KPMG: Addressing Britain's energy crisis is a priority

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Guest essay by Eric Worrall

On the first day of the new British Government, Simon Virley, UK chair of energy and natural resources at KPMG, has warned that a priority for the new government is addressing Britain’s looming energy crisis.

According to The Telegraph;

Ahead of the results of one of the closest elections in decades, Simon Virley, UK chair of energy and natural resources at KPMG, has warned of tight energy capacity in 2015 and 2016.

“The next couple of winters are expected to be among the tightest this decade in terms of electricity capacity margins due to announced plant closures; while Britain’s overall dependence on imported energy is soaring as North Sea production declines,” he said.

According to KPMG, the margin for power generation this winter could be even lower than the 4.1pc winter outlook provided by National Grid last year following the potential closure of plants at Killingholme and Longannet.

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WUWT has covered Britain’s energy issues on a number of occasions. Last year a fire at Didcot Power Station cost Britain an unscheduled 3% loss of electrical generating capacity. So it might not take much of a run of bad luck, to erase Britain’s razor thin electrical safety margin.

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Joel O’Bryan
May 8, 2015 11:08 am

Fortunately, the election was far from close. The pollsters wide miss, like they did on Scottish independence vote, will cause some serious reflection on how they are selecting samples in their queries.
Sound famaliar? A common theme in Groupthink is seeking cognitive confirmation. Happens on all sides. It is what Dr. Feynman warned about in scientists becoming activists.

Billy Liar
Reply to  Joel O’Bryan
May 8, 2015 3:22 pm

All the respondents in polls are self-selected, whatever the pollsters may think. They will never be accurate.

Louis LeBlanc
May 8, 2015 11:11 am

Let them have windmills!

Bruce Cobb
May 8, 2015 11:18 am

“Green” energy policies hard at work.

May 8, 2015 11:20 am

Maybe they should start with the 100 billion barrels of oil they have underground near Heathrow airport.

Silver ralph
Reply to  Dobes
May 8, 2015 11:33 am

Care to elaborate?

Reply to  Silver ralph
May 8, 2015 12:20 pm

UK Oil and Gas, Horse Hill Well, near Surrey. Got the airport wrong, it was Gatwick. 100 billion barrels in situ with probably 10 -15 % recoverable by todays technology.

Reply to  Silver ralph
May 8, 2015 12:28 pm
Reply to  Silver ralph
May 8, 2015 1:51 pm

Gatwick sitting on giant oilfield. Plus Ed Dvaey is no longer energy Secretary.

Reply to  Silver ralph
May 8, 2015 2:33 pm

I think UKOG have now indicated that the 100 billion figure may be a top-end-of-possible-estimate number. And not all [just 10-15%] can currently be recovered.
A small pastie in the sky [not the full ‘pie’, I surmise].

Reply to  Silver ralph
May 8, 2015 2:54 pm

Dobes, although the ‘gatwick’ discovery is significant, the press blew it all out of portion by not understanding elementary oil and gas geophysics. The discovery is in the something clay stratum (I don’t remember the name off hand, and is unimportant to this comment). Same stratum that is a major North Sea producer. Utterly unsurprising that it extends into terrestrial UK.
But clay doesn’t hold hydrocarbons. Deposits are in sandy reservoir lenses within that general stratum. Those are biggest (and deepest) out over the North Sea. The portion of this general geological basin that is UK terrestrial is called the Weald Basin. The press estimates came from multiplying the per km estimated TRR for the ‘Gatwick’ lens discovery by the known areal extent of the entire Weald basin. In the real world, that’s nonsense. And, the ‘won’t frack’ part was additional siliness. This is not a shale source rock. It is a conventional sand reservoir, in this case impervious clay capped. No need for fracking at all.

Reply to  Silver ralph
May 9, 2015 6:18 am

. I agree 100 billion barrels is a headline vs what it may end up being but look at what a smaller discovery (Bakken) can achieve. Now as far as the 10-15% recovery, that is by today’s technology. This field will be active for a long time and technology will change to benefit the specifics of this field. If 100 billion barrels is correct and 15% is all they ever recover, it could supply the UK with all its oil needs at today’s consuption rate for 25 years. Not a bad pastie.

