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.

Photo: Getty Images
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Stella Creasy targeted for deselection

Organisers on the left believe the Walthamstow MP is the ideal target for political, personal and geographical reasons.

Stella Creasy, the high-profile MP for Walthamstow and defeated deputy Labour leadership candidate, is the first serious target of an attempt to deselect a sitting Labour MP, the New Statesman has learnt.

Creasy, who is on the right of the party, is believed to be particularly vulnerable to an attempt to replace her with an MP closer to the Labour party’s left. Her constituency, and the surrounding borough of Waltham Forest, as well as the neighbouring borough of Leyton and Wanstead, has a large number both of new members, inspired either to join or return to Labour by Jeremy Corbyn, plus a strong existing network of leftwing groupings and minor parties.

An anti-bombing demonstration outside of Creasy’s constituency offices in Walthamstow – the MP is one of around 80 members of Parliament who have yet to decide how to vote on today’s motion on airstrikes in Syria – is the latest in a series of clashes between supporters of Creasy and a series of organized leftwing campaigns.

Allies of Creasy were perturbed when Momentum, the grassroots body that represents the continuation of Corbyn’s leadership campaign, held a rally in her constituency the night of the Autumn Statement, without inviting the MP. They point out that Momentum is supposedly an outward-facing campaign supporting Jeremy Corbyn and the Labour party towards the 2020 general election and the forthcoming local and European elections. Labour holds 27 out of 27 council seats in Creasy’s constituency, while Creasy herself has a majority of 23,195 votes.

“If you look at the seat, there is nothing to win here,” said one Labour member, who believes that Momentum and other groups are planning to depose Creasy. Momentum has denied any plot to remove Creasy as the MP.

However, Creasy has come under pressure from within her local party in recent weeks over the coming vote on bombing Syria. Asim Mahmood, a Labour councilor in Creasy’s constituency, has called for any MP who votes for bombing to face a trigger ballot and reselection. Creasy hit back at Mahmood on Facebook, saying that while she remained uncertain of how to vote: “the one thing I will not do is be bullied by a sitting Walthamstow Labour councilor with the threat of deselection if I don’t do what he wants”.

Local members believe that Mahmood may be acting as the stalking horse for his sister, the current mayor of Waltham Forest, Saima Mahmud, who may be a candidate in the event of a trigger ballot against Creasy. Another possible candidate in a selection battle is Steven Saxby, a local vicar. Unite, the recognized trade union of the Anglican Communion, is a power player in internal Labour politics.

Although Creasy has kept her own counsel about the direction of the party under Corbyn, she is believed to be more vulnerable to deselection than some of the leader’s vocal critics, as her personal style has led to her being isolated in her constituency party. Creasy is believed to be no longer on speaking terms with Chris Robbins, the leader of the council, also from the right of the party.

Others fear that the moves are an attempt by Creasy’s local opponents to prepare the ground for a challenge to Creasy should the seat be redrawn following boundary changes. The mood in the local party is increasingly febrile.  The chair of the parliamentary Labour party, John Cryer, whose Leyton and Wanstead seat is next to Creasy’s constituency, is said to fear that a fundraiser featuring the shadow foreign secretary, Hilary Benn, will take an acrimonious turn. Cryer was one of just four shadow cabinet ministers to speak against airstrikes in Syria.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.