Energy

UK to Ration Power

By Ryan McGreal
Published January 20, 2006

Apparently, Britain accidentally received Ontario's winter this year.

According to The Scotsman, the Department of Trade and Industry is warning British businesses that they may have to "restrain demand" for electricity and gas to protect consumers from energy shortages and soaring prices.

An especially cold winter is causing supplies to dwindle dangerously, even as North Sea supplies of natural gas continue their inexorable decline. Britain has access to European natural gas via pipelines, but instability in European natural gas markets has threatened this supply as well, although the standoff between Russia and Ukraine over natural gas prices has been resolved since the Scotsman article was published.

One thing Britain's energy woes has demonstrated is that market forces can't always resolve supply/demand mismatches. Demand for energy in particular is inelastic, which means people cannot simply reduce energy use if the price rises quickly.

Instead, people continue to use energy until either shortages force them into alternate arrangements or governments impose emergency rations on nonessential uses.

In an article in today's Independent, oil geologist Jeremy Leggett warns that Europe faces "the spectre of an acute, civilisation-changing energy crisis."

He points out that Britain doesn't have enough pipeline capacity to meet its NG needs now that North Sea is in decline, and the trickle of liquid natural gas (LNG) ships are following the money to the US, where gas prices are even higher.

Unfortunately, market forces don't smile on reserves, which economics regards as expensive excess capacity - inventory, glut, pick your epithet. Britain is down to 11 days' worth of gas reserves, compared with 55 days in the rest of Europe. If cold weather continues, British manufacturing companies will have to turn off for a day a week.

North America has been spared the same crisis this winter, thanks to unseasonably warm weather that has kept demand for NG down. However, our situation next winter will be unchanged - in fact, it will be slightly worse, because total continental NG output will be lower than it is this year.

We can't count on mild winters forever. When we finally get the sustained chill that's coming our way, our NG supplies will also be pressed to the limit and may be found wanting.

Ryan McGreal, the editor of Raise the Hammer, lives in Hamilton with his family and works as a programmer, writer and consultant. Ryan volunteers with Hamilton Light Rail, a citizen group dedicated to bringing light rail transit to Hamilton. Ryan writes a city affairs column in Hamilton Magazine, and several of his articles have been published in the Hamilton Spectator. He also maintains a personal website and has been known to post passing thoughts on Twitter @RyanMcGreal. Recently, he took the plunge and finally joined Facebook.

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