The Sunday Times and the strikingly similar ‘dash for gas’ research
Research suggesting that the UK would be billions of pounds better off if it replaced old coal power with gas instead of renewables has been promised in the press in different guises for around 18 months.
With the UK’s energy bill nearing completion, the work has finally been published under the title ‘Time for a courageous conversation’, calling for affordability to return to the agenda in the energy debate. We take a look at the research’s sometimes difficult evolution.
Difficult beginnings
Last year, the BBC’s Panorama programme aired a report entitled ‘ What’s really fuelling energy bills in Britain?‘, based on a report by consultancies KPMG and AF Consult. KPMG’s press release was also trailed in the Sunday Times.
The report claimed the UK government could save £34 billion and still reach carbon reduction targets if it invested less in renewable energy and focused on dramatically increasing the number of new nuclear and gas projects.
In a press release for the report, Dr Mark Powell, who was head of power and utilities at KPMG at the time, said:
“Taking a clinical, economist’s view of hitting our carbon reduction targets for the least cost shows that we can reach our goal for less – a lot less. However, in order to do this, the most expensive forms of renewable energies – particularly offshore wind – need to be scaled back in the generation mix.”
But KPMG never published the report – originally to be called ‘Thinking about the affordable’. KPMG’s official reason for ditching the report in the first place was the uncertainty about the cost of fuel and the balance of technologies. It told the press:
“The assumptions and parameters used in the model produced large swings in the financial outcomes. To avoid any misinterpretation, we decided not to publish any findings.”
KPMG told Carbon Brief at the time that Powell left the consultancy voluntarily some time after November 2011, when the report was originally due to be released.
A piece in the Sunday Times reported that after KPMG and the BBC came under fire for publicising the findings when the report was still unpublished, KPMG head John Griffith-Jones asked AF Consult to redo the calculations. AF Consult later decided to release its own version of the report, calling it ‘ Powerful Targets‘.
‘Powerful Targets’ contained an even more striking topline based on AF Consult’s new calculations: a mixture of gas and nuclear could cost the UK £45 billion less than renewables and still hit carbon targets. Despite its headline-grabbing conclusion, the report also acknowledges that the outcomes of the report could be quite different depending on financial factors, among others. It says:
“[T]here is considerable uncertainty about the costs of different fuels, so the scenarios should be considered as comparative only (this is why scenario one is important as a reference case). In all three scenarios we used the same publicly available [Department of Energy and Climate change (DECC)] central forecasts of fuel prices. If the cost of fossil fuels are higher or lower than DECC’s forecast, the costs and fuel mix will change.”
DECC disagreed with AF Consult’s findings. In a blog, a spokesman pointed out its findings depended strongly on a much more ambitious nuclear rollout than is currently in the pipeline, and fails to account for future challenges such as an expected increase in electricity demand over the next few decades.
But for the most part, KPMG and AF Consult’s findings became secondary news to the confusion surrounding the report’s release – or non-release.
The second coming
All was quiet – at least for a while. Then, in February this year, the Sunday Times, again, announced the unveiling of a new power industry lobby group. The Power Line, with former commercial director of British Energy, Philip Stephens, at the helm had formed “to avert the nightmare of blackouts and misery” caused by the coalition’s energy policies, according to the article.
As part of its launch, The Power Line was to publish a study by management consultancy, AT Kearney, containing what appeared to be a now-familiar argument. According to the article, it claimed the government could hit its carbon reduction targets for billions of pounds less if it focused on smaller generation plants and gas-fired stations. It said “affordability has become a key issue in the green energy debate”.
Despite widespread interest in The Power Line’s opening shots, the group has failed to contribute anything further to the debate. Since April, The Power Line’s website has been shut down, according to BusinessGreen. The AT Kearney report was never released.
Finally released
Until this week, that is, when two articles appeared, drawing on AT Kearney’s report – again, in the Sunday Times – ahead of the third reading of the UK’s energy bill.
The report says the UK could hit energy and emissions targets for £40 billion less if the government “eschews renewables and goes for gas”, it says. The research has been shared publicly but is not yet available on AT Kearney’s website.
Mark Powell, is again quoted, now in his role as head of AT Kearney’s utilities arm – which he took up in 2012. He says:
“We have headed down the road to green transition without fully thinking through the consequences and without considering how best to achieve the transition at the lowest cost possible. We need to have the courage to stop the policy juggernaut, if only for a few moments. Sometimes you have to slow down to speed up.”
The current mix of EU and UK policies wouldn’t allow an all-out dash for gas. The three policies it looks at are the EU Large Combustion Plant Directive, will see much of the UK’s old coal power stations close; the EU 2020 Renewables Target, requires member states to source 20 per cent of electricity fromrenewables by 2020 and the UK carbon price floor, guarantees the price of carbon will not sink below a set level.
But AT Kearney says this mix is providing counterintuitive outcomes, which are hurting the affordability of power, creating a generation gap as coal retires, and affecting UK competitiveness by driving up businesses’ power costs.
According to the consultancy, it will cost £72.7 billion to meet DECC’s central estimate for renewables in the power system – which would see renewables build increase sharply up to 2020 and level off by around 2030 as new nuclear comes online.
In contrast, AT Kearney calculates it would cost £32.5 billion to build efficient new gas-fired power stations, which still emit half the amount of greenhouse gases as coal does.
A theoretical exercise
It’s worth noting that AT Kearney acknowledges that simply looking at how much it will cost to build new capacity is a “theoretical exercise”. While the idea of withdrawing from the EU is popular in some quarters, it is unlikely to happen at least in the near future – so the renewables target will remain a part of UK energy policymaking.
There’s another important caveat to take into account: In an accompanying article, the Sunday Times points out the “wild card” in AT Kearney’s report remains the price of gas and the ease of securing supplies.
A government spokesman told BusinessGreen that the report does not take into account any savings from energy efficiency, falling renewables costs or any additional benefits of developing new generation technologies such as new jobs.
The consultancy says its report is the beginning of a longer piece on the wider energy market – but failing to address issue such as future gas price volatility feels like a significant omission in a report that aims to put “affordability back in focus”.
But whatever the arguments in the most recent report, its fruition, as documented by the Sunday Times’s articles, has been a difficult process.