UK electricity demand, GDP and energy policy

In our industrialised society, energy consumption and gross domestic product (GDP) are correlated. We use energy, large quantities of it, to make stuff and to do things that combined add up to make GDP. A single Man equipped with a 200 horse power tractor, can produce a vast amount of food, and wealth. GDP growth is vital to the well being of our social and economic systems and leads to rising tax revenues to fund health care, education, welfare and pensions. It is also required to pay the rent on our national debt. And so, without GDP growth the expectations of the populace may be dashed and national finances may head towards insolvency. All this is dependent upon energy!

UK politicians should therefore view the recent decline in UK electricity consumption with some alarm…..

Figure 1 UK electricity consumption v GDP index, 1920-present. The oil price shocks of the 1970s brought growth, and electricity consumption to a halt. When growth resumed it was along a steeper GDP-electricity trajectory showing that the economy had adapted to be more electricity (energy) efficient. The current situation, where high energy prices are strangling the economy, is reminiscent of the 1970s. GDP index and power generation statistics from DECC, historical electricity data, 1920 to 2012.

Figure 2 UK electricity supply 1920-2012 plotted by source fuel. Around 2003 demand growth for electricity stalled and has been falling ever since. Using less electricity / energy may seem a good thing, but in fact a significant portion of the fall can be attributed to economic decline. High energy prices are a component part of bringing about economic decline. The chart is from my previous post on UK Electricity Generation Statistics 1920-2012

Whilst a component of the decline is down to commendable improvements in energy efficiency, the greater part of it is down to economic contraction and stagnation (Figures 1 and 2). The electricity v GDP plot has been through a knot like this one before following the energy crises of the 1970s that was brought about by OPEC flexing its muscles. The economy eventually emerged on a more energy efficient trajectory.

Figure 3 

Figure 3 shows details from Figure 1 plotting only data from 1990 to 2012. Four scenario trajectories are shown that have very different outcomes for the UK economy and society, as discussed below.

BAU+ The Business As Usual + scenario is one where the economy and electricity consumption both resume growth, but on a steeper trajectory than before indicating that society and the economy are adapting to higher prices through energy efficiency savings. In essence we become more productive, producing more GDP per unit of electricity (energy consumed). I am absolutely convinced that George Osbourne would be committed to the BAU+ scenario along with many of his government colleagues.

Utopia The Utopia scenario is one where the economy starts to grow again but we continue to use less and less electricity. This would require a quantum leap in the energy efficiency of the way we live our lives – transport, heating, etc. But it will also require a quantum leap in the energy content of what we manufacture towards high value low energy content products. iPhones and designer handbags are likely candidates for high value / low energy content goods whilst a £30 flight to Spain with Easyjet has low value / high energy content. I have nothing against the Utopia scenario but warn against the Bubble illusion. From 2003 to 2007 it appeared we came close to Utopia, creating money by credit expansion to buy imported goods (energy to make the goods was consumed in China) gave the illusion of expanding economic growth with constant electricity, until puff, the bubble burst.

Nightmare is a continuation of the trend for the last 5 years where the economy continues to trade sideways and our electricity consumption continues to fall. This scenario eventually leads to debt default and The End of Britain. To get out of the Nightmare trend, the UK economy needs a big shot of cheap electricity that should ideally be made in Britain.

Olduvai The Olduvai theory, proposed by Richard Duncan, is one where energy shortages lead to blackouts and the eventual disintegration of industrial society. Electricity availability goes down and our economy with it. High energy prices today are a symbol of energy scarcity, demand growth outpacing supply growth,  and so we live in perilous times where the impact of high energy prices upon the economy remains poorly understood.

The government I’m sure may point to the 8.9GW of wind and 1.7GW of solar generating capacity installed by 2012 (BP data). But it remains a fact that these electricity sources are expensive and unreliable. There will be spells every winter when solar and wind production are negligible and the grid needs to fall back upon legacy generating assets that are now being bulldozed.

To get out of the Nightmare trend, the UK economy needs a big shot of cheap electricity that should ideally be made in Britain.

To conclude, I want to take a  look at a few of strands of UK energy policy to see how they measure up against the aspiration of the quote above.

The Large Combustion Plant Directive

Under the EU Large Combustion Plant Directive, 9 large UK power stations have closed or are set to close representing 11.6 GW of generating capacity (peak UK demand~60GW). The environmental objective here is to limit emissions of sulphur dioxide and nitrous oxides (not CO2). Here is the list according to industry representative Energy UK (Figure 4). According to Wikipedia 6 of the 9 plants have already closed.