Reply to  Dobes
May 9, 2015 6:12 am

. I agree the 100 billion figure is probably inflated but the first well has been tested and should be able to deliver 20 million barrels. Not a bad start. It will take some time to truly delineate this field and find the sweet spots but the main point is the UK does have options other than wind. I think the greater shortage in the UK is political will, not energy. Same can be said for the U.S.

Reply to  Dobes
May 10, 2015 6:55 pm

Actually Gatwick – LGW
Heathrow – LHR

May 8, 2015 11:30 am

Government addressing energy is where the problem lies. The solution is for government to leave the energy industry alone, and it will produce what is needed. It’s what they do. The announcement means the new government is clueless, and unlikely to produce beneficial results. They will likely try to tweak rules, instead of just getting rid of them.
“In this present crisis, government is not the solution to our problem, government IS the problem.” – Ronald Reagan

Reply to  Gamecock
May 8, 2015 12:05 pm

Absolutely true! But does anyone believe the UK is ready to face that truth – that governments destroy, they don’t create. Maybe a few freezing winters will wake people up.
If not, the more that people expect the government to provide energy solutions, the worse the problems will become.

Gary Pearse
Reply to  paulg23
May 9, 2015 7:12 am

Yeah, can you see Cameron saying “Whoa, this IS a big problem. This is a job for the private sector”. I don’t know why a bunch of lawyers and activists feel qualified to decide how to solve technical problems. Call for solutions from the private sector, and you will be recognized as a real manager of the public trust.

Leonard Lane
Reply to  Gamecock
May 8, 2015 12:06 pm

Gamecock. I think your analysis is correct. Government should have certain basic and essential roles and certain basic and essential limitations. Their major roles should include protecting individual liberties, providing for national defense, border control, treaties, and other functions that protect people and their nation from big government. The basic limitations should be in size, ability to tax, and limitations on their ability to assume powers and functions that belong to the people. Their guiding principle should be to serve not rule.

Reply to  Gamecock
May 8, 2015 2:06 pm

As Dreadnought pointed out on another thread:
The Tories may just do something worthwhile. Maybe.

Reply to  dickon66
May 8, 2015 2:11 pm

Ah, maybe not. So embarrassed. Forgot to check the date on the original article. Damn.

May 8, 2015 11:34 am

Also in the Telegraph
“A majority government is an oportunity to fix Britain’s broken energy department”‘
A good point from the article is:
“Last year, Mr Davey’s astonishing claim that fossil fuel companies could be turned into the “sub-prime assets of the future” by action to limit climate demonstrated what was wrong at the heart of DECC while he held a ministerial role. His judgment and naivety on some critical issues such as the environment arguably helped to drive a wedge between fossil-fuel-producing industries, which are vital to the British economy, and campaigners. “

May 8, 2015 11:34 am

The UK’s electricity infrastructure is creaking. Drax apart all the coal stations were commissioned in the first half of the 70’s and are woking museums. The nuclear stations bar Sizewell B are also very aged 70’s vintage and practically life expired although EDF plan to limp them through to 2030. The gas fleet is a mix of ultra modern and first and second gen CCGT. Half the existing oal station will be closed in the next few years so the only flexible fuel secure generation is shrinking and old, and no strategic plan has existed for my entire adult life (20 years). The generating companies are all in frighteningly bad financial state and we need £200Bn of investment in the next 15 years.
No problems, nothing to see here. Move along please.

Reply to  PlacidCasual
May 8, 2015 1:44 pm

Did the ’70s technology not work? Can one no longer make replacement parts for ’70 technological level things?
This “it’s old, just toss it” is a simplification without merit. Yes, I know the “issues” of keeping old things working. My “daily driver” is a 1979 car. Yet it is less cost than a new one to just do the maintenance, and it works just fine.
For that matter, nothing prevents replacing old parts, as they need it, with newer tech if desired. I’m about to put an electronic ignition module on my car instead of the present “points and condenser” (but I’ll keep a set for any loss of electronics in the middle of the Mojave Desert…) just like I have radial tires on it now. ( 16 inch rims soon to replace the harder to find 14 inch sized tires). New paint on the cards too, with whatever passes for paint in this no VOC world.
I have packed peaches in an old cannery that had label applying machines originally run by belts. They had added an electric motor… The thing still ran fine and was built to last forever. Shop foreman occasionally had to make a part if one broke that was no long sold. One small lathe is about all it took. It’s the new stuff that can’t be fixed when it dies and nobody makes that electronic-wonder-gizmo with the all-glued-and-seal parts.

