Energy Incoherence

This has been an interesting month for revealing the effects of the lack of a coherent UK energy policy.

Three fossil fuel power stations have closed; Cockenzie in Scotland (1GW Coal), Didcot A (2GW coal) and Fawley (1GW oil). These recent closures bring the total closures since December 2012 to 7.5GW accounting for about 10% of UK generating capacity.

Didcot A Power StationThese stations were built at a time when we didn’t recognise the damage that carbon dioxide does to our ecosystem, but we did recognise the importance of domestic industry. The UK had, and still has, extensive coal reserves and our power stations were built to exploit this and create growth in UK industrial capacity at a time of optimism.

The closures occurred not because the stations were failing, but due to European legislation on air pollution and a hike in UK carbon taxation. These stations could have continued in operation if pollution control had been installed, or until 2015 in any case under the European Large Combustion Plant Directive. However it appears that the majority of operators have chosen instead to run them flat out during the profitable winter period and shut them down on the eve of a new tax on fossil fuel. The ‘Carbon Floor Price’, to be introduced on 1st April, has a stated purpose of making fossil fuel generation uncompetitive. Congratulations Mr Osborne, you’ve succeeded!

In the same month, the UK’s largest remaining coal mine, Daw Mill Colliery was pushed over the edge of financial viability by an underground fire and closed. The price of coal on the international market has collapsed, pushed down by a glut of american coal caused by their rush to shale gas. Private electricity generators will of course buy coal at the lowest cost available, making the UK coal industry ultimately unviable.

A total of 1000 energy industry jobs have been lost in March.

It is estimated that despite the closure of the majority of coal power stations by 2015, our reliance on imported coal to generate electricity will rise by 70% as the UK coal industry collapses. Of course these power station closures will also increase our reliance on gas to generate electricity. We already import half of gas consumed in the UK and this is expected to rise to 70% by 2019.

We saw an example this month, coincidentally on the day that Didcot A closed, of our sensitivity to gas imports. The UK-Belgian gas pipeline suffered a fault in a dewatering pump and had to be shut down for half a day. During that period the price of gas jumped 50% to an all time high, as it became temporarily scarce. During one of the coldest weeks we’ve experienced for a while, our national reserve of gas was reduced to just 36 hours.

Surely a national energy policy should address energy security and jobs as well as carbon.

Government seems to be banking on new gas generation coming along to fill the gap until the new nuclear power stations come on line. However its policies are focused on renewable energy and its rhetoric is all about beating up energy companies to keep bills low. It has taken its eye off the ball with regard to energy security, jobs and UK industry.

We have a privatised, fragmented energy system whose individual players won’t make necessary investments in new capacity unless they are confident of a return. If Government will not give them that confidence through coherent policy then they won’t invest until market forces drive energy prices sufficiently high. Once electricity becomes a scarce commodity the price will increase, that is the way of the market. If the lights start going out then maybe Government will be happier to discuss the subsidies energy companies are asking for in the absence of policy, but of course, by then, subsidies will be unnecessary.

HMRC in Meltdown

For once I’m not writing about the environment or the construction industry, but an issue that will affect virtually everyone. I had a long conversation with my accountant yesterday about the implications of Her Majesty’s Revenue and Customs’ (HMRC) new requirement for real time reporting of payroll taxation.

From April all businesses must report to HMRC the payroll deductions and payments made to all employees on the day that the payments are made! This is to be known as Real Time Information or RTI.
Back in 2010, HMRC told Channel 4 News that over 40 million UK employees pay tax through PAYE. That means that presently UK employers will submit 40 million annual returns during the 6 weeks following the end of the tax year. From April, UK employers will submit 40 million RTI returns on the last Friday of the month every month!
HMRC is of course introducing a new IT system to allow all the RTI to be submitted online. But remember back in 2008 when HMRC mandated online filing for personal tax returns? On the filing deadline day HMRC’s servers crashed with just 104,000 people accessing the system, leaving 10,000s unable to do so. Do we really believe that just 5 years on HMRC have developed a system which will be able to handle a 400 fold increase in submissions and do it every month reliably?
Also woe betide any employer who makes a mistake in either the calculation or the payment amount. Penalties will apply immediately for any inaccuracy in the RTI reporting. Businesses previously had the opportunity to correct any mistake at the next month provided that the end of year returns were correct. Back to the 2010 Chanel 4 News piece and HMRC also reported that the were 5.7 million mistakes in PAYE calculations and payments. This would be an average of 475,000 mistakes per month, clearly a nice little earner if penalties were applied to each one under the new system.
However, note also that last year HMRC left 1 million letters unanswered. If actions on payroll errors are going to be piling up at a rate of around 1 million every two months, I wonder how long it will take the RTI system to collapse under the backlog? Does anyone want to take a bet with me? I give it six months.

When Ecobuild Ends

Unbelievably I think that I may have been proved right about something. I have often questioned the sustainability of Ecobuild now that it is a corporate behemoth (most recently here). I felt sure that the levels of waste involved in this sort of exhibition was anathema to the sustainable agenda it purports to advocate.

Well, I was passing Excel this morning on the DLR and spotted skip trucks lined up on the external loading gallery. Ecobuild finished last week and the next event starts on Thursday. (Which, by the way, is the Big Bang Science Fair and well worth attending if you can.)

I thought I detected something vaguely familiar about the contents of the skips, but I’ll let you be the judge.

Ecobuild photographed 6th March 2013

Ecobuild photographed 6th March 2013

Ecobuild photographed 11th March 2013

Ecobuild photographed 11th March 2013

Excel in the snow

Excel in the snow