Figure 4  Planned closure of 20.7 GW dispatchable capacity of large UK power stations over the next 10 years. It is very likely that the nuclear AGR fleet will get license extensions.

Figure 5 The impact of The Large Combustion Plant Directive upon UK dispatchable generating capacity.

Figure 5 from Hugh Sharman at Incoteco shows the trend and impact upon dispatchable electricity supplies in the UK. A year ago the UK had a capacity buffer of > 20GW generating capacity. This created a safety net if supply of a fuel source was disrupted or if there was operational problems in some plant. It also created competition in the market, keeping electricity prices down. Much of that surplus dispatchable capacity is now gone, thanks to EU Greenthinking and UK government complacency.

Carbon Capture and Storage

Carbon capture and storage (CCS) is a Greenthinking dream and everyone else’s nightmare. A very rough estimation is that CCS will consume 20% of all electricity produced by a plant fitted with it. This is a real snake eating its tail. The bottom line is that UK consumers will get 20% less electricity than they planned for at a much higher cost. CCS still lies at the heart of government energy policy thinking.

But it will also require a quantum leap in the energy content of what we manufacture towards high value low energy content products.

CCS is effectively a zero value product that will consume vast amounts of imported energy. It is poles apart from where UK energy policy should be taking us. Olduvai here we come.

Wind and Solar

Renewable energy, deployed in reasonable measure, has much to commend it. We  own the rights to harvest the solar and wind resources over the UK. But we currently do not own much of the manufacturing capacity of the devices used to capture it. Renewables accrue to indigenous primary energy production which is positive, they remain expensive, but the price of solar PV is falling. Offshore wind remains one of the most expensive means of generating electricity invented. The renewables drive so far brought renewable generation, excluding hydro, to 6% of the total in 2012.

However, in my opinion it is a grave mistake to place intermittent renewable energy at the heart of power generation strategy. Without vast and energy efficient storage of renewable power, the UK runs the risk of stumbling into winter blackouts. These could occur during extreme cold conditions similar to those experienced by Europe in recent years, caused by the North Atlantic Oscillation (NAO) switching to negative mode.

What is missing from UK Government thinking?

  • The UK government needs to place affordable, secure and reliable energy supplies at the heart of energy policy. It is possible to achieve this and to have respect for the environment at the same time. The change in emphasis will take energy policy in a different direction that would be of likely benefit to the economy and the well being of the population as a whole.
  • A plan to maximise oil recovery from the UK North Sea using CO2 miscible gas flooding of reservoirs. This is a tried and tested means of enhanced oil recovery. This may not be cheap, but it is CO2 neutral, and likely provides a means of  boosting economic indigenous electricity and oil production. We are going to continue using oil for a long time, we might as well produce it ourselves.
  • A plan to massively expand combined heat and power district heating systems that would contribute towards the quantum leap required in the efficiency of power generation.
  • A strategic plan to facilitate the investment guarantees needed for widespread and timely expansion of nuclear power generation. 16 GW of new nuclear capacity is planned in Britain, but with 8 GW scheduled to close by 2023, this seems too little too late.

To get out of the Nightmare trend, the UK economy needs a big shot of cheap electricity that should ideally be made in Britain.

Dounreay on the north coast of Scotland was once a world leader in fast breeder reactor technology. The third reactor to be built there provided 250 MW of power to the grid from 1975 to 1994. Why was the site closed down?

Update 17 Oct: In my mail box this afternoon, a report titled GB electricity capacity margin published by the Royal Academy of Engineering.

1.2 Key conclusions

There are a number of market-based and political factors that are currently combining to bring about a reduction in the electricity capacity margin within the next five years. It is our view that this combination of factors, in the absence of intervention, would reduce the capacity margin during the time frame considered by this report, in a manner that would present an increasing risk to security of supply.

We therefore recommend that the government:

  1. Undertake interim measures to maintain capacity in the period before the Electricity Market Reform (EMR) package takes effect
  2. Resolve the EMR process as quickly as possible
  3. Resolve uncertainties regarding the carbon price floor
  4. Work together with industry to foster a constructive dialogue with the public on energy policy
  5. Develop a holistic energy system strategy
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22 Responses to UK electricity demand, GDP and energy policy

  1. Hi Euan,

    Thank you for an interesting series of posts.

    “A plan to maximise oil recovery from the UK North Sea using CO2 miscible gas flooding of reservoirs. This is a tried and tested means of enhanced oil recovery. This may not be cheap, but it is CO2 neutral,”

    In what sense is it neutral? In a seminar once I asked Steve Koonin, then Chief Scientist at BP, what the ratio of recovered oil carbon atoms to EOR CO2 carbon atoms, and he said 2:1. That would make it very much carbon positive.