Reply to  E.M.Smith
May 8, 2015 8:12 pm

EM Smith,
An excellent point re up grading and repairing older plants.
I am not familiar with the hardware electricity generating industry, but I know for a fact in the oil and chemical business some plants over 50 years old have been continuously upgraded and are still operated profitably and competitively in the market place. I personally worked on revamps of units over 50 year old to upgrade and take advantage of latest technology. We replaced reactor vessels or modified them to take advantage of the latest developments in Catalyst technology, etc.. Keep in mind that a typical processing plant consists of numerous equipment items including towers, pumps, compressors, piping, heat exchangers, valves, instrumentation, electrical stations, control house, environmental equipment, etc. Over the 50+ years some of this equipment has been rebuilt, and repaired or replaced as necessary on a regular basis to keep the unit running efficiently. Why throw away all that equipment if the unit can be upgraded?
I think the equipment is being retired for a faux green energy agenda.

Reply to  E.M.Smith
May 8, 2015 10:19 pm

Indeed. The oil well on my farm was drilled in 1952. It is still pumping though many parts have been replaced and upgraded over the years and it has been reworked every 5 to 10 years. My 1975 Jeep Cherokee still runs well as does my David Brown Tractor (Case in North America) and my similarly old John Deere. At the auction last week, old diesel tractors were going for 25% more than last year. With a bit of care, things can easily run 50 years. How old is the Grand Coulee Dam? It has been producing electricity since 1941 – 74 years. Maintenance and upgrading are the keys.

richard verney
Reply to  E.M.Smith
May 9, 2015 6:51 pm

Nice to hear that you are keeping an old car running. Hopefully, it will have many years left in it.
My first car, I kept for more than 30 years. Soon after I bought it, I fitted an after market electronic ignition; the distributor cam had to be machined down to get the magnetic rotor to fit on the shaft, so there was no going back. One day, I drove up to London for my first job interview, and the car broke down coming back home. Not a good thing when wearing one’s best suit! It turned out to be the electronuic ignition. Fortunately, i had a spare engine in the garden of the student digs I was living in, and I got a housemate to take off the distributor and come up to London on his bike. We had to fit it under the street lights, with no strobe for timing. Fortunately, the replacement distributor was slotted in, in the approximate position such that the engine would start and then we just turned the body of the distributor until we found the sweet spot. So a good idea to keep a spare original just in case of problems.
As you are no doubt aware, if you are fitting larger rims you need to check the tyre circumfrence and work out what that will do for the speedo reading. You don’t want to get caught for speeding inadvertently.
PS. I now have a 1969 car, but that is only taken out occassionally. Shame. There are very few parts available for it, but as you suggest, anything can be engineered.

Reply to  richard verney
May 9, 2015 7:09 pm

There’s developed a huge new replacement parts business for a lot of the 60 ‘ s ish and later (plus lots of old cars as well) cars, you can now buy complete new bodies and most of the components for camaros, mustangs, and repair parts for a host of others.
The last car I had with points, a 1969 440 Cid 3 X2 barrel carbs Dodge Coronet R/T, got switched to electronic 🙂

Eamon Butler
Reply to  E.M.Smith
May 10, 2015 4:23 am

From ”Only Fools and Horses” Trigger’s broom.
Enjoy. Eamon.

Reply to  PlacidCasual
May 8, 2015 2:46 pm

E.M.Smith on May 8, 2015 at 1:44 pm
“Can one no longer make replacement parts for ’70 technological level things?”
I’m in the product lifecycle management business, and in some products space, a manufacturer can’t buy about 30% of the parts in last year’s design!

Reply to  PlacidCasual
May 8, 2015 3:09 pm

In the 70s and 80s, I worked in a manufacturing plant that had boilers from the 1930s. Visitors described them as well-maintained antiques. And, yes, they still worked.

