Joint Energy Security of Supply Working Group

We received the sixth report from the Joint Energy Security of Supply Working Group (JESS) recently (May 06), this follows the fifth report published way back in November 04. In the third paragraph of the report they state:
In a market-based system such as the UK's, the provision of adequate energy supplies to meet demand depends on effective market responses, which in turn rely on market players having information to inform their expectations about future supply, demand and prices.
Hopefully we won't have to wait another 17 months for the seventh report and information to inform future supply, demand and price expectations.

The JESS report is concerned with the UK gas and electricity markets over the medium- to long-term rather than short term although some mention of the past and coming winters are made.

Gas Market

On demand JESS repeated the following information from National Grid:

It forecasts an average increase in annual gas demand of 2.2% per annum through to 2014, with peak demand growing at the marginally lower rate of 2.1% per annum; and an import dependency of 46% by the end of the decade, rising to around 80% by 2014-15.
They expect continued increase in gas demand in the face of indigenous depletion with this demand being met by imports. The magnitude and timescales of reliance on imports is surprising though, previous reports have suggested 80-90% reliant by 2020. Forecasting 80% reliant by 2014-15 is the most pessimistic outlook I have seen.

No graph is provided showing this annual supply and demand forecast but this chart showing daily demand against supply is provided


Click to enlarge.

On first glance this picture is reassuring, the demand curves are comfortably below the solid supply curves, however the text of the report admits this picture "may be overstated".

The following assumptions are made:

  • The UK Continental Shelf (UKCS) production is shown at 95% of maximum - this is optimistic since recent past performance has shown gas delivery (on days where demand exceeded UKCS supply) vary between 85% and 95% of maximum centred on 91-92%.
  • All other supply sources are shown at 100% of capability. It is by no means guaranteed that all available import (pipeline and LNG) and storage infrastructure will be utilised to such an extent, I would suggest it is extremely unlikely that the volume of gas will be available to fill all possible import infrastructure or even that all infrastructure would be available simultaneously.
  • Much of the required infrastructure doesn't exist yet, the three categories are defined thus:
Proven incremental supply capability: Those projects that, on available evidence, are virtually certain to be technically and economically successful (ie better than a 90 per cent chance of being developed).

Probable incremental supply capability: Those projects which are not yet "Proven" but have a better than 50 per cent chance of being technically and economically successful.

Possible incremental supply capability: Those projects which cannot be regarded as "Probable" at present, but are estimated to have a significant, but less than 50 per cent chance, of technical and economic success.

If that graph were to be redrawn recognising that only a fraction of the proven, probable and possible supply capacity will actually end up being built, once built it would operate at below 100% capacity and UKCS is likely to deliver below 95% the picture would be very different indeed.

This graph shows the same information, including all "possible" gas supply infrastructure, now broken down type along with summer, winter and severe winter demand curves.


Click to enlarge.

This time JESS is even more open about the optimistic nature stating:

...with the exception of UKCS production, it shows all supply sources at 100% of delivery capability. This is likely to be considerably overstated since there is no guarantee that that this volume of gas will be supplied, even if the infrastructure is built.
What I find most surprising is even after adding such a caveat to the graph they felt no need to attempt a more realistic forecast.

Norwegian production is sure to collapse in a similar fashion to UKCS with the impact on exports to UK likely to be exaggerated from the total decline. Other imports sourced from Russia and the Middle East (via an energy scarce continental Europe) are unlikely to maintain such magnitudes as indicated and with supply excluding storage barely above even summer demand (remember the 100% build and utilisation) when will `spare' gas be available to recharge the storage infrastructure clearly needed for the winter?

There is neither analysis of export availability nor competition for imports from other countries included in this report. This omission from a report stating the UK will be heavily dependent on imports is inexcusable.

Electricity Market

Regarding electricity the most significant factor is the decommission schedule of the nuclear fleet which we have discussed previously: Nuclear Britain

Also covered is the impact of the Large Combustion Plants Directive on the coal-fired fleet. The LCPD imposes restrictions on emissions including sulphur dioxide (SO2) and nitrogen oxides (NOx). Individual plants can either elect to opt-in, in which case they have to meet the LCPD by burning cleaner coal or employing technology to scrub emissions or opt-out in which case they have to close completely after 20,000 hours operation or by the end of 2015, which ever comes earlier.

The opt-in/opt-out decisions were finalised on 3rd Feb 06 with the following results; of the total 28.8GW coal generating capacity 20.6GW have opted in with 8.2GW (28.5%) opting out.

Whether the opted out plant run flat out for just over two years or chose to run with a low (less than 30% activity factor) is a decision left to the plant owner and determined by the economics of the situation and any additional environmental and technical limitations.

Together this means by the end of 2015 the UK will lose 28.5% (8.2GW) of coal fired and 59.5% (7.1GW) of nuclear generation capacity.

Taking this into account the following forecast for electricity generation by fuel type is made with the decrease in coal and nuclear output more than compensated for with new gas and renewable build:


Click to enlarge.

It is assumed that eligible renewables reach a market penetration of around 8% in 2010, though there is a great deal of uncertainty about the likely outcome. Penetration is assumed to reach 15% in 2015, remaining at the same absolute level of supply in 2020.
This statement illustrates how the target of 10% by 2010 and aspiration of 20% by 2020 is not expected to be met.