  2. Euan Mearns says:

    Hi Dave, good question. What I wrote was from memory, but I did a lot of reading around this a year or two ago. The link goes to a good presentation by Prof Jon Gluyas at Durham:

    Slide 43 says: Typically 1 (net*) tonne of CO2 injected delivers 2.5 to 5 bbl oil (average 3 bbl)
    1 bbl oil = 0.137 tonnes; so 1 tonne CO2 delivers 0.411 tonnes oil (3 bbls)
    Molecular weight C/CO2 = 12/48 = 0.25C: Molecular weight C/CH2 (oil) = 12/14= 0.86C
    So 1 tonne CO2*0.25 = 0.25Carbon and 0.411 tonnes oil * 0.86 =0.35Carbon
    The ratio is positive 1.4 – this has gone up since the last time I looked at it. Very powerful argument in favour of CO2 EOR for energy security, not so good for emissions control.

    • Euan Mearns says:

      Dave, by email I received this:

      “On the carbon neutrality of EOR remember that only 60% of produced oil gets burned. The rest is made into petrochemicals, plastics and the rest. This ratio should improve as burning oil for fuel is akin to burning antique furniture for firewood. Those carbon bonds are too valuable. ”

      In fact this source suggests 75% goes into liquid fuel, the rest into materials. So 1.4*0.75=1.05:-)

      The point about petroleum and materials I think is very well made. E

      • Hi Euan,

        Thanks for your reply and the links. In the EIA list, I would classify 95% as something that is either burned quickly or evaporates quickly. The remaining 5%: asphalt, petrochemical stocks, waxes, some of the miscellaneous products, some of the other liquids.


  3. Euan,

    You are amazingly prolific with your posts!

    One thing I don’t thing people talk about is the amount of fossil fuels used to build renewables, such as wind turbines and solar panels. Most of these fossil fuels are used up front, but there are also indirect uses–installing the devices and repairing them uses fossil fuels, and the repairmen use their salaries to buy fossil fuels. Those receiving interest payments also use the proceeds to buy fossil fuels.

    If the cost of offshore wind is a lot higher than thermal electricity, doesn’t this suggest that the fossil fuel use involved with offshore wind may be in fact be greater than in fossil fuel burning plants? The difference is that the fossil fuel use is hidden, so it looks better to naive investigators.

    If solar panels are made in China, one can probably guess that most of the energy used is coal–but again, this is not something that people look at.

  4. Euan Mearns says:

    Hi Gail, I won’t stop writing until my traffic hits 50,000 / day 🙂

    The thrust of your comment is about the energy embedded in renewable energy devices. Has a wind turbine ever been manufactured from wind electricity? A solar panel manufactured from solar power?
    The first part of this question comes down to mining and making the raw materials used. Mining and making the materials for the dumper trucks and diggers that mine the stuff to make the turbines. Its a good one for David MacKay. Lets see a 5 MW offshore wind turbine built, installed and maintained using only wind power. Here you need to build ships, helicopters, factories, mining equipment etc – building an electric powered helicopter is a good engineering challenge in itself.

  5. Richard Miller says:

    Hi Euan – still testing how to make comments.


  6. clivebest says:

    Excellent article !

    The UK should have built a couple of modern coal fired stations with low emissions within the EU Directive. There seems to have been an ideological aversion to coal at DECC because in April this year the UK introduced a carbon floor tax. DECC was unhappy that the EU carbon price had fallen to €5 per ton so the government introduced a UK only tax to push price up eventually towards €50 per ton. This is also why DRAX had to convert 2 burners to wood chips to avoid crippling taxes and get subsidies instead. Meanwhile he Germans have 19 coal plants in construction and the Dutch another 3.

    It is all too late now for the UK. Our only serious option is to go for a strong nuclear component. We need at least 10 Hinkley style EPR nuclear stations built over the next 10 years. This would bring economies of scale and provide a core relaible base-load of 20-30 GW for the next 60 years.

    • Euan Mearns says:

      Hi Clive, how do you get to 20-30GW from 10 EPR’s? They are rated at around 1.6GW. And do you have a view on the Olkiluoto 3 status. It looks like they employed the same engineering crew that Edinburgh did to build a simple tram line. In email, I’ve been told they are “unbuildable”.

      But I agree that a new nuclear role out is inevitable and likely the only option to keep UK solvent and lights on. I suspect the eventual scale of the role out will be much more than 10. Just watched BBC news with George Osborne in China at early stage of buying nukes. Interesting that Ed Davey is flapping his wings on the sidelines. I think Osborne understands that money is leveraged from energy.


