This is the first in a series on resilience, focusing on energy.
Since the pandemic, there has been a marked shift in policy and industry discussion of ‘resilience’. It is now increasingly accepted that, as a result of a confluence of factors, from the pandemic itself to the war in Ukraine and conflict in the Middle East, rising interest rates and higher government debt have brought to an end the era of the post-Cold War ‘peace dividend’. This was characterised by increasing globalisation and freer trade underpinning efficient supply chains, buoyed by relatively stable geopolitics.
This change of perception has led to a renewed convergence of discussion on industrial policy as vital to addressing both the UK’s domestic challenges of regional inequality, productivity and energy resilience, as well as protecting the nation and securing its place in the world. Broadly the aims of boosting national resilience through industrial policy can be distilled into four priorities:
1. Abundant, affordable green energy
2. Reliable infrastructure
3. A defence industrial base and Armed Forces capable of meeting a new threat paradigm
4. An innovation ecosystem underpinning genuine, sustainable growth
Energy Resilience and industrial strategy:
It is hard to overstate how fundamental energy is to a modern economy and to our standard of living. However, as a result of the Russian invasion of Ukraine in 2021, rising energy prices became an acute issue both for consumers and businesses. Gas and electricity prices in the UK are linked, meaning that supply shocks to gas have contributed to rising electricity prices. While the UK does not currently import Russian gas (and when it did, it was only a small part of the mix), it is linked closely to the European wholesale market, meaning that efforts to diversify away from Russian gas have had significant impacts on both UK gas and electricity prices.
There are three key tests for a resilient energy strategy: first, ensuring that the UK does not suffer blackouts and can meet increasing demands for energy; secondly, that the cost of energy can be lowered in the UK to power growth and prosperity, and thirdly, that we can achieve the first two through carbon neutral sources and therefore meet our sustainability goals. It has often been argued that it is impossible to achieve all three, but that is what we need – and innovative industry drawing on improving technologies, supported by a strategy in which public and private sectors play coordinated roles is the way in which we can make this essential goal become reality.
The cost of the cost of energy
Britain’s productive industries are operating at 5% less output than they were 5 years ago. The recent surge in the cost of electricity has been part of a longer and more consistent rise over the last 20 years. The UK has the highest electricity cost compared with its peers, and has lost a third of its manufacturing capacity since the 1990s, where other service-based economies have maintained their manufacturing sectors over the same time period. It’s clear that the high cost of electricity correlates to lower manufacturing output.
The importance of more affordable and sustainable electricity goes far beyond manufacturing. Paul Wilson pointed out at our session last month that data centres use around 3% of the UK’s electricity. A consistent and resilient energy backbone is necessary if we are to maintain and build on the UK as an international leader in AI and data.
The energy mix and variable power
Firm (predictable and easily dispatched[DL1] [DL2] ) power is essential if the UK is to achieve its ambitions of greater domestic manufacturing capacity.
We are faced with an uphill battle: as the need to revive the UK’s industrial capacity grows, we must be able to do so in the context of high energy prices, an ailing National Grid, demanding net zero targets and a restrictive planning system.
Anthony Green, Future of Energy Director at SGN, joined us February, setting out some of the vulnerabilities of the National Grid. In its current capacity, the grid is vulnerable to ‘Dunkelflautes’ – periods in which there is little wind and little light, forcing the UK to switch away from wind and solar energy and rely more on imported gas. Most notably the UK came close to blackouts in 2018 during the ‘Beast from the East’ storm, if not for emergency LNG imports.
Wind, solar and hydrogen cannot provide enough consistency and availability alone for the UK to both reduce energy prices and provide enough firm power, particularly in the current context of more vulnerable energy supply chains. This is not to suggest that they should be deprioritised. They are a viable source of carbon neutral energy and technologies will only continue to improve.
A firm energy backbone
What can the UK do to work towards affordable, reliable and carbon neutral energy? Where solar, wind and hydrogen have roles to play in the mix, they are all too variable to provide a firm power backbone. In the past, we have used coal and gas as a source of last resort when variable clean and renewable energy has not been available, which is not suited to meeting our sustainability goals. Wind and solar generation can become more efficient, and ‘turquoise’ hydrogen offers a low carbon option to increase yield.
Geothermal, hydroelectric and biomass sources are limited by their environment, which, barring breakthrough advances (which are being worked on), leaves nuclear as the most viable option for a sustainable and resilient firm power backbone.
How does the planning system affect energy?
However, transforming the UK’s energy mix is not possible without a properly oriented planning and consenting system. Regardless of what the UK’s sustainable energy mix could and should be, the transition can only be facilitated by procurement and planning systems that prioritise speed and recognise the scope of the challenge.
Unfortunately, this is not currently the case. Great British Nuclear’s SMR competition has taken far longer than expected, resulting in Rolls Royce scaling back their plans to build nuclear factories in the UK. The next Government should prioritise speeding up review and approvals in nationally significant infrastructure, perhaps starting with updating the National Policy Statement on renewable energy infrastructure to include on-shore wind, and updating the statement on nuclear power generation (last updated in 2011) to reflect a greater sense of urgency.
The importance of Social Technology in resilience
Lord Arbuthnot joined us in April to set out the vulnerability of the UK’s grid. There are two kinds of vulnerability worth considering. The first is that reliability and security of the National Grid itself, the second, how at risk the UK’s energy supply chains are to external shocks.
Given the recent news of solar flares, it is worth bearing in mind that the earth is always at risk of a ‘Carrington Event’. While they might make for some interesting Auroras, a more intense solar storm could cause widespread electrical disruptions, blackouts, and damage due to extended outages. While it might not impact mobile phones or computers directly (see here for an explainer on how solar flares affect electronics), an extended and international blackout could cause unprecedented upheaval.
Resiliency in this scenario falls back to a far more fundamental level than using new material science and engineering to protect against blackouts. ‘Social technology’ plays a vital an undervalued role in national resilience. This broadly refers to systems of interaction that underpin our daily lives, coming out of concerted human agency. In this case, having strong social cohesion is vital, with a publicly-known and available space to coordinate action and resources and to establish norms. We are currently not prepared as a society to manage this kind of emergency.
Even outside of this extreme and relatively unlikely circumstance, ensuring that problems are resolved quickly and effectively also requires a degree of corporate coordination that does not come by default to the sector. When Paul Wilson joined us a few weeks ago he described the data sharing ‘CReDo Project’ , making the case for secure, resilient information sharing across sectors to mitigate the impact of flooding on energy, water and telecoms infrastructure.
Conclusion:
Building resilience and sustainability into our energy mix must be treated as a transformational effort. As with other areas, including defence, the nation has gambled on a run of relative stability which now appears to be coming to an end. As we have learned in the D Group Programme over the last month, resilience is not just about policy and industry, but also about society’s preparedness for challenging circumstances ahead.