May 8, 2015 11:39 am

Unfortunately the Conservative energy policy is likely to continue with little change from that of the Coalition and Labour before it. It is unlikely that Cameron will appoint somebody like Owen Paterson to sort out the mess that the UK electricity supply is in. The bureaucrats will ensure that it is business almost as usual, with lots of useless renewables being subsidised at the expense of the necessary new despatchable power stations. Only UKIP had an energy policy that made sense and would have stopped all subsidies to useless wind and solar power, not to mention tidal, wave and biomass.

Reply to  phillipbratby
May 8, 2015 11:40 am

Hopefully they will crack ahead with fracking, but it will all be too late.

Harry Passfield
Reply to  phillipbratby
May 8, 2015 12:04 pm

Hi Philip! If we have any hope for the Conservative party’s government’s energy policy – which should be a practical policy without the Libdem’s Davey – we have to hope that Cameron is no longer influenced by his wife and her step-father.
On a rather weird aside, it occurs to me that War of the Worlds was not fiction, but an allegory for a world attacked by little Green men (or women). We can but hope they all catch flu.

Gary Pearse
Reply to  Harry Passfield
May 9, 2015 7:22 am

I’ve wondered if ‘Planet of the Apes’ was an allegory or only accidentally so.

Reply to  phillipbratby
May 8, 2015 1:30 pm

This article from the Green Alliance Blog lists examples of Tory MPs who are very Green.
I’m not convinced about Osborne’s greenyness (I dislike his ideas for other reasons).
But most of the rest sound familiar. The right wing Conservatives are still Greens.

Gary Pearse
Reply to  MCourtney
May 9, 2015 7:26 am

Conservatives in name and definitely not so in comparison to outside of EU. Conservatives elsewhere don’t think a bunch of lawyers and activists should be trying to solve technical-economic problems.

Reply to  MCourtney
May 9, 2015 10:23 am

I would point out that the incumbent party will get the blame if there are black out caused by Red Eds climate change act.
Given that we have 650 MPs and only 3 voted against the act it’ll be hard to shift the blame anyway.

Reply to  phillipbratby
May 8, 2015 2:01 pm

Blair should have ordered many new power stations during his first term of government. That he didn’t is an indictment of his ability to ignore real world problems. That the Tories then ignored the vital need to build grown up power stations rather than the renewable resources they opted for is a further sad indication that politicians are quite willing to stick their heads in the sand in order to follow their ideological obsession. Let’s hope for some warm winters

May 8, 2015 11:42 am

Remember this
UK families will have to get used to “only using power when it was available”

May 8, 2015 11:50 am

We are finally getting people with real power calling the AGW BS

May 8, 2015 11:51 am

You are playing their game, only this time they are not breaking windows.

Peter Miller
May 8, 2015 12:00 pm

As someone who has been for years highly vocal about the self-inflicted electricity crisis, which is facing the UK, I can only hope the Tories will have the cajones to ditch the insane energy policies of the Green Blob.
Most Tory MPs are pragmatic about energy and want to ditch the ‘green crap’ policies foisted on them by their previous coalition partners the Liberal Democrats. The problem is the Tory leader David Cameron is a closet greenie, presumably as a result of his Greenpeace card carrying wife.
Hopefully the UK’s Ministry of Climate Change will now be rightfully consigned to the dustbin of history.

Stephen Richards
Reply to  Peter Miller
May 8, 2015 12:14 pm

I cannot for one moment believe that dave will go against his wife’s wishes and start being sensible on climate. He doesn’t have either the nunce or the guts to do what is necessary. However, at least this time, the crunch will come under his responsibility perhaps that’s why he said he will not stand at the end of this parliament.

May 8, 2015 12:01 pm

At least you have water and are allowed to take showers. A lot of Californians are about to smell.

Derek Wood
May 8, 2015 12:44 pm

Fortunately, Ed Davey is out of the game now (huge sigh of relief). But who knows when reality will return? He will probably be replaced by another numpty.

