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Action and Independent Expertise Are Needed Now on Energy and the Environment

Guernsey’s government must wake up to the need for urgent, expert action on three critical issues: energy security, energy affordability and the environment.

So far, there has been little or no action and, worryingly, government is gathering more powers into its inexperienced hands. All the while the challenges increase.

Perhaps the pandemic created a false sense of security. The truth was that, although energy demand fell when the pandemic began, it surged when restrictions began to ease. The massive financial injection into the world economy acted as a powerful stimulant to economic activity and now demand for fossil fuels outstrips supply. At the same time, the pressure to decarbonise is holding back investment in production facilities.

The Ukraine invasion and sanctions on Russia caused a further shock. The price of oil leapt to over $100 a barrel. Prices are likely to remain high. Some pundits even forecast a further 50% rise.

Aren’t we protected because of our deal with France for the supply of electricity generated by nuclear power? No - for two important reasons.

Firstly, when the French supply fails, we rely 100% on burning fossil fuels. Much of the current generating kit is old and polluting, and there are vulnerabilities associated with importation and storage.

Secondly, and more importantly, French energy prices reflect market prices, themselves driven largely by oil and gas prices. During a recent cold snap, France had to import electricity from Germany (which has recently restarted coal fired plants) pushing prices to two year highs. Guernsey is vulnerable because our current deal with France ends in 2027 and the fix on forward prices ends in 2025. Negotiations to extend or renew the contract are ongoing, but the terms are vulnerable to the market.

Is renewable energy (solar, wind, wave, tidal) the answer? Nice idea, but not yet. The sun and wind aren’t 100% dependable, wave and tidal technology is not advanced enough, and battery storage also has a way to go. Using them as much as possible would involve substantial investment in kit that might become obsolete very quickly as technology advances. No amount of wind or solar could meet the peak winter needs of the Island especially as the move to electric cars increases consumption. We would still need a 100% reliable backup.

Public support for reducing greenhouse gases is strong, but this could well be undermined by rising living costs. In their report “The Net-zero transition,” McKinsey & Company concluded “The prevailing notion of enlightened self-interest alone is unlikely to be sufficient to help achieve net zero, and the transition would challenge traditional orthodoxies and require unity, resolve, and ingenuity from leaders.”

Do our politicians display that unity, resolve and ingenuity? Hardly!

Guernsey is committed to adopting the Paris accord on climate change, but there is no plan for achieving its targets. The Government Work Plan talks of beginning development of a green economy plan only in 2026.

Have our politicians been canny by choosing to be a late adopter of ever improving technology because it will likely deliver a more economical and effective solution? Again, history suggests quite the opposite – a failure to plan effectively, an absence of expertise, and paralysis.

Remember 2011, the year “Game of Thrones” first hit our screens? That same year the States produced a document entitled the Guernsey Energy Resource Plan. This set out an “energy vision for 2020” promising decarbonisation and diversification of energy generation. What happened to that?

Then, in 2020, the States produced their Energy Policy 2020-2050. Following the October 2020 election, that morphed into the Government Work Plan 2021-2025. This lists a lot of big challenges, but again delays important actions:

  • the electricity tariff structure has yet to be formulated;

  • the Electricity Strategy has yet to be agreed and will take decades to implement;

  • the on-Island licensing framework for renewables won’t be ready until at least 2024;

  • if installing a new cable to France is agreed, this won’t be done until at least 2026;

  • the framework for licensing and regulating utilities won’t be ready until the end of 2026 at the earliest;

  • urgently required upgrading of the grid could take decades and will be massively disruptive.

For years Guernsey Electricity (GEL) has suffered a major lack of investment, making it unable to meet demand or update its distribution network. Losses and debt have mounted. Some blame GEL for not getting permission from the regulator to raise prices. Others blame the regulator [of which this author was briefly a director] for inaction. Yet others blame the government for announcing that the regulator would no longer carry out that role and, as a result, it lost funding. Wherever the truth lies, government knew of the problems and had the power to act, but failed to do so.

One consequence has been the suppression of prices – a situation which is bound to be painful for consumers when it unwinds.

Government’s current solution has been to award itself, in the form of the States Trading Supervisory Board, the power to set prices. Government therefore now owns and regulates GEL. Not a comforting thought.

What relevant expertise and experience does the STSB have? How will the conflicts of interest between STSB as the owner and regulator of GEL be resolved so as to protect consumers? A new and complex tariff structure is needed to rebalance Guernsey’s electricity market. How will the STSB achieve this?

In a similar move, under the Government Work Plan, responsibility for licensing companies in the energy market has been placed with the Committee for Economic Development. Where is the independence and the necessary breadth of expertise?

And GEL? It is well known that the normal commercial and competitive constraints are absent in the case of a virtual monopoly owned by a government. There is also much less incentive to reduce inefficiency.

How is government ensuring these disciplines are imposed on GEL?

Where is the independent expertise to judge what capital investment and funding GEL needs to maintain power generation, upgrade the grid and build the infrastructure for Guernsey’s transition to renewable energy? A massive injection of capital into GEL is likely to be required. Who will decide how much and when? Has this been factored into government spending?

Is a new cable to France essential to provide a secure basis for Guernsey’s transition to renewable energy? If so, why is this project and the raising of finance for it being delayed? It would improve security and resilience of supply and the electricity would be largely carbon free. An urgent decision is needed. Negotiations on the supply agreement should be completed as soon as possible. Only then should the massive capital expenditure involved in a new cable be approved.

As if that was not enough, the UN’s Intergovernmental Panel on Climate Change has just issued its most devastating assessment so far of the effects of global warming, emphasising the urgency of the situation. The report draws attention to the vulnerability of small Islands and their increasing need for [expensive] coastal defences while the crisis is not addressed. We may be less exposed than others, but we are not unaffected.

Guernsey needs to agree policies on all these matters as a matter of priority. Implementation should be informed by the changing circumstances. Those taking decisions should be free of conflicts of interest and pressures from changing political whim. Experts with the necessary breadth of experience should be introduced into the process. In the area of renewable energy government should have policies that are flexible, able to adopt new and more effective technologies as they become available, and ultimately reduce our dependence on imported energy.

Work is undoubtedly going on in the background, particularly in the current circumstances, but what is needed is meaningful action on all the important issues.

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