The report goes on to detail some 11,990MW of combined cycle gas turbine (CCGT), 1,211MW of combined heat and power (CHP)and 10,680MW of renewable infrastructure currently planned although the vast majority of this new build has not yet received planning approval

Summary

In summary I think this report has failed in its objective to provide the market with future supply, demand and price information. The quantitative data presented is so optimistic to be virtually worthless with qualitative caveats that don't adequately describe the risk.

Encouragingly their future work plan for the coming year does include this long overdue point:

examination of international aspects of security of supply e.g. impact of global markets in LNG and coal

Interestingly in 61 pages of discussion about the medium- to long-term UK energy security of supply there isn't a single mention of new nuclear build except to list it amongst the things that the Energy Review would consider.

Yes, it's very disappointing in most ways.  Interestingly, the outline message seems to be similar to the recent IEA report which what what I've picked up basically said "things will be OK if xyz", with "xyz" being a string of occurances that are essentially implausible.  Maybe both are the first stage of breaking the bad news to the public that things are not going to be Ok and we must make do with less energy in the future - something that mainstream politicians and related bodies cannot do in one fell swoop.

I wonder if other parties and particularly Mr. Cameron will pick up on the points raised?  Maybe a formal response could be drafted to send to him?

I see it is the normal goverment report everthing
will be alright,with a few over-hyped examples
to show how it might be possiable to do so,
and when things go wrong. They will say the
market did not build the supplies we expected it
is not our falt.
 I run a small hotel, and do not know if I should
change over to electric heating or stay wiyh gas.
May be I should just sell when the first shortages
occour.
Don't change to electric.  The power stations lose their gas before domestic customers when there's a supply crisis.
Surely we will still produce electricty from
coal, nuclear and renewables,even after gas
has become too expensive to generate electricty.
 I think people will forget global warming
once they start suffering power cuts, and will
burn a lot of coal
OK, how do we rank the evils: commercial gas shortage, commercial electrical shortage, residential gas, residential electrical? I think they will be rationed this way:

  1. commercial NG will be cut (without the power stations!)
  2. commercial electricity will be cut/rationed
  3. residential gas will be reduced (you will not freeze if you need to lower your thermostat!)
  4. residential electricity will be cut as a last resort - remember all people that heat with electricity (and also vote)

Turns out that electricity is a better failsafe option IMO. And in the light of the coal and nuclear plants whose building is becoming an almost certainty in future, think it is the right long-term investment. A geothermal heat pump if possible will be best.
Sorry to be off topic, but I have been waiting for a TOD:UK thread for a while. I was thinking of buying a small scale wind turbine. I was thinking of a vertical axis one rather than the usual horizontal one. My electricity usage is about 150 kWh per month +- 50 kWh. The average wind speed of my area is about 4.4 m/s (according to UK Dti database). I live in a small town in a built up area. Has anyone any suggestions of what to buy for a limited budget of £1,000 to £2,000? Are there companies that are worth talking to or worth avoiding? This is more of a small scale experiment to see how wind generators work rather than going for complete independence from the grid. I hope to see how this goes for a couple of years before buying bigger.
The only commercial vertical axis one I'm aware of is this one: http://www.quietrevolution.co.uk/ It's not available to buy yet, according to a conversation I had with someone there, but they are putting it through testing/comissioning at the moment.

The thing to remember is that a horizontal axis (HAWT) is inherently more efficienct than a vertical axis (VAWT). Put simply, this is because on the VAWT when a blade is at the back it is in the "shadow" of the blade at the front, and when the blades are at the side they are not generating any power at all. In contrast, the blades on a HAWT generate power all the time.

However, it's important to consider where you plan to mount it. If it's going to go on your roof then there's a special case - as the wind flows over the house it has a vertical component, rather than just being horizontal. In this situation a HAWT is less efficient than normal, and will experience higher stresses and therefore needs to be stronger. In contrast, the VAWT copes quite well with non-horizontal air flows.

Another important difference is that a VAWT is potentially easier to install as the weight of the generator/gearbox is at the base rather than at the top. However, this also means there is a fair amount of stress on the generator/gearbox bearings when a strong wind is trying to push the turbine sideways.

Finally, there's the obvious difference that you have to point a HAWT into the wind. The advantage for a VAWT is not just that it can be more simple, but that a HAWT can only respond so fast to changes in wind, and in a built-up area the wind is often gusty and turbulent.

Regarding the wind database you got the 4.4m/s from, don't base any important decisions on it. These databases are notoriously unreliable, especially in built-up areas. The only good solution is to put up a wind mast and data logger, ideally for a year, but any length of time is worth it. A cheap way to get one is to spend about £100-150 on a "weather station" that links to your computer. I have one at home that can store 175 samples of all data for you to download periodically. (Note that a real data logger would store thousands and only need downloading once a month or so)

Which weather station do you have? I've been meaning to get one that can download to the computer for a while now.
The one I have is roughly like this one: http://www.extremekiteshop.com/kites/skyview-ws2300-weather-station-p-576.html

You might find it cheaper elsewhere though. It's worked fine for over 2 years now, apart from ants making a nest in the rain gauge!