May 8, 2015 12:50 pm

Unless the UK uses a significantly different way of measuring their safety margin, 4% is pretty much a guarantee that they will have problems if the weather is even a little unusual or if they have a single large plant or line outage.
The US typically requires about 15% of excess capacity for reliability. During slightly unusual weather, pretty much all of this margin disappears. The Northeast, Texas, and California frequently have calls for load reductions and/or rolling blackouts during fairly normal weather like the last two winters and pretty much every summer in California. In California, it’s pretty much a matter of a poor market structure that doesn’t sufficiently incentivize reliability investments. In Texas, many plants aren’t designed for low temperature operation – the only reason they didn’t have blackouts this year is because they were lucky enough to have a lot of wind while it was cold. In the Northeast, the problem is that too many coal plants have been replaced with gas plants – and the gas infrastructure hasn’t been sufficiently upgraded. When it’s unusually cold, residential, commercial, industrial, and utility gas customers all increase gas use and the pipeline pressure drops below the level necessary for utility users. All of these problems are expected to be exacerbated by large amounts of coal capacity being retired in the next few years – even California. While they have little or no coal generation left in state, they rely on coal energy imported from neighboring states.
So far, the regulated parts of the US have been ok because they’ve kept their coal plants running and are incentivized to make sure the power system is reliable.
Any power system running on the edge can go into a complete blackout if any one line or generator trips off. Restoring power can take several days, even if there isn’t any storm damage. With storm damage, it can take weeks.
If you live in the UK or any deregulated market in the US, I’d suggest keeping a backup heat source handy.

Crispin in Waterloo
Reply to  vboring
May 8, 2015 1:43 pm

It takes very little to bring down a teetering network. It is claimed that solar eruptions tend to be larger during periods of quietude. Is that true? How much of a hit can the infrastructure take? If two or three large transformers are taken out, how long to get the system up again and what sort of load shedding will be required? What happened in places like Beirut was that everyone had to buy generators. Good for business I suppose. India solves the problem by dropping the voltage to about 80 or so. Maybe Tesla will sell a lot of batteries – to the rich.

Reply to  Crispin in Waterloo
May 8, 2015 3:00 pm

I fear you are correct. And from a grid stability perspective, UK is scary. Normal safety margins are 5-7 percent depending on generating mix. UK ran 4.1% this winter. Killingholme and Longennet (sp?) are shutting. Nobody is building. The fastest new construction (CCGT) takes 3 years if t an exisring site (transmission exists). Good luck through 2018, given the pickle you are now in.

Reply to  Crispin in Waterloo
May 8, 2015 10:30 pm

In my very rural area of Alberta, Canada, there is a lot of “industrial” demand (read oil batteries). I had to put capacitors and low voltage cutouts in my main electricity panel on the farm as during extreme cold with high demand the voltage often drops into the 90’s – at which time the panel cuts off the grid electricity and starts the backup generator. Low voltage plays havoc with electronics. When I worked in Ethiopia many years ago we had large power conditioners to keep the low voltage from frying our computers. Welcome to the new world order.

Reply to  vboring
May 8, 2015 3:12 pm

Yup. Atmy Wisconsin farm we have a wood firebox heater to supplement the propane furnace (in addition to the wood fire/stove in the family room adjacent to the kitchen), just to cut cost. Plus a hand pump well outside the kitchen somthere is always water if we lose power. We lose power several times a year for many hours at a time (pretty remote). Kerosene lamps for light during. But then, the main cabin part of the farm house was built in the 1880’s before electricity was even discovered.
Now, for the milking machinery for the cows, we have a whopping big diesel backup generator along with diesel storage tanks needed anyway for the farm machinery. Between me and my neighbor, over 2000 gallons. First things first…

May 8, 2015 12:58 pm

It seems like Simon Virley has been reading up on back copies of Christopher Booker’s Sunday Telegraph columns. Christopher has been banging on about the crazy lack of future energy planning for several years. So finally the high paid consultancy industry, or at least Simon Virley, has caught up. Maybe as KPMG has the ear of givernment somethinhg may actually start to be done. But I’m not holding my breath.

May 8, 2015 1:30 pm

According to the UK Telegraph on May 4, the internet uses 8% of all electrical power generated in Britain, either to serve or to view. What was served or viewed was not commented on other than most of it was streaming content.

Reply to  ShrNfr
May 8, 2015 1:48 pm

First they came for the lightbulbs, and you said nothing,
next they will come for your internet…

Will Nelson
May 8, 2015 3:22 pm

Time for a good old fashioned scare mongering. Peak affordable plentiful life-giving energy. (We’ll call it CAGW (Catastrophic Anthropogenic Green Wattage (I believe that acronym is no longer claimed))).

May 8, 2015 3:34 pm

Even if the power goes out we get to watch British comedy.

Gary Pearse
Reply to  Max Photon
May 9, 2015 7:34 am

Sharp, Max!!

May 8, 2015 3:36 pm

Maybe that is what is needed to recalibrate the 2008 lunacy and just maybe the voting public decided enough of this crapolla. They froze their butts off last winter and the Brits are nothing if not pragmatic. Note the stuffing the Green party received. Back to basics.

May 8, 2015 3:42 pm

Then there is this which no doubt did not go unnoticed as we head to a possible new MM:

Questing Vole
May 9, 2015 3:22 am

UK coal-fired power stations were getting the upgrades needed to keep them in business, but
(a) Miliband’s Climate Change Act and Davey’s Energy Act, added to EU emissions regulations, have made it next to impossible for them to continue operations at all beyond 2018, let alone operate at sufficient profit to attract the investment they would need to continue generating into the 2020s/30s; and
(b) upgrades are one thing; investing in new, state-of-the-art-efficient units is another. It hasn’t happened in UK for decades – not under governments of either party – and it won’t now while the CCA’s no-new-build-without-CCS rule still applies.
UK is still dependent on coal-fired capacity to get it through the winter, but successive governments, conned by CAGW-promoting climate models that make opinion polls look reliable, have let that good tweed coat wear to threads while wasting taxpayers’ cash on designer g-strings.
One beast of a winter across Western Europe and UK will this find out the hard way.

Reply to  Questing Vole
May 9, 2015 12:44 pm

With the downturn in the solar sunspot cycle, the winter Arctic jet stream can be expected to get more wobbly and for blocking highs to occur. So a hard winter could come very soon.

Dave Ward
May 9, 2015 6:45 am

EM Smith & others – re 70’s technology, I also run an old car with a carburettor and simple electronic ignition. But I have a points distributor and coil under the seat which takes 10 minutes to swap! Whilst gardening yesterday a (deliberately?) weak part of my edging spade broke. The rest of the handle and blade were fine, so I cut it back a few inches and repaired it with some car body filler…
I think the main problem for power station operators in keeping old tech running is legislation. Since coal has effectively been demonised, it’s pointless spending money if you have no hope of meeting CO2 emission standards. Getting replacement parts is also a problem – manufacturers obviously want to sell new kit, rather than keeping an inventory of old stock. Whilst making your own is the obvious answer, finding people with the experience and suitable equipment is no longer as easy as it once was. A brand new steam railway locomotive was recently completed in the UK by a group of volunteers, helped by substantial donations. However many of the larger components had to be made in other countries. We also had a very experienced nuclear manufacturing industry at one time, but it was sold off by short sighted politicians….

Coach Springer
May 9, 2015 9:34 am

Is there any reason to think that 2017 wouldn’t be worse? I’ve not heard of any change in direction as yet.

May 9, 2015 12:17 pm

Any hope that renewables will correct the situation in the UK is likely to be severely dashed when looking at the current grid situation;
Of the 32GW demand only 1.3GW is supplied by metered wind against 28 GW from coal. This figure for wind come at a time when several fronts are blowing through the country and is surprisingly , but not typically, low. The figure for wind rarely exceeds 5GW , according to gridwatch’s data and last May, June , July it was very low . Yet another 20+GW is required from renewables (mainly wind , I mean solar in Britain has to be a joke) according to Miliband’s Act. It is impossible.
We seem to be getting 2GW from France , which is the limit that can be supplied through the interconnector and France has the dream combination , economically and environmentally, of about 85% nuclear and 15% hydro. I heard a rumour that Hollande was planning to replace all the nuclear power stations with wind turbines – please say it ain’t so.

richard verney
Reply to  mikewaite
May 9, 2015 7:00 pm

That is indeed his wish. But, of course, he may not be in power for that much longer so perhaps the French will be saved.

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