Governments have many different issues to consider. In Britain, for example,
the coal industry is under threat. It is cheaper to burn gas, which is currently
plentiful, than to continue to generate 40 per cent of our electricity from
coal. Gas is also a cleaner fuel than coal and, through good fortune rather than
by design, it has captured a quarter of Britain’s energy supply market, compared
with 1 per cent in 1990. Left to the market, this figure could rise even
further, perhaps to 60 per cent by about 2030. But is it sensible to let
Britain’s coal industry die, and have to rely on gas imported from Russia and
Iran in the future? There is also that other arch-producer of carbon
dioxide—the motorcar—which breeds a good deal faster than people.
How is it to be contained?

These are not new problems, but they have been brought into focus by the
realisation that we really are changing the global climate, probably for the
worse. In Britain, the government has chosen the worst of all worlds by
introducing energy policy in a piecemeal fashion. VAT on insulating materials
has been reduced, but only if used as part of a government energy-efficiency
programme. There’s a moratorium on building gas-fired power stations. Ten per
cent of electricity is supposed to come from renewable sources by 2010, but
reducing VAT on domestic fuel to help the needy will increase energy
consumption, injecting each year an extra 300 000 tonnes of carbon into the
atmosphere (0.2 per cent of Britain’s output of carbon). These measures may have
been introduced with the best of intentions, but the lack of a coherent energy
strategy to deliver our environmental commitments is evident.

Simple arithmetic can correct politicians’ wilder enthusiasms. For example,
if every wind farm in the world were moved to Britain, their combined output
would just about meet the commitment to generate 10 per cent of the country’s
electricity from renewable sources—but only on a windy day. This is hardly
feasible. One way to fulfil the commitment would be to build the Severn Barrage
and its water turbines, which could provide 7 per cent of the country’s
electricity. But the bird lobby is doing its best to see that the barrage never
gets off the drawing board. It seems we are not very good at balancing risks and
benefits.

This is certainly the case with the nuclear industry, which is set to decline
as stations come to the end of their life and are not replaced. An extra 4
million tonnes of carbon a year will go into the atmosphere by 2010 if they are
replaced by gas-fired power stations, or 8 million tonnes if they are replaced
by coal-fired power stations. These figures will probably double by 2020 because
of increasing energy use. With the predicted 30 per cent rise in the number of
cars by 2010, this makes the prospects for a cleaner future grim.

The problem is that we live in a society where it’s fashionable to have
brightly lit houses, take children to school in four-wheel drive off-road
vehicles and jet off to holidays in exotic locations. Introducing a carbon tax
might be a good way of reducing this demand for energy. The proceeds could be
used to fund public transport, and to boost renewable and nuclear energy
sources—the only technologies capable of reducing greenhouse emissions.
But with world energy demand expected to have doubled by about 2030, it will be
hard to stabilise carbon dioxide emissions at their present levels, let alone
reduce them.

THE sunflower harvest came early this year in Gascony, after ten gloriously
hot days at the beginning of September. A gigantic green machine like a
monstrous beetle briskly devoured the sunflower heads in the field beside our
house, vibrating them in its maw and spitting the seeds into a waiting yellow
skip. All this is part of the process that makes the European Union
self-sufficient in vegetable oil.

If the Fells family were fortunate enough to own a Rolls-Royce Silver Shadow,
circa 1926, which was designed to run on any oil fuel available anywhere in the
world, we could drive the 7 kilometres into Valence d’Agen on market day
(Tuesday) using green fuel. These days, it would be equally possible in my
turbocharged diesel, preferably using the ester of the oil, but it would cost
twice today’s going rate for diesel. In France, diesel costs 4.50 francs (52p) a
litre. Petrol, incidentally, costs 6.40 francs a litre.

Although alternative motor fuels are fashionable, they are expensive, apart
from ephemerally cheap natural gas. Here, where the twin cooling towers of the
Golfech nuclear power plant, the tallest in Europe, dominate the landscape,
electricity is seen as the best bet.

Peugeot has produced an electric version of its little 106 that is beginning
to look like an attractive prospect. Although the price tag is around 25 per
cent higher than for a petrol version, it has considerably lower running costs.
A litre of petrol provides around 13 kilowatt-hours of energy and costs 60p to
65p in Britain, compared with 100p or so for 13 kilowatt-hours of energy from
the electricity mains. An electric vehicle with regenerative braking, which
converts the car’s kinetic energy into electrical energy and recharges its
batteries, is about 70 per cent efficient. By contrast, a petrol engine
struggles to reach 10 per cent efficiency, especially in traffic. So the
comparison is now 50p for petrol and 11p for electricity per useful
kilowatt-hours. Electric traction is certainly doing better than petrol as far
as running costs are concerned, maybe as much as four to five times better.

