the next 15 years. This could cost us £10 billion a year – about the same as our net contribution was to the EU.  There are now serious question marks about our ability to source gas from and through Europe. If we are no longer a part of the Energy Union we have to accept we are, indeed, at the end of the pipeline.

But importing gas across continents and oceans by tanker has a serious environmental impact compared with producing it ourselves, either from the North Sea or onshore.  And there is also an economic cost.  In the immediate aftermath of the Brexit vote the pound fell 10% against the dollar, which meant the cost of liquefied natural gas in the UK jumped by a tenth.  We, as a country, cannot afford to be at the end of these dramatic price swings.

Fourth, we must re-emphasise our belief in UK innovation. We have a long way to go to find a low carbon solution to heating and transport. But hydrogen made from UK supplies of natural gas (methane) from the North Sea and onshore, transmitted through our existing gas system, with integral carbon capture – or indeed made through electrolysis of water – could be the major opportunity for zero carbon heat and transport. And the UK has the skills and experience to lead the way.

I have read a lot about the risks of disintegrating regulations on shale gas as the UK leaves the EU. The oil and gas industry is, and intends to remain, highly regulated and is determined to continue its good track record.

What now needs to change is the UK’s emphasis: jobs and energy security for our industries across the country, increasing the production of a mix of home-grown sources of energy: gas, renewables and nuclear, and working together on innovation must now be the way forward.