Thanks, you added a few things I was not quite aware of.
Another off topic comment. On Tuesday 30th May, BBC2 at 11:20 PM is showing a program called If the Oil Runs Out. Don't know if anyone has bought this up on another thread.

According to the Times ('The Knowledge'):
2016, Saudi states that the west cannot take its oil for granted, Oil goes to $160/bbl, winter fuel costs rise by 40%, Petrol stations run dry, budget airlines collapse, shortages, hoarding, more shortages, layoffs etc.

Shame its not on at nine on Beeb 1.

It forecasts an average increase in annual gas demand of 2.2% per annum through to 2014
I've not yet read the full JESS report thus am relying on the excellent summary Chris has posted here.  I assume the report has not addressed the far from trivial issue of affordability of such large scale gas imports (and I agree that I've never before seen estimates of 80% imports much before 2020).

Assuming UK gas demand for 2005 was around 1.7m BOE/d, escalating at 2.2% pa thru 2014 and assuming 80% imports the JESS forecast assumes that UK will be importing 1.65m BOE/d NG in 2014 i.e. imports will amount to just slightly short of UK's 2005 entire consumption.  Using an import price of $100/BOE (which may well be extremely conservative by 2014 given increasing 'scramble' for scarce enery imports) gas imports would cost UK trade balance $5bn per month or £2.8bn per month @ 1.80 exchange rate.  Put another way projected gas imports by 2014 would more or less double existing trade deficit which is running at around £3bn per month.

The problem doesn't end there - oil imports will likely exceed £1.5bn per month by 2014 and almost every day we read reports of manufacturing and services processes departing UK for low cost bases in China, India etc.; all such moves contribute to deteriorating trade balance.  Neither can UK expect to rely on financial services to offset much of the additional currency costs of energy imports as sizeable downturns in the markets are likely to occur in light of increasing cost and declining availability of oil and gas.

To summarise even if sufficient surpluses in producer nations exist for UK to import gas on such a large scale by 2014 I would seriously question how affordable it is; certainly to borrow such a large amount of foreign currency would mean long term rises in interest rates which in turn would seriously impact those already over-indebted for housing etc.  Not least 2014 is, in energy terms, 'tomorrow' and very little we do now on the supply side will deliver by 2014, certainly not a new generation of nuclear power stations.

Your comment on the UK using 1.7 MBOE/D surprised me. I know that UK oil consumption is around 1.8 MB/D, but I hadn't realised that we use as much natural gas as we do oil. According to EIA latest figures, we have about 18.8 Tcf of proven reserves (-10% from previous year), and we produce less than 3.6 Tcf (2003 latest figures) per year. That gives us about 7 years of NS gas, using a no depletion model and no more gas is added to the proven reserves.
We used 1.7m boe/d for UK gas consumption in a paper prepared last year as submission by Depletion-Scotland to a Royal Society Edinburgh energy enquiry.  This figure was based on 2004 consumption and we had a DTI source reference at the time we wrote the paper but this reference no longer works (URL no longer valid).  On further checking on DTI site and downloading the 'Supply and consumption' report (ET 4.1) revised March 2006 annual UK gas demand for 2005 is stated as 1,100,732 GWh which converts to 714.6m boe or 1.96m boe/d.  On this basis potential import costs by 2014 are some 15% higher than stated in my earlier post.
Chris, do you have any info re contract price and escalation clauses for gas from Ormen Lange?  I would assume UK will simply have to pay prevailing world prices for gas imports from Norway, Qatar, Algeria etc.

It's interesting to note that not only did N Sea provide security of gas supplies but it did so at artificially low cost (I know as I was at many of the meetings negotiating gas prices and escalation clauses).  For years after inception in late 1960's contract prices for the major southern gas fields were low and the escalation clauses were not only extremely hard to trigger but only applied to a portion of the price when they were eventually activated (after the 1st 1970's oil shock).  The (then) Gas Council was the monopoly buyer and they, and consumers, were thus highly protected from any increases in world gas prices.

Chris, do you have any info re contract price and escalation clauses for gas from Ormen Lange?  I would assume UK will simply have to pay prevailing world prices for gas imports from Norway, Qatar, Algeria etc.

I too would be interested to know about the current LNG & pipeline NG contracts status:

  • How many contracts are in place, and with whom?
  • What are their lifetimes?
  • What volumes have been agreed?
  • For Norway, how much flexibility do they have to cutback our supplies?

I have a feeling that there are a lot of "maybes" in all this!
I don't have any specific information about import contracts or Ormen Lange... however in the case of Ormen Lange I doubt there is enough infrastructure to export its full potential anywhere other than the UK so the logistics alone might offer the UK some degree of security from that source.
"If The Oil Runs Out" - it's on late Tuesday evening - see:

http://news.bbc.co.uk/1/hi/programmes/if/4989146.stm

Most of the film is apparently set in 2016 and the site above says the film starts with oil at 85 dollars per barrel.  Presumably it starts at the end of this year !?

Anyway in the course of the scenario it goes up to 160 dollars.

The scenario as described on the BBC website could so easily fit the imminent future. Perhaps there is a reluctance in an institution like the BBC to relate such a life changing topic to the here and now.

Be very interesting to watch and see how much of what is related is current. Perhaps a deliberate typo!

It's good to see that both sides of the argument (late peak / early peak) are represented in links suggested by BBC - IEA, EIA etc offset by ODAC and ASPO.

In the 'Facts behind the fiction' page the declining discovery trend is referred to but it would be nice to see mention that this trend has been downward since 1965 rather than just going back to 2000.  You also need to 'read between the lines a bit' regarding the stated per capita oil consumption (2 bbls pa in China, 11 bbls pa in UK and 25 bbls pa in US).  What is omitted here is population stats - 1.2bn in China v c355m US/UK combined and what are the consequences of Chinese consumers aspiring to achieve western levels of energy consumption?

As mentioned elsewhere on this thread it's a pity this program has been allocated such a late night slot but at least it's a start.

...and replying to zceb90's scenario above, the UK economy would surely be pushed into deep, steep recession long before 2014, maybe in 3-4 years rather than 8 as energy imports rocket, jobs are lost and interest rates rise.  The more one looks at these things, the more alarming the scale of the problem seems to be.
ASPO describe the few decades of North Sea oil and gas production as 'A short period of history for Great Britain' here. Some of us are old enough to recall economic conditions in UK prior to N Sea oil and gas production.  In 1967 the Gov't was forced to devalue sterling and borrow heavily from the IMF...and that was at a time when manufacturing was still a major industry in UK, cost of oil imports were $3/bbl and gas was made from indigenous coal in form of town gas.  A summary of UK economic events in 1967 is located here.

In effect the relatively sudden 'bonanza' from N Sea in form of oil and gas provided a lengthy 'free lunch' thus avoiding several decades of harsh economic conditions as UK was starting to experience in 1967, just as N Sea gas production was being commissioned.  We are now moving into a period, however, when prospects are very different to 1967 in that N Sea energy production will decline irrevocably year on year.  Consumers (and UK plc as a whole) will thus be forced to make some hard choices - either they continue with the energy consumption 'party' and use an awful lot of hard currency in the process (assuming imports can be sourced) or significant demand reduction occurs.

My own view is that during the N Sea bonanza 2 generations have become accustomed to being able to heat every room in the house (including 5 bedroom McMansions), 40 mile commutes with 1 person per vehicle, 2nd homes abroad with regular visits via cheap flights, cheap food and goods due to globalisation etc.  Now we face rapidly rising energy imports (when oil is $70 rather than $3 per bbl) at a time when many other major nations are looking to also increase their energy imports.  As these import costs mount sterling will depreciate and interest rates will rise.  The combination of more expensive flights due to more expensive fuel, increased sterling cost to obtain foreign currency used at 2nd home abroad and rising interest rates at home is likely to place many who have stretched themselves financially to buy expensive property abroad (and in UK) in position that they are forced to sell into an unwilling market.  The situation will be made worse if, as doctorbob says, there is a steep recession as that, in turn, will lead to forced property sales by heavily indebted individuals who no longer have highly paid work.

I've been reading the regular advice provided by Westexas and others on our parent site and totally endorse their comments.  To me a major recession in UK within a few years looks a near certaintly thus one should get out of debt, live near your work and start to move your focus of work so that you provide goods or services which people need rather than want.  For example those employed in food or energy production or sustainable transport (public transit) are much more likely to retain their jobs rather than those who are employed at out of town leisure parks or expensive gymnasiums. In any recession the first thing consumers cut back on are discretionary items i.e. those things which are 'nice to have' but far from essential.

The reason I (and others) are so pessimistic re UK's economic prospects is due to a combination of factors but these are my 'top 3':

  1. Rapidly rising costs of energy imports (inevitable due to N Sea declines).
  2. Absence of a large manufacturing base in UK.
  3. Level of consumer debt which has recently surpassed £1 trillion.

Like it or not many in UK are going to have to become used to once again using a lot less energy; the lack of affordability is not going to offer them any choice in the matter.  
But surely Gordon, who in his wisdom sold 300 tonnes (almost half of the BoE's reserves...) of gold at around $275/oz, will let the printing presses run if there's an economic crisis, to avoid the mass defaults on private debt?

History is clear - if theres a minority of debtors, the creditors win. If there's a majority of debtors, the creditors get shafted. ;-)

I don't know where you live zceb90 but the "harsh economic conditions" of the 60s were nothing on the very harsh economic conditions of the early to mid 80s. From what people tell me the 60s were more or less an optimistic time as rationing was becoming a distant memory and people finally had some disposable spending in their pocket. Forward to the 80s... 3 1/2 million unemployed, UB40 singing of 1 in 10 when it was nearer 1 in 7, riots in Brixton, Toxteth etc., civil war (i.e. the miners' strike), the complete running down of cities like Liverpool (The Boys from the Blackstuff) and Glasgow and yet we had all this oil and gas!!!
I don't know what the next few years have in store but there is a lot of scope for conservation and innovation. Eventually we'll probably have to change everything but even under the glory years of North Sea oil and gas things were not so rosy...unless you happened to live in the South East of England.
PhilM, if you read my post again you'll see that I stated that UK avoided several decades of harsh economic conditions due to start-up of N Sea oil and gas production.  UK had quite a run on the currency in 1967 resulting in devaluation when Harold Wilson said on TV 'the pound in your pocket is still worth a pound'; we also had to borrow heavily from IMF.

Were it not for N Sea oil and gas I strongly suspect we'd have seen a lot more of the same.  The big question is 'will such economic problems return with ongoing N Sea declines?'

I appreciate there were (and still are) big regional differences in economic and employment prospects and suspect that, due to declining energy availability and increasing cost, a big downturn will be experienced in the financial sector in the not too distant future which would in turn impact the normally more prosperous SE.

"Harold Wilson said on TV 'the pound in your pocket is still worth a pound'"

And as I recall in the late 1960's you could not take too many of these pounds with you on holidays abroad.  There was something called a "V form" under which you were limited to maybe twenty five pounds on your trip.  There was nothing like THAT in the 1980's.

Excellent points.

One thing I had forgotten about is the never ending strikes of that era. If inflation kicks in again in the next few years I suppose that we can expect more of the same.

This makes me think that getting a home based electricity supply (PV / wind / car batteries / generator) & a large water tank might be a wise idea ... simply to deal with public service cuts, not specifically PO.

Next thing for me to think about: moving from a big drafty house to a cosy small place before people realise that heating will get very expensive  ... and before those dreaded Home Information Packs are needed!

The UK could be the "canary" for the rest of the Western world, acting as an early example of an energy crisis in action. Sadly there won't be a North Sea to save us this time.

This "they'll just print money" suggestion has been aired on the main TOD site as well in relation to the dollar.  I'm no economist, but the assumption is that this would result in further fall in currency value, inflation and resulting increase in interest rates.  Though I'm not clear what the pound would fall in relation to, if the US does the same thing and much of Europe (Euro) is in energy trouble as well.  The advantage most European countries have is that they import most of their energy now, so have adapted their economies, homes, etc. to cope.

I must say that Chris's excellent analysis and zceb 90's comments are the most alarming things I've read on TOD.  Unlike the doom-laden talk on US-based sites of population die-off, Mad Max scenarios, etc., this energy starvation and resulting near bankruptcy for the country, seems to be based on incontrovertable evidence and appears inevitable.  Moreover it's very difficult to see effective action being taken in time to prevent most of the worst effects of it.  

In my opinion we could be sliding rapidly down the drain in as little as 3-4 years as inflation, interest rates and unemployment rise, house reposessions rocket and the economy shrinks.  With more people needing benefits and tax revenue falling we could soon enter a spiral of decline and depression.  At least there wouldn't be money to build a fleet of nuclear power stations!

At the moment not one person in a thousand is aware of the likelyhood of this.

If UK and US were to print money on a large scale it would simply bring forward the day when oil and gas producers would want something other than 'Greenback paper' in exchange for their increasingly valuable energy supplies.  The resulting inflation would have the effect of cancelling out much debt for UK Gov't and consumers who are heavily in debt but it would also wipe out savings.  In other words rapid inflation would be a 'great leveler'.

Assuming the producer nations required payment in something other than sterling or dollars rampant inflation would do nothing to help UK consumers fund energy - sterling would fall in line with inflation thus import costs would rise in sterling terms.

Whichever way I look at it the solution is going to have to come from the demand side of the equation.  Gov't and consumers will have to take measures to deliver big reductions in consumption over the next few years.  Currently there are precious few signs that policies will address this issue; on this basis it will be down to economic forces to make it happen.

Presumably the printing presses will only start running hot once an economic slow-down has kicked off. Usually people are thankful for any economic activity when this happens, so the effect isn't necessarily inflationary at first (or rather it is inflationary by the classical definition: an expansion of credit, but not by the media definition: a rise in prive level).

The way the printing presses work has to be considered - the Fed/BoE create money by lending it out. If the private sector isn't willing to borrow, the government would have to step in to borrow and spend.

Governments are sadly very good at spending, however it takes time for them to alter their spending patterns etc. (And once they start they don't tend to stop). So in the scenario above there maybe a couple years of recession (long and variable lags) before the presses become effective. And oil prices could fall, if demand falls faster than supply in an economic crisis.

...this energy starvation and resulting near bankruptcy for the country, seems to be based on incontrovertable evidence and appears inevitable.
Evidence which, in fact, comes from DTI's own production forecast graphs.  Another key point to my analysis is that it doesn't depend on the global peaks of oil and gas production occurring anytime soon, it's simply the consequences of our having passed the regional oil and gas peaks in N Sea.  Global peaking would, of course, make the UK situation worse in that imports would become more problematic and expensive but even at current prices UK will have a big economic problem funding future energy imports.

Using $100/bbl (boe) for 2014 is by no means unreasonable as it's only 40% more than current price and there seem few prospects that world supply / demand squeeze will ease substantially in the next 8 years.  Resulting oil / gas import costs in 2014 will be c£4.5bn per month and, assuming 22m households, this amounts to £205 per month per household.  Given that not all of the 22m households are highly economically active let's assume that a much higher burden (say between £300 and £400 per month) will fall on the more affluent households.  I'm not an economist but the above represents a considerable burden and has to impact tax / council tax revenues, discretionary spending etc.  I also agree with Chris V's comments in an earlier post - by 2020 UK will be using less gas than currently.

It could go horribly wrong on several fronts.
Public spending is now at 43% of GDP on average, up from 38.9 % in 2001. But this varies hugely between regions.
Examples:
Northern Ireland 71.3
Wales 62.4
North East 61.5
Scotland 54.9 etc.

The lowest being London at 33.4, South East at 33.9.

As money drains out of the exchequer abroad, layoffs occur (usually in the private sector first) and the tax take falls, then providing regional support will be almost impossible. This will include paying for all but essential government jobs. Only this time, most people have had 3 decades of a relatively easy life.

As stated before I am pro nuke, but we may not be able to afford this option!

I live in Wales - 62.4% of GDP is public spending.  In the most densely populated areas, a large proportion of people are on low incomes or benefits of one kind or another.  Most of these have only a small amount of discretionary income that they can divert to pay higher energy bills.  Even £2,000 per household would be beyond the means of a large percentage. Many houses are old and/or badly insulated.  In an economic crisis the benefits many of these depend on now could not be raised to keep pace with general inflation, let alone soaring energy costs.

Many of those in work, especially those with fairly well-paid jobs are, like this writer, employed in the public sector.  An economic crisis would lead to loss of some of these jobs and knock-on effects on those whose jobs depend on on discretionary spending from such people.  Rather like the late 1970's and early 80's, unemployment would soar but this time there would be no cheap N Sea energy windfall to turn things around.  It promises big trouble indeed.

On the energy source front, the FEASTA publication "Why nuclear power cannot be a major enrgy source" (from www.feasta.org), argues that a new nuclear programme would simply divert resources and attention from what is needed - which it terms a "Lean Energy" programme, free of the "false promise" of a nuclear techno-fix.  Of their recommendations, the first two are a "transformation in standards of energy conservation and efficiency" and "structural change (of) local economic and energy systems".  Given the oil and gas situations that are going to arise in any case before new nuclear capacity can come on line, maybe this is the best option?

...and I also agree with MUDLOGGER - that my (public sector higher education) job is probably a goner in the medium term.  How many times more H.E. students are there in UK now than there were 25 years ago? - I doubt we will sustain even 1970's numbers in 10 years. Also, the part of the world where I am is probably destined for destitution as well.  Unless the Gov't can be brought to action soon, it will be time for me to start planning Heinberg's "lifeboat" option.
Perhaps then we are faced with a `Perfect Storm'.  Money draining out to pay for imported oil and gas; consequential inflation and corresponding interest rate hikes; layoffs with corresponding reductions in tax takes and a growing state support cost due to unemployment. All of these post peak phenomena occurring at the same time.

Add to this the likely possibility that the pound sterling may not survive well or even at all, since sterling has been a de-facto petro-currency for the last 30 years.

Then whether pro or anti nuke, coal, renewable, tidal will not be a question. We may not have the resources to fund any `big ticket' projects.

Unless energy planning becomes the flagship, headline policy for this government or the next government (of whichever stripe); then the outlook is indeed dire, because we could be running out of time now rather than a decade or so hence.. Perhaps making the assumption that `big government' is all knowing and will make plans to avoid the worst for all of us are naïve.

Then whether pro or anti nuke, coal, renewable, tidal will not be a question. We may not have the resources to fund any `big ticket' projects.

I think this is the key point. I don't know if we have already left it too late to embark on big ticket energy projects but every year that passes makes it harder and there must come a time when we won't really be able to undertake a 10-20 year construction project like new nuclear or massive marine. The big demand and supply side decisions really needed to be made at least 10 years ago.

In Blair's energy speech a couple of weeks ago he said it would be a dereliction of duty if he failed to take long-term decisions. He's right, but he and the previous government have already failed to take the necessary decisions required in the nineties.

The big question now is how much low hanging fruit is there on the conservation tree. How easy would it be for the UK to reduce its total consumption say 50% by 2020? What are the real world impacts of less energy?

Since most individuals during the course of their everyday lives can cut back by 20%, then this is effectively, their 'low hanging fruit'. This level of 'scaling back' is perfectly feasible with little impact upon the so called 'quality of life'. It can be achieved with little more than:

Turning lights / unused appliances off
Low energy light bulbs replacing hot bulbs (as they fail)
Appropriate clothing in winter.
Planned driving
Engine capacity reduction (when it is time to replace a vehicle), since selling on an older vehicle to replace with a new(er)more fuel efficient vehicle actually adds to the BOE over the life cycle of both vehicles. (the amount of a vehicle's energy cost is in construction rarely offsets this BOE in fuel efficiency; at least with currently available vehicles). However this itself is problematic: Buying a new vehicle adds to the global BOE used in construction. If someone can drop down in personal BOE buy reducing engine capacity, then it may be worthwhile. IMO it would require dropping from a RAV 4 to a Common rail Diesel VW Polo to make a contribution! Not many are willing to make this transition (yet).

Consider the above (and other methods) to be the low hanging fruit of conservation.

Call the above 'negative conservation'. It reduces consumption by cutting out / cutting back. It achieves two things: Actual conservation and an awareness of energy in general terms

'Positive conservation' is not quite such low hanging fruit. As mentioned up the thread, the UK Housing stock is on average, old, poorly insulated, housing a population with marginal levels of discretionary income and thereby unable (in a lot of cases) to positively affect energy reduction by adding insulation, double glazing etc. 'Positive Conservation'then requires energy to be actively used to achieve a result over the longer term. This could be insulation, micro generation, PV panels, wind etc. All require additional installments of technology and materials. This can be expressed in payback time in current £££'s. However, if expressed in current costs of energy, then there is a problem. Even at current costs in pounds, then the payback time is in decades (even at the cusp of a major energy cost transition),however comparing todays outlay in pounds with tomorrows outlay for energy consumption, the cost savings over time would be enormous because:

You pay todays pounds to save tomorrows outragous costs for energy.

Ok: I'll rein myself in a little bit here, I dont want to sound like a double glazing rep... But there again, maybe a good glazing rep is a true planetary saviour...

In short: money spent in todays pounds on positive energy conservation, will pay serious dividends in money NOT spent in the years to come. Money which we may not have in years to come if we are paying through the nose for energy imports. Money that can no longer be ring fenced for big ticket items for general 'base load' generation.

So. The old adage: ' a penny saved is a penny earned' probably still holds true.

So, just for the sake of argument, we could conserve 30% of UK domestic consumption with both 'positive' and 'negative' conservation methods. This is not impossible. It comes down to Leadership, political will and education and judicially applied grants/tax rebates for the installation of 'positive conservation' methods.

So far so good.

Lets look at one aspect of conspicuous energy consumption:

Going back up the thread to dropping from a 'RAV 4 to a Polo'.  Actually , its not fair to pick on a Rav driver and cannonise a Polo driver: Neither have met this national problem before. Nobody told them one was 'bad' the other was 'good'. Both machines are legally available by wallet and/ or lifestyle.

Let's just say dropping Engine CC is a good thing.

However, look at the TV ads and colour supplement ads.
Big vehicles are still in the vogue.

Will education and social attitudes work? No. If one person can afford a bigger chunk of energy than another, then they will see nothing wrong. In absolute terms, then this is fundamentally wrong. A nurse has just as much right to get to work and serve society as a bond dealer. Each, in there own way contributes to the 'common weal'. One by services to the people, the other by tax generation. Without each other, the fabric of society erodes.(try running a health service with no taxes, try being a bond dealer with a broken leg)

Where then, does this leave us? The bond dealer has a right to get to work. The nurse has a right to get to work.
Neither has the right to obtain access to the other's energy and impede the ability to get to work.

Ultimately, we are left with rationing. For travel and household use.

Now by and large I am a free market type. It has been a long and tortuous journey to get from stance that to rationing!

But,IMO, resolving this problem is way beyond free market principles. 'Rationing' can be applied by legislation or by social mores. If the common weal requires that the basic level is to get to work, then if access to public transport is not feasible, then there is no logic to having much more than access to a Polo or Corsa.
Ok: so the nurse gets a basic model, the bond dealer gets leather seats. The engine CC / MPG gets controlled. Either way, both get to work. Even this is a stop gap solution over the next two decades: Ultimately and assuming we have access to a reasonable base load, people will get to work by public transport on an electrical system. Assuming we can make the transition, people will eventually live within walking or bicycling distance from work.

Which ever way I look at it, IMO , we have to ensure a fair distribution of energy access in the UK.

This will be a pre-requisite of an orderly powerdown.

Sorry this is so long. Hope it raises a few discussion points.

I still think nukes will play a big part in base load generation, but hopefully, not as much as I originally thought, and perhaps, ultimately as a bridging technology.

So you expect:

a) Petrol rationing.  I can imagine tradeable allowances of fuel being a posibility.  Better than rationing by price which is what we are now approaching;

b) People to be told which car they can/can't have!  Things would have to get pretty desperate before that would even be seriously proposed.  Imagine telling someone who nows drives a Jag or Range Rover he can only have a Polo or whatever that does 60mpg!  A bit like communist Russia where you have a Lada or a Lada.

One problem is, in the last 10-20 years we have moved to an urban/suburban planning pattern that makes public transport impractical for many people - and reversing that will either result in a huge waste of resources in abandoned buildings, offices, etc., or take a generation.

I see a lot of tough times and upheaval, whatever happens.

I would not like to see a soviet style command economy where the Nomenclature get the Jags (or even two jags...) and the rest of us get 1 model of an equivalent to a Lada.

I think however, that either legislation capping engine cc's and / or taxes and / or larger gas guzzlers becoming unfashionable to the point of 'social death' is ultimately a likely feature of life.

I think Formal rationing be a vital pre-requisite.
Why So?
The alternative would be rationing by price. This would have unfortunate social consequences, possibly social dislocation. Rationing by price would lead to riots.

As we inevitably go beyond peak, these issues will need addressing in a way that free market theories may not be able to cope with. The free market model has worked in a powering up society , I think reliance on the free market model while powering down will not work.

Some energy uses could be cut by 50% by that time, without too much harm.  A significant reduction in car use and an improvement in fuel efficiency to an average of 50mpg should be possible - by that time almost all vehicles currently on the road except the most recently made will have gone.  Oil prices alone might take care of that, plus tax penalties for less economic vehicles.

Most houses could have their heating and lighting bills cut by 50% with grants for insulation, efficient heating systems and the use of energy efficient lights.

Air travel will no doubt see a big reduction as costs soar in relation to what most can afford.  That might mean no net loss of jobs in Uk if most instead take holidays here.  Less air freighting of imported food might also maintain some UK jobs - we might have to do without mangoes and green beans in January but eat home-grown food instead.

The rest is less easy.  Energy using domestic appliances seem to increase every year.  In 10 years many people may be unable to afford new ones and also unable to afford to run those surviving.  Building new houses uses energy as do almost all forms of employment and manufacturing - there is much less scope for painless reduction here I imagine.  Even production of energy saving items, itself uses energy.   Higher energy costs will inevitably lead to loss of many jobs in energy intensive industries.

In all, I think the severity of the crisis will depend on how the government decides to spend our money in the next 2-3 years - before the problems really bite - in dealing with future energy problems.  If they plan to spend tens of billions on the techno-fix of nuclear power, to the exclusion of radical energy conservation steps, that is the worst - probably most of the nuclear stations won't be finished before the money runs out and we'll be down the tubes.  If they go for conservation and renewables, then it may be we can move toward sustainability without too much chaos.  But they might see that as economic contraction and defeatism in the face of the problem.  Will they be brave enough to go in that direction?  Is it possible that Blair will be as he's going soon anyway?  Personally, I doubt it.

One aspect of peak oil that occurred to me some time ago, I might mention now while we are talking about people's likely reactions to what may be the best response.  Since the start of the industrial revolution 250 years ago, people have become accustomed to ever-increasing technology, gadgetry, sophistication, convenience - and energy use.  

Any "powerdown" scenario - even a well-managed, chaos-free one - would represent the greatest paradigm change since the start of the industrial revolution.  This would be exacerbated by the fact that the above trends have been especially rapid and almost exponential in pace, within the memory of most people alive.  Selling to the mass of people the concept that we have to do change in this way, which might be seen as the start of a reversal of 250 years of progress, would I think be extraordinarily difficult at any time before a crisis made things desperate.  The attitude of many might be "the techno-industrial growth machine has developed a fault - you, government, must fix it, or we will elect someone else who will".  

Having read the various posts here I now see why the BNP is so involved in Peak Oil.

They too may have realised that economic hardship is coming to the UK Real Soon Now.

I can imagine the current government failing miserably to control inflation, unemployment, strikes etc.

I can also imagine the government trying to keep the immigrant population happy i.e. peaceful  via preferential treatment.

Alternatively I can imagine various sectors of the inner city community taking the law into their own hands to seize resources or local control.

Either of the above will allow the BNP to get a lot of support. I assume that the BNP has plans to do more than hand out leaflets when this stage is reached ... they must have some "logistics" in place or planned.

If they moved fast and in a well organised manner the political landscape could change quite quickly. It's worked in other countries ....

Pessimistic article in The Scotsman concerning next winter's gas supply.
So gas prices will "tumble" and generators will chase customers with electricity price reductions. This continues to make the assumption, highlighted on TOD UK, that available import capacity will both be fully utilised and that the gas will be cheap to buy. With Russia in control of Europe's gas and all the LNG export / transport / competition problems we have discussed I think this is the worst kind of irresponsible projection which will continue to discourage sensible conservation and mitigation measures (insulation, efficient boilers, wave, tidal, wind etc)in the belief that the problem is short term and we will get back to our cheap energy again.
I don't know the pricing terms of Norwegian gas imports from Ormen Lange (and Chris V in post higher up this thread says he doesn't know them either) but I just can't see how other nations is going to sell UK lots of gas at well below prevailing world prices.  In any event maximum imports from Ormen Lange will be 20 BCM pa whereas current UK consumption is around 100 BCM pa and assumed by forecasts to rise at 2% pa.  With reported decline rates for UK N Sea gas at 9% pa even Ormen Lange will only buy a little time, just under 2-1/2 years in fact before UK will need to source gas from further afield hence current dash for LNG terminals.

LNG will be considerably more expensive than gas supplied from N Sea by pipeline.  For starters LNG tankers are c$250m each and number of tankers required is raised by length of voyage from Qatar, for example.  LNG terminals cost several billion dollars each.  Not least there are various estimates as to energy losses in liquification, shipping and regasification which, according to some reports can amount to some 15% - 20% of gas originally produced from the reservoir.  I can't see the Qatar state oil / gas company or the LNG tanker owners absorbing these costs - UK consumers will.

Similarly gas shipped by pipeline from Russia will not be cheap.  It is already evident that Russia will sell at the prevailing market price, the pipeline runs from W Siberia are very long and energy will be consumed by various pumping stations en route to UK.  Gazprom won't pay for this; UK consumers will.

In summary I just can't see how UK customers are likely to see cheap supplies of gas in the future and, quite frankly, I find it hard to see why it's so difficult for journalists to figure this out (and print their findings).  Could some of Westexas' 'Iron Triangle' be at work in MSM in Europe also?

There is a small LNG spot market .. which will be too erratic and expensive to rely on. (The spot market prices QUADRUPLED one day last winter ... and supply was STILL short!)

However most LNG liquefaction trains are built to service a specific customer on long term contracts.

I assume that a train can take 2 or 3 years to build (they cost 2-5 $billion each).

So the UK had better already have some substantial contracts to build & run some LNG trains in Algeria or Qatar or wherever in place NOW ... or we might have a problem Houston.

Does anyone know of any LNG contracts that the UK has with anyone? And if so, who is paying for the plant?