      • clivebest says:

        I was assuming at least a couple of the old AGR stations and Sizewell B would still be operating !

        I discovered that the UK budget for nuclear fusion research is £60m per year whereas renewable subsidies are several billion/year. Britain built the first nuclear power station in the world – but now we have to get the Chinese to build them as there is no real nuclear industry left.

        • Euan Mearns says:

          I didn’t understand the BBC report about requiring Chinese assistance to build EPRs? I thought it was Areva who did that.

          Do renewables actually get subsidies? Is it not more preferential access to market and guaranteed high price?

  7. G. Watkins says:

    No mention of the potential of gas/oil from hydraulic fracturing?

    • Euan Mearns says:

      I may be wrong, but I don’t believe shale gas will save the UK. Folks are simply not aware of the vast number of wells required for shale development. The drilling effort in remote parts of the US and Canada has been staggering. Will get around to a post on shale some time.

    • Luís says:

      And exactly what potential is that?

  8. Nigel Wakefield says:

    So much to comment on…

    There are two areas where a massive difference could be made:

    1. Residential and SME lighting. Everywhere I go, there are dozens of halogen spots burning in homes and SME offices. Make it mandatory to replace these with LED! Without really shopping around I just bought, for a friend, 15 LED GU-10 spots after a brief E-Bay search – total wattage 57 watts, replacing ~600 watts of halogen spots. That’s a ~90% energy saving for a cost of £76.35, or £1.34/watt. The house where these will be installed uses these lights for at least 3 hours day on average. 600 watts x 3 hours x 365 days = annual consumption 657 kWh/year. New consumption <63 kWh/year. Difference 594 kWh/year, at cost 15 p/kWh = £89/year. Payback will take less than a year. My SWAG is that we could reduce peak loads in the UK by some 5 GW simply by getting rid of all halogen spots…

  9. Nigel Wakefield says:

    Mandatory switch from halogen spots to LED spots in homes and SME offices could cut up to 5 GW off peak demand. Payback period for most people would be within a year, tops….

    Massive cheaply-financed roll-out of micro-CHP in homes and SME offices (1 million/year for five years) could cut another 10 GW off peak demand (there’s a huge correlation between peak power demand and heating demand in homes and SME offices).

    We don’t need more centralised power, we need energy efficient lighting and distributed generation… just for starters… utilities will hate both the above ideas and they’ll likely therefore never see the light of day… ideas for discussion

    • Euan Mearns says:

      Hi Nigel, Welcome to EM:-) Sorry about the small size of the comment box – something I have not managed to fix yet. Agree entirely that more could be done to manage peak demand. We keep MWs of generating plant to supply peak, peak demand for just a few days each winter. Got to take your word on halogen spots and potential savings. The government seems to have been very slow at rolling out initiatives to discourage electricity consumption during the day.

      Micro CHP in homes – care to elaborate…. E

      • Nigel Wakefield says:

        Micro-CHP has not taken off: it’s under-marketed and the unit cost is too high.

        Take a typical ratio of 6:1 heat/power with a gas-burn efficiency of >85%. Make standard units of 12, 18 and 24 kWth (2, 3 and 4 kWe) and you’ve covered probably 75% of the UK residential market on the gas grid. 4 kWe is low enough to for almost all houses not to exceed the ampage on their grid connection.

        Add close to zero cost finance (a la bankers’ bailout) and have the loan paid back from electricity cost savings for a homeowner over 12 years.

  10. Nigel Wakefield says:

    At essentially zero-cost to consumers, and with a strong marketing campaign defining the benefits (massive reduction in electricity bills, plus net-metering payment at wholesale half-hourly prices for surplus electricity generated and exported) the market would explode to critical mass in no time, allowing manufacturers to deploy economies of scale.

    I find it hard to believe that a 24 kWth micro-CHP could not be manufactured and installed for less than £5k if the demand was in the hundreds of thousands (a standard 24 kWth gas boiler, >85% efficient, wholesales for a few hundred quid…).

    Install a million a year for five years, with average 18 kWth / 3 kWe and you’re reducing peak power demand by 3 GW per annum.

  11. Richie says:

    The lifecycle greenhouse gas emissions of each type of power plant gives a good idea of the fossil fuels used per kWh generated, including building and maintaining the plan / turbine and the fuel required. No surprise here, power plant using carbon-based combustible are way worse than others (source: metastudy by IPCC, 2011. Data summarized here:

  12. I’m not sure about your economic stance; you quote GDP & energy production as an essential for UK growth as a positive good, but that model is not universally accepted, and in my mind flawed.

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