Electricité de France is contemplating using electric vans in a joint
venture with Gaz de France. Both companies share not only local office
accommodation, but also vehicles that carry the logo EDF/GDF and provide a joint
service to customers. In the 1970s, I suggested to Tony Benn, who was then
Secretary of State for Energy, that one person could read the gas and
electricity meters at the same visit. I also suggested that one computerised
billing agency could deal with both gas and electricity. Benn said it was a good
idea but nothing came of it.

But the problems of transport and the pollution it causes continue to dog
Europe, with few signs of a political solution. In France, as in much of the
rest of Europe, diesel-powered vehicles dominate, and a modern diesel engine
with an oxidiser to clean carbon particles is preferable to any petrol engine. I
have friends in Sussex who have fitted a 2.3-litre diesel engine into their
converted Austin Princess hearse, which now has a double bed in the convenient
space behind the driver’s seat. They travel down to their tiny house in Auvillar
in style and economically.

However, there is still plenty of room for improvement in green transport. As
far as transport of goods goes, the Canal Lateral Ă  la Garonne, which
links Bordeaux to Toulouse and the Canal du Midi, has been extensively
refurbished and modernised, but as yet carries little commercial traffic. Grain
and aggregate continue to be carried by large lorries along the parallel
autoroute.

But in rural Gascony, environmental issues seem rather neglected these days.
The antinuclear graffiti on water towers and road signs have all but disappeared
and the nuclear power station steams contentedly away in the valley of the
Garonne, dispensing electricity as far away as the Pyrenees. The high price of
transport fuels does little to deter the local farmers and country dwellers, for
public transport is negligible and they have no choice. Only the excellent and
subsidised train system tempts commuters and long-distance travellers to
Bordeaux or Toulouse out of their cars and onto the rails. As in Britain, local
rural train services have all but disappeared.

But there is one service the French do manage well, and that is water supply.
Despite long hot summers here in the south, there are no restrictions on using
water, which is plentifully available. Of course, everyone is on a water meter
and unlike in Britain the mains don’t leak 30 per cent of the precious fluid
away. Perhaps that is the secret. Also, they do not irrigate their vines as the
Australians and Californians do, which must save water—apparently it is
the law. Curious. But then the really great French vintages beat the opposition
even if the vin de table could do with the ministrations of some of the
antipodean wine-making experts.

Electricity and water are the staple components of civilised life as we know
it; to allow their control in Britain to stray into American and French hands
respectively seems to me folly. OK, the French may be pretty good at managing
their own utilities, but there’s no reason why we can’t put our own house in
order.

I am in a quandary as I drive south, looking forward to two or three relaxing weeks in the farmhouse in Gascony near Valence d’Agen on the Garonne. If I drive my turbo-charged diesel down the autoroute at the maximum speed allowed, 130 kilometres an hour (81 miles an hour), being a French car it is “performance optimised” at 3000 revs per minute, which produces 130 kilometres an hour in fifth gear, and uses 5.7 litres to do 100 kilometres (some 50 miles to the gallon).

This is about 10 per cent better than I achieve if I stick to the speed limit in Britain, and 10 per cent better than if I follow the bis routes. And as far as any of the proverbial greenhouse emissions are concerned it is clearly better, and quicker, to travel at speed down the autoroute, but it means I have to pay the tolls which can amount to ÂŁ30 all the way to the south. Of course, in France gasoil (diesel) costs 4 francs a litre and petrol 6 francs a litre, which gives diesel engines a substantial edge on fuel costs. Clearly, it requires a lot of tricky arithmetic to stay ahead in the greenhouse stakes.

Life in Gascony is not recognisably different from when I last wrote from there three years ago (Forum, 16 January 1993). The Tuesday market in Valence d’Agen is its bubbly, colourful self with mouthwatering local fruits and vegetables, rabbits, guinea fowl, quails, thirty or forty different cheeses all surrounded by a buzz of French conversation not so very different from the buzz of the insects in nearby shady lime trees.

Things are not quite so lively in the supermarchés. As in Britain, rather a lot have been built and competition is fierce: why else would the Continental Supermarché in Agen advertise three live lobsters for 98 francs, an almost irresistible offer? But I must temper my enthusiasm with the penalty of having to drive from the farm to Agen, some 25 kilometres along the N113.

I could, however, take the scenic route past the twin cooling towers of Golfech Nuclear power station and through LamagistÚre, a delightful old town at the confluence of the Garonne and the canal bringing the cooling water from the power station. Nearby there is an engaging fish lift which traps fish in cages as they swim up river. The water flows swiftly past the old quays of the town where the fishing is particularly good and exciting. Electricité de France has paid for most of the refurbishment around here. It even paid to rehabilitate the cornmarket at Auvillar and the historic circular wash-place at Valence.

We decide that the trip to Agen carries an environmental benefit which more than offsets the cost of the fuel and we stop on the way to walk along the shaded towpath of the Canal latéral à la Garonne, sadly now a much underused component of an important transport system.

This year, the fields are planted with wheat. The bureaucrats in Brussels perceive an impending shortage and have provided incentives for the farmers to plant wheat rather than sunflowers, though some sunflowers are still grown. Our friends at Chñteau-les-Fours, near Beaumont-de-Lomagne, cut down their 200-year-old oaks as a cash crop three years ago to fuel the trendy wood stoves of Toulouse and have now replaced their spare land with wheat. It’s another imperfection in the market.

Our friends say they have a new, though unrelated, problem with the high-efficiency, low-energy light bulbs that they purchase in the supermarket in Castelsarrasin. The bulbs interfere with BBC Radio 4 long wave reception, which is the cultural lifeline of the expatriate British residents here. They are all avid listeners of the Today programme and, being an hour ahead of Britain for most of the year, they can pick up the 7 am news at 8 am local time.

By chance, as I sit on the terrace sipping a postprandial drink and listening to a Radio 4 programme on energy in which the presenter, a highly excitable Johnny Vaughan, interviews a number of pundits, including me. I seem to be the only optimist among those interviewed, predicting that eventually we will understand gravitation well enough to employ the powerful effects of black holes to provide all the energy we need (sic). I suggest to my friends that they switch off the interfering light bulbs and listen in the dark.

When I discover I have to visit Madrid for a few days during that holiday I decide to investigate the possibilities of the train. A car would be of little use to a visitor in Madrid: all the streets around the centre are double-parked and the owners dare not unpark them for fear of never finding another space. Road transport is now the biggest offender in the air pollution stakes. Valence is too small to boast a travel agent so I go to the local station and in my best French attempt to explain that I want to go by the Rapide to Bordeaux, pick up the TGV to Irun on the Spanish border, take the Talgo to Madrid and return via Barcelona using the sleeper and thence via Narbonne back to Valence, all first class.

Pausing only to attend to a train which stops at his station, the station master confidently taps away at a PC with its large colour screen and, after some 20 minutes, produces all the tickets with times and reservations. He explains them carefully: the cost is about the same as two first-class return tickets from Newcastle to London, while the distance is about twice as far and includes sleepers. I am left wondering why, if the technology for international ticketing is not beyond the ability of a railwayman operating a station in a remote French provincial town, his counterpart at Hexham or Pickering cannot do it. And why does travel cost so much less in France than in Britain?

That said, it is a relief to get back to the calm of Gascony and to visit the MusĂ©e d’Armagnac at Condom where the product competes in the market with Scotch whisky but lacks the sophistication of the Island malts. The vin de pays of Scotland is hard to beat, even in Gascony.

For the past 13 years the government has followed the Lawson line, desperately trying to “remove distortion in the market” to facilitate free play “on a level playing field”. The Department of Energy has been closed down and absorbed into the Department of Trade and Industry. Gas, electricity and coal have been privatised and the nuclear industry is soon to follow, making money for a select few at the expense of the taxpayer.

There have been improvements in efficiency as a result of the privatisation process, but the improvements have not been spread evenly. As a result, regulators with Draconian powers have been called upon to provide artificial competition and to control profits through the imposition of special “targets”, which probably provide more distortion in the marketplace than ever before. When things get too out of hand, the regulator refers the industry to that fount of all economic wisdom, the Monopolies and Mergers Commission.

Research and development has also been a serious casualty of the privatisation process, with famous and respected departments slashed to a tenth of their former size by chief executives, fearful of their shareholders rather than acting for the long-term interests of the company.

As Britain careers down the privatisation path, the rest of the world watches with fascination and horror, tinged with envy. For once we are leading the way, but it is a crazy race and one in which it would prove better to be third or even fourth in the running. Certainly, no one would want to copy the British “Pool System” with all its Byzantine complexity. Each day, generators of electricity bid to sell electricity to the Pool for the 48 half-hour periods into which the following day is divided. A stack of the cheapest bids is accepted and the generators are paid, strangely enough, at the price of the highest accepted bid for each half hour.

The European Union and the European Parliament want a guaranteed supply of reasonably priced energy because they see it as the cornerstone of continuing economic development. So there is a move afoot in the EU to include a chapter on energy in the second Maastricht treaty. Within the EU, planning is not seen as a discredited, bureaucratic bogey but as a useful tool, including fiscal incentives which stimulate the free market to provide what members require.

These fiscal incentives include taxing those who pollute the environment. Preserving and improving the environment are two of the more spectacular failures of the market so far. But in a world which does not place a cost on environmental degradation, but sees the environment as a free resource, it is not surprising that a market-led energy policy lets industry dump sulphur dioxide, carbon dioxide and other pollutants indiscriminately into the atmosphere unless prevented by legal regulation.

Fortunately, through its directive on large combustion plants, the EU has forced the electricity generators to clean up their act. The EU and its member states now have an international obligation to stabilise and ultimately reduce their emissions of greenhouse gases. But it is difficult to see how this is to be achieved without some sort of strategic framework for patterns of fuel usage. Nuclear power and most renewable forms of energy do produce greenhouse gases, and this is recognised in Britain by the Non-Fossil Fuel Obligation. According to this agreement, 20 per cent of the country’s electricity must come from non-fossil fuel sources. It is a sensible arrangement but a curious piece of planning by those dedicated to free-market mechanisms. Another failure of the market mechanism is the lack of advances made in improving energy efficiency. Perhaps this is because the fuel suppliers have a vested interest in selling more and more.

The failure of the gas and electricity regulators to agree how to improve matters demands government intervention but as this smacks of “policy” such action has not been forthcoming. The Department of the Environment’s Energy Efficiency Office has exhorted us all to save energy, but although its efforts are laudable and generate a plethora of pamphlets, they have had only limited success.

In general, concern for the environment is increasingly driving discussions on energy policy. The source of most pollution in Europe, which is often neglected in these discussions, is transport. Perhaps it is ignored because it is such an intractable problem and politicians are reluctant to tangle with it. It is really a car problem since the number of cars in Europe is set to double in the next twenty years or so unless action is taken now. Drivers will continue to insist on their right to drive wherever they want to, despite increases in the price of fuel. Even if impending congestion is ignored, the implications for pollution are horrendous. Cars are already the largest single source of carbon dioxide in Europe.

If growth in air transport is added to that of cars and nothing is done to curb this growth, there is no prospect of stabilising carbon dioxide emissions, which will leave our commitments to the Rio Summit in tatters. A change in social attitudes towards cars, akin to the remarkable change achieved in attitudes towards smoking and smokers, is necessary if we are not to be suffocated by car pollution.

With Western economies apparently tied to the success of the motor industry, it is no surprise that politicians have chosen to opt out of this dilemma. But if we decide to “opt in” and develop a strategy to achieve a secure, diverse energy future incorporating the undoubted strengths of the marketplace, we could sleep secure in our beds knowing that disruption of gas, oil or even coal supplies are not going to leave us in the dark. And the environment would be protected to the best of our ability rather than left to the unreliable consciences of an entrepreneurial industry and millions of outrageously selfish car drivers.

But now, following a tremendous fitness campaign, Scottish Nuclear and Nuclear Electric are different beasts from those of 1990. They are running a lot lighter and have dramatically improved their performance. Output is up by almost 40 per cent, costs are down 40 per cent and the two together provide 25 per cent of Britain’s electricity supply. And they are champing at the bit to be allowed to enter the privatisation race.

At last the starter’s flag, in the form of a White Paper, has heralded the government’s approval of their entry (Prospects for Nuclear Energy in the United Kingdom, HMSO, 1995). The paper claims that this will complete electricity privatisation and benefit the public by removing the nuclear levy from electricity bills. However, cynics point to the ÂŁ3 billion proceeds from the sale which will give Chancellor Kenneth Clarke the means to lop between one and two per cent off income tax before the next general election. And, according to the government’s own projections, removing the levy will increase demand for electricity and push up CO₂ emissions by about half a million tonnes a year. (This Week, 20 May).

So how is the sell-off to be achieved? Of the two companies, Scottish Nuclear is the smaller, consisting of one magnox reactor in the process of being decommissioned and two advanced gas cooled reactors (AGRs). Nuclear Electric has one pressurised water reactor (PWR), five AGRs and eight magnox reactors, two of which are being decommissioned. But the magnox reactors are ageing and the liabilities associated with their decommissioning makes them unacceptable to the City. So the government says it will assume responsibility for these reactors and has chosen to divide Nuclear Electric into two smaller companies. One company, to be called APCO, will take on responsibility for the AGRs and the PWR and will be privatised; the other company, responsible for the magnox reactors, will remain in the state sector, operated by British Nuclear Fuels Limited.

As regards the AGRs, the government had two options. The first was to give a couple of APCO’s five AGRs to Scottish Nuclear, creating two companies of equal size which would both be privatised. The second was to merge APCO and Scottish Nuclear into a group to be called the Great Britain Company. In terms of competition, the first option was preferable: more players would mean more competition. A major flaw in the 1990 privatisation was the creation of only two privatised generators in England and Wales when four or five would have been preferable. But the government has decided on the second option and combine Scottish Nuclear and APCO into the Great Britain Company. This will create a company with a 22 per cent share in Britain’s electricity market. Scottish Nuclear, wishing to remain independent, campaigned vociferously against this outcome. As a consolation prize, the headquarters of the Great Britain Company will be set up in Scotland. The Scots, however, doubt this will ever happen and point to a long history of such promises being broken.

But these shenanigans will have wider implications for Britain’s energy market. It is unlikely that the Great Britain Company will remain a generator of nuclear power alone, but instead will diversify into other fuels, such as natural gas. This is not surprising given that a combined cycle gas turbine reactor costs around a third the price of a new nuclear plant, and that the government says no finance or guarantees will be made available for nuclear generation.

Such cost comparisons must be put into perspective. The cost of nuclear generation includes the management of the nuclear waste that it produces. Generating electricity with fossil fuels does not produce such wastes, but its costs don’t take into account the CO₂ and other pollutants that are emitted when generating electricity.

However, in 1992 Britain signed the Climate Change Convention, which obliged it to return CO₂ emissions to 1990 levels by the year 2000. Britain’s increased use of nuclear power is helping it to achieve this target. In fact, the government has predicted that if it builds no more nuclear power stations, emissions of CO₂ will continue to rise (Energy Projections for the United Kingdom, Energy Paper No 65, HMSO, 1995). And, as environment secretary John Gummer recently suggested, more stringent targets for reducing CO₂ could well emerge as the battle against global warming hots up. This would result in the need for more strategies to control CO₂ emissions and possibly even lead to the introduction of a carbon tax, both of which would improve the prospects for nuclear generation.

But this is speculative talk. The British market is not renowned for its long-term strategies and so, on the basis of current costs, we could end up with no nuclear generation whatsoever. While nuclear privatisation may be challenged on environmental grounds, the need to maintain fuel diversity is a further cause for concern.

If most electricity generation were fuelled by natural gas, problems would occur when Britain’s North Sea gas runs out. Based on figures from the Department of Trade and Industry, this may happen in 15 or 20 years’ time (Development of Oil and Gas Resources of the United Kingdom, HMSO, 1994). The generators will then have to buy gas supplies abroad. The world’s largest gas reserves lie in Russia where, by unhappy coincidence, the gas and oil infrastructure is crumbling. Greater demands on Russian gas supplies could lead to a spate of accidents such as the recent huge explosion of a gas pipe. Is this a wise strategy for Britain’s future electricity supply?

A more sensible approach would be to harness the market mechanism, but to provide a framework to take into account the security of the environment and the energy supply, both of which are now sorely undervalued in the market. Such a framework could, for example, comprise 25 per cent gas, 25 per cent nuclear, 25 per cent coal and 25 per cent others (including combined heat and power, and renewables such as wind and wave power). Competition would be promoted in this framework.

While some free marketeers may balk at such a notion, it must be remembered that although the market operates efficiently to a point, if inherent imperfections exist then the process will come unstuck. The electricity market is stuffed with imperfections. If the runners are given their heads completely they may run out of steam and make a mistake before the finish. It’s not a five-furlong sprint. A secure, environmentally sound and reasonably priced electricity system is a worthy goal. To achieve this end requires action from the government not just to trim the hedges and smooth the track, but to refrain from undue interference. Otherwise we may end up with a repetition of the ill-fated 1993 Grand National that never was.

This quick ‘fix’ may return to haunt Heseltine as markets fail to
materialise; the miners have made it clear what they think of the proposals,
as a steady haemorrhage of men stream from the doomed pits claiming enhanced
redundancy payments as they go. Perhaps this is what the government
intended all along; the miners were only reinstated as heroes for a short
time. Memories are short, especially among the journalists of the tabloid
press, and other matters now dominate their front pages. Perhaps the one-day
miners’ strike was just the last convulsive gasp of a dinosaur before it
became extinct – the dinosaur being the leader of the National Union of
Mineworkers. But could Heseltine have got it right? Will nice, clean,
efficient gas-fired power stations spring into action all over Britain,
causing the rapid closure of ageing, dirty coal-fired power stations and
accelerating pit closures?

Well, efficient, environmentally friendly gas-fired power stations have a
lot going for them. Britain was out of step with the rest of Europe in
having an electricity-generating industry dominated by coal which provided
more than 67 per cent of output, compared with 32 per cent in OECD Europe –
the club of leading industrial countries – in 1990. A balanced portfolio,
with more gas and, incidentally, more nuclear (the OECD Europe figure is 32
per cent compared with Britain’s 20 per cent) would make more environ-mental
sense and give security of supply.

World usage of different fuels for producing electricity show that coal is
in the lead at 42 per cent and hydro next at 19 per cent, less than half the
coal figure. Coal also has the largest share of the energy market in the
developing world, and its use is predicted to increase. In Britain, coal, if
it is still available, could well take an increasing role in the early
decades of the next century. But most of the coal used today, mainly in
boilers, is burnt inefficiently and dirtily. What can be done about it?

Clean-coal technology was first developed in the early 1960s by Douglas
Elliot at the Marchwood Laboratories of the Central Electricity Generating
Board (now closed, a victim of privatisation). This was the fluidised-bed
technique of combustion. The CEGB was not interested, so the National Coal
Board Research Establishment (now the Coal Research Establishment of British
Coal) picked up the idea and developed and extended it to produce a
pressurised fluid-bed gasifier, linking this to a ‘Topping cycle’ for a
highly efficient method of producing electricity from coal.

Other countries have taken similar routes, all relying on the principle of
gasifying the coal one way or another, cleaning up the gas to remove sulphur
and then burning it in a combined gas-turbine/steam-turbine generating
system. Such a system has an overall efficiency of 47 per cent in generating
electric power. This compares with 35 per cent for a standard
pulverised-coal power station of the kind used by National Power and
PowerGen, and 53 per cent for a natural gas-fired combined cycle system. It
is easy to see why the generation companies have opted for natural gas
systems, but as gas prices rise steadily, the attraction of clean coal
technology systems becomes apparent.

But technology development cannot be switched on and off like a tap; it is
an area where a policy led by market forces gives no useful signals at all,
hence the abandonment of much research. Britain’s record on clean-coal
technology has been dismal, with CRE struggling for funds and British Gas
mothballing its successful coal-gasification system.

After great pressure was brought to bear, the White Paper The Prospects for
Coal states: ‘To ensure that there is adequate support for research and
development on coal utilisation in the UK the government has decided to
increase its support for coal Research and Development from Pounds Sterling
3 million per annum to around ÂŁ7 million for the next three
years.’ That will rescue CRE, which was in danger of being closed; but how
does it compare with the record of our competitors? Five international
companies now offer integrated-gasification combined cycle designs. Two
demonstration plants are under construction in Europe, one of 250 megawatts
at Buggenum in the Netherlands and one of 305 megawatts at Puertollano in
Spain. The British design of H. & G. Process Contracting is being used to
build a 500-megawatt power station in Sicily. Coal gasification at Cool
Water, California, is highly successful.

For a country with extensive coal reserves, why isn’t Britain developing its
technology by way of a demonstration plant? On the idea of building a
clean-coal demonstration plant in Britain, the White Paper points out that
such a venture would ‘not materially affect the number of coal mines kept in
operation in the UK this decade’ and so could not justify supporting it.

So, Britain watches its initial lead in this vital area slip away to its
competitors. Long-term R&D is the major casualty of the ‘short termism’
engendered by a market-led energy policy. Britain is in danger of destroying
its innovative industrial base and becoming an offshore ‘banana republic’
buying licences for high technology engineering from its European partners.
The government will be forced to balance the books by turning UK Ltd into a
gigantic theme park with tourists visiting sanitised coal mines and gas
works to see how Great Britain was in the old days.

Ian Fells is professor of energy conversion at the University of Newcastle
upon Tyne.

They are as delicious and tempting as ever and no more expensive than
they were a couple of years ago. The local wine from the Cote du Brulhois
has also held its price of around ÂŁ1.60 a bottle. That is because
times are hard and the market has reacted as Adam Smith predicted it would
in An Inquiry into the Nature and Causes of the Wealth of Nations, written
200 years ago. One might be forgiven for thinking that ‘the dismal science’
of economics has hardly moved forward since those days, certainly when it
comes to predicting upturns in recessions; better to simply chart electricity
consumption per capita. The mushroom man with his wide range of mouth-watering
fungi has gone back to the building trade, for the time being only we hope.
The stall selling exotic basketweave elephants and the like is not here,
although the furniture man with his traditional oak dining tables that extend
to 3 metres without benefit of any metal screws or pegs continues to do
business. The French are practical people and dining comes high on their
list of priorities. We bought one of his masterpieces for ÂŁ500 and
conveyed it to Britain in the back of a Peugeot 205.

Here is a market, with few distortions, operating for the benefit of
the customers. A few inefficient producers have gone out of business, as
have those selling the wrong, usually too exotic, products, but in general
the customer has done well; prices have been squeezed downwards in real
terms.

The market in wood here has operated predictably also, but with scant
regard for the long-term health and beauty of the environment. It is notoriously
indifferent to such intangible consequences. In this largely rural community
many houses are equipped with wood-burning stoves, usually because they
are practical; but sometimes those with holiday homes down here believe
them to be environmentally friendly. Others, in the fashionable suburbs
of Montauban and Toulouse, like the style of a wood-burning stove, even
though they have central heating.

Such is the demand for firewood that the price in Toulouse has risen
to 550 francs per tonne (roughly ÂŁ60 per tonne). At this price the
ancient woods, often consisting of massive oak trees hundreds of years old,
which adorn the landscape here, suddenly look like a ‘cash crop’. A local
farmer has already cut down and sold the fine trees, standing on common
land between the Chateau les Fours and Pordiac, a fait accompli which led
the local mayor to shrug his shoulders in resignation. The farmer is now
going to attack a wood on his property which will net him around ÂŁ3500.
It will certainly not be replanted with oak trees, but more likely sunflowers
which are subsidised by the European Community, one of those minor distortions
introduced by the Common Market.

So we are no better off environmentally than those inhabitants of sub-Saharan
Africa or Southeast Asia who have denuded their land of trees to provide
firewood. Ironically, firewood will be the first fuel to ‘run out’ even
though it provides 12 per cent of the world’s fuel supplies. It is difficult
for us in Britain to criticise the action, except with hindsight, that exasperatingly
exact science. After all, Britain cut down its great oak forests which spread
across the Midlands and the Lake District to fuel the Industrial Revolution.
The environmental effect was profound. Should the French government put
a tax on firewood to protect the environment? Adam Smith would probably
have approved such an action. After all, he pointed out that injuries to
society can arise from some entrepreneurism and the populace should be protected
by the state.

Of course, the state already intervenes substantially in energy here
in France. The two highest cooling towers in Europe at Golfech, a twin pressurised
water reactor, dominate the landscape for many kilometres around and the
plume of water vapour can be seen even further. The local population is
uneasy. Antinuclear protesters floated mines into the cooling water canal,
which is fed by the Garonne, damaged the water inlet system and coincidentally
also emptied the lake at St Nicolas-de la-Grave, causing thousands of fish,
eels and a particular mussel to die. You cannot make protests without some
environmental damage.

The population in general is less extreme and more resigned, especially
as Electricite de France has provided substantial grants to improve the
quality of life in the area. The beautiful old town of Auvillar has been
lovingly restored, particularly the 16th-century Place de la Halle. Creches
are subsidised and Golfech itself has a superb brand new swimming pool.
Electricity is plentifully available, even in remote country areas, where
it could substitute for wood although it is not cheap. Domestic electricity
works out at around 8p per unit, although this includes VAT, a local tax
and, of course, a standing charge. Our friends, who live here and who had
never done the calculation, were surprised by the figure, having believed
what they were told, namely that French electricity was the cheapest there
is. But the nuclear electricity generation, whatever else it does, does
not cause acid rain, and, in the case of France, has reduced carbon dioxide
emissions by 30 per cent during the past decade.

So where do we go from here? Market forces clearly benefit the customers
in Moissac market operating on a day-to-day basis. But do we want to see
the ancient oak woodlands chopped down for short-term gain without intervening
to save them, and are we prepared to accept the risks and benefits of nuclear
power? There are no easy answers and leaving it to ‘market forces’ is not
one of them.

Ian Fells is professor of energy conversion at the University of Newcastle
upon Tyne.

The government has introduced desperate measures to inject competition
into these naturally monopolistic industries. Some of the measures are so
Byzantine in their complexity that it is difficult to judge their effectiveness.
There is certainly competition between electricity generators, although
the really powerful companies have predictably seen off some of the opposition.
The lives of the independent generators have not been made any easier by
an unpredicted, and now partially rescinded, increase of 35 per cent in
the price of natural gas, which British Gas introduced in early 1991, and
which is now the subject of acrimonious legislation and regulation.

The market in gas and electricity is working fitfully. A disguised carbon
tax in the form of the levy on fossil fuels subsidises electricity generated
by nuclear power – which remains in the public sector – and by renewable
sources of power (but not in Scotland).

British Coal looks gloomily to March 1993, when the large supply contracts
agreed with National Power and PowerGen come to an end, and the logical
outcome of an energy policy that is market-led could be massive imports
of cheap coal resulting in a halving of Britain’s coal industry.

So, the future of energy supply in Britain is obscure. Can the market
be relied on to get it right?

Perhaps the greatest change that has taken place since 1982 is the way
concern and alarm over our deteriorating environment have come to dominate
public and international thinking. Energy policy, such as it is, is now
driven by concern over the environment rather than with resources. But it
is in the very area of environmental protection that the imperfections of
a market-led policy on energy are most obvious.

Protecting the environment costs money – a lot of money. Without regulation
there is little incentive to spend money on, for example, a plant for flue
gas desulphurisation at a coal-fired power station. The costs of running
the desulphurisation plant will have to be recovered. The overall efficiency
of generation at the station will be reduced. The period when the generators
are being serviced and out of action will be increased, and ironically the
‘greenhouse’ emissions will be made worse. In all, the electricity that
is generated will cost more. Altogether, it is an unattractive and expensive
prospect, and no amount of improved ‘green image’ of the industry can compensate
for the increased costs. The industry must be directed to clean up the pollution
by enforceable legislation.

In the same way, the exhaust fumes from petrol-driven vehicles will
only be reduced and cleaned up by regulation or legislation. Fiscal measures
can be used as another form of encouragement. Lead-free petrol only came
into general use when the duty was reduced by l0p, making it noticeably
cheaper than leaded petrol. By themselves, exhortations to clean up the
local environment by using lead-free petrol fell on deaf ears.

Environmental pollution is no respecter of national boundaries – witness
acid rain, the radioactive fallout from the Chernobyl disaster and the ubiquitous
global warming. The European Commission takes these matters seriously, and
has started a series of regulatory initiatives to limit climate change engendered
by pollution.

Indeed, the centre of gravity of environmental energy policy is shifting
rapidly to Brussels, almost by default. If Britain and its government want
to influence matters, a strong voice in the European Commission is essential.
But it would help if it was backed up with a clear British strategy, instead
of a ramshackle collection of checks and balances intended to bolster the
marketplace, which characterises our present energy policy.

An example of short-termism led by the marketplace, with a fortuitous
bonus for the environment, is the scramble by established and new electricity
generators to build gas-fired combined-cycle power stations. These use cheap
natural gas to fuel high-temperature turbines and then derive more electricity
from the hot exhaust.

But if we are serious about protecting the environment and even restoring
it to, say, its 1950 condition, some sort of energy strategy that minimises
environmental pollution while still providing a secure energy supply that
is reasonably priced will have to be devised.

A reduction in the emission of carbon dioxide – one of the main causes
of the greenhouse effect – so as to hold production at 1990 levels past
2000 and beyond has important implications for the growth of power stations
that use fossil fuel. And it has similar implications for the use of cars
and lorries.

The increased generation of electricity without producing copious quantities
of greenhouse emissions brings problems of cost. The probability is that
it will be based on renewable energy and nuclear energy, with the prospect
of visual and noise pollution and other difficulties, such as those associated
with storage of radioactive waste.

Security of supply is particularly important. Too much reliance on a
single source of energy brings with it the dangers of restrictions on supplies
for political, economic and even religious reasons. A strategy that is led
by the market encourages the use of the cheapest fuels available at the
time, but with scant regard for the depletion of their resource, the environmental
damage they cause, or the long-term security of their supply.

The essential ingredients of such a policy are short payback periods
and high return on capital. Long-term generic research into energy becomes
someone else’s responsibility.

The last White Paper on fuel policy was published in November 1967;
geologists had only just found natural gas in the North Sea, and oil was
still undiscovered there. After two-and-a-half decades of momentous change
in the energy sector, and as concern for the preservation and improvement
of the world environment comes to dominate thinking, an energy strategy
to chart our way forward is becoming an obvious and inescapable necessity.

Ian Fells is professor of energy conversion at the University of Newcastle
upon Tyne. He was a member of the Electricity Supply Research Council until
its disbandment on the eve of electricity privatisation. He is special adviser
to the House of Lords Select Committee on Energy and the Environment.

The mushroom man told me that the new nuclear power station at Golfech,
just 8 kilometres away, was not working because drought had caused a water
shortage which was exacerbated by the six bombs, three of which had gone
off some weeks ago, placed in the dam that controls the canal specially
built to bring the booling water from the Garonne to Golfech.

The local farmers were displeased because Electricite de France (EDF)
had bought up local water supplies which were now unavailable to them to
irrigate their parched fields. This year the yield of sunflowers has fallen
from 6 tonnes per hectare to 2 tonnes because of the months of hot, rainless
weather. But most other locals have been keen to see the commissioning of
the nuclear power station, as those in its vicinity receive cheaper electricity
to compensate them for the inconvenience they have suffered during the construction
period.

Why did I shop in the market and not at the excellent local supermarket?
For a variety of reasons: convenience because it was open on Sunday morning,
cheapness, the quality of the vegetables which had been brought in locally
that morning, hens and rabbits are bought alive with their legs tied so
that they are fresh for whatever culinary delight they are destined for,
and that unquantifiable delight of shopping in the warm southern sunshine
amongst friendly, keen salesmen and women who tolerate my execrable French
because I am a customer.

Here is the market working and controlling prices as Adam Smith identified
it over 200 years ago in his estimable and seminal tract The Wealth of Nations.
But there are snags even in this most simple of examples of a genuine marketplace.
The farmers’ produce depends, among other things, on irrigation which is
now not under their control because EDF has intervened by buying up local
water supplies and the farmers’ customers support EDF because it supplies
them with cheaper electricity than before, even though they want cheap vegetables
too.

The simple marketplace mechanism has been distorted by the intervention
of a powerful interloper which has tilted the whole price control system.
But the system has really been strongly affected by the long hot summer
and the EDF problem is only a secondary effect of this.

The marketplace for food has always been powerfully influenced by the
weather: glut and famine have been with us for 5,000 years or more. The
simplicity of the marketplace control mechanism has outperformed any attempts
to plan our way out of such problems whether centrally or locally.

The failure of the communist system with its five-year plans is the
lates frightening example of the futility of centralised planning. It is
ironic and paradoxical that just as Adam Smith’s disciples point with gleee
to the move of the Eastern Bloc to a market-led system, the consensus of
scientific opinion is that we are, for the first time, irrevocably changing
the plant by our behaviour and that some sort of global planning to minimise
this change must be agreed and acted upon.

Market forces will do their best to react but the migration of whole
populations as desertification increases equatorially, enormous changes
in the prosperity of low-lying countries as sea levels rise and masss starvation
in drought-stricken areas are socially unacceptable. Adam Smith would have
agreed. He pointed out in The Wealth of Nations that injuries to society
can arise from free enterprise and they must be controlled by the State.
His economic theory is a good deal more sophisticated than the simplistic
market-led system that some of his latter-day disciples propound.

But though economics may not have changed since Adam Smith the world
has changed and is under threat from man’s activities as never before.

Any new theory must absorb Adam Smith’s powerful ideas, just as Newtonