Volatility is the next big debate in energy policy

Unstable prices, cultures, and companies all breed uncertainty in an area of our lives where we need reliability.

Yesterday, the New Statesman, in association with Shell, held an event called Fuel for Thought: Rethinking Energy. The focus of the event was on three "myths" about renewable energy: that more people means more demand, and only by reducing usage can we reduce carbon output; that investment in fossil fuels means reduced investment in renewables; and that, due to our reliance on importing fuel from unstable sources, we need to become self-sufficient.

If those myths were the stated focus, though, there was an undercurrent to the event, which was the idea of volatility. It was explicitly addressed in the final "myth", but came up throughout the session.

There was general agreement throughout the session on a number of compromise positions where there is frequently heated debate. We need investment, in the medium term, in both renewable technologies and transitional fossil fuels. We need to both reduce usage and reduce carbon produced per kWh. And we need to increase our domestic generation without cutting ourselves off from the wider market.

But the point about self-sufficiency opened wider disagreement. The key argument, provided from the floor, is that "instability" affects the market far more widely than one would think.

Most of our fossil fuels come from or through the Middle East and Central Asia and Russia, and this fact has been used by many to argue for decarbonisation. Surely it is better not to buy from nations which abuse their citizens, and which use their status as energy provider to silence criticism?

Quite aside from the fact that, as well as North Sea oil, we get a huge amount of gas from Norway – hardly likely to cause any diplomatic problems anytime soon –  it takes more than self-sufficiency to isolate yourself from volatility caused by instability. It would take total autarky.

The problem is that even nations which are self-sufficient in energy provision still tend to be engaged in the international market, but exporting, not importing energy. Generating all our energy internally would mean that the country spent less on importing energy, but it wouldn't prevent internal prices from rising when events rocked a world-wide energy exporter – because if they did rise, our domestic energy companies would start exporting more, and prices would rise here too.

This type of instability is the first that comes to mind when talking about volatility in the energy world (well, unless you're a chemist), but it's not the only one.

Jeremy Bentham, VP Global Business Environment at Shell, was careful to point out that, for energy companies, even "stable" nations can be rather volatile when it comes to the investment culture they encourage.

Energy, after all, is an extremely capital-intensive business to be in. As Bentham pointed out, the infrastructure turns over on the scale of decades, not months or years, and so for any real investment to happen, there has to be stability for at least that long. Unfortunately, in countries like Britain, that simply isn't the case. Ministers like John Hayes will always exist, battling against what were thought to be settled questions – such is the price of democracy.

That investment volatility is thus an argument against trying to build a self-sufficient energy system: to do so without the political structures in place to guarantee stability would be prohibitively expensive.

There was one source of uncertainty which went unmentioned by the panel – possibly because its root lies, not with politicians or foreign nations, but the business and investor communities in Britain.

As a paper from the Carbon Tracker think tank argued in March this year, much of the world's carbon is "unburnable".

We have in the order of five or six times as many fossil fuel reserves as can be safely burned without raising the global temperature too high. In fact, even the fossil fuel reserves held by just the top listed oil, gas and coal companies bring us above that limit.

What this means is that nearly every company specialising in fossil fuels faces the chance of a bubble bursting when the value of their reserves is reassessed to take the unburnable nature of most of their assets into account. That bust would make the volatility introduced by rebellious ministers look tame in comparison.

Perhaps the best hope for the holders of unburnable carbon is widespread adoption of CCS. But until that happens, those in the industry fearing volatility would do best to start warning their own investors that there's a tumble ahead.

Oil flares from a refinery. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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How Ukip’s Douglas Carswell made himself obsolete

The brightest possible future for him now involves joining one of those sinister US think tanks.

On a muggy day in August 2014, Douglas Carswell, the Conservative MP for Clacton in Essex, defected to Ukip, saying that he hoped to see “fundamental change” in British politics. He won the ensuing by-election comfortably, becoming the first person elected to parliament on the purple ticket. The next day, in a column in the Daily Express, his new leader, Nigel Farage, asked how many more Tory MPs would follow suit: “Two, seven, ten?”

Farage wasn’t alone. There were rumours that other Tory right-wingers were poised to follow Carswell over the top. The bookies started laying odds on who would go next. In the end, just one did: Mark Reckless, the MP for Rochester, who defected on 27 September 2014, donning the chain mail and gormless expression of a particularly unthreatening crusader for an ill-judged Sunday Times photo shoot. (Reckless, unlike Carswell, lost his seat in the 2015 general election; he now fights the good fight as a Ukip member of the Welsh Assembly.)

Not only did Farage’s predicted flood never happen, it has now gone into reverse. On 25 March, Carswell quit the party to sit as an independent. This time, oddly, he seems unconcerned that the “only honourable thing” to do would be to call a by-election. Ukip, once again, is left without an MP.

The party’s grandees are delighted. Farage has dismissed Carswell, without irony, as a “Tory party posh boy”, too much of a wuss to talk about immigration. Arron Banks, formerly Ukip’s main donor, was even threatening to stand against him – an interesting approach to take to the only man ever to win your party a seat at a general election.

It’s hard to imagine that Carswell feels too heartbroken, either. He claimed that he only defected in the first place to pressure David Cameron into promising a referendum and to stop Ukip from wrecking the Leave campaign’s chances of victory. On both counts, he succeeded: the referendum was included in the Tories’ 2015 manifesto; official recognition as the voice of the Leave campaign went to the cross-party Vote Leave group, rather than the Ukip-dominated (and Banks-funded) Leave.EU. In this version of events, Carswell was never really a Ukip man at all: the reason so few Tory MPs followed him is that he made sure they didn’t need to.

So has Carswell won? He has achieved his big goal of getting Britain out of the European Union. Yet there’s a measure of pathos in this victory, because he was wrong. It wasn’t his liberal, free-trading vision of Brexit that swung the referendum. It was Banks’s and Farage’s warnings that 70 million Turks were going to move in and take over.

More than that, the tone set by the referendum has put the rest of Carswell’s agenda out of reach. The Plan: Twelve Months to Renew Britain, the 2008 book that he co-wrote with the Conservative MEP Daniel Hannan, painted a liberal picture of Brexit, all Norway model and free trade. It spoke of other libertarian pipe dreams, too: moving powers from prime minister to parliament, local democracy and (God forbid) more referendums.

This now looks quaintly irrelevant. It’s hard to see Theresa May’s newly authoritarian Conservative Party embracing these ideas. If Ukip is dying, that’s largely because the ideas that it espoused have been adopted by the governing party.

As for Carswell, he has given up any influence he once had. May, not one to forget betrayals, is unlikely to welcome him back. The Tories will probably throw everything at retaking his seat in 2020 to show that they have conquered the Ukip threat.

How the Clacton MP, aged just 45, will fill the second half of his life is an open question. His CV is not one that points towards a career as a well-paid City adviser. He has neither the passion nor the charm (nor, frankly, the looks) for a broadcast career. The brightest possible future for him involves joining one of those sinister US think tanks that talk a lot about freedom while plotting to make poor people poorer.

Carswell joined Ukip to drag it in a more liberal direction. He ended up pushing the Tories in a more Farageist one. Today, he is best described by an epithet that he once reserved for the EU: obsolete.

Jonn Elledge edits the New Statesman's sister site CityMetric, and writes for the NS about subjects including politics, history and Daniel Hannan. You can find him on Twitter or Facebook.

This article first appeared in the 30 March 2017 issue of the New Statesman, Wanted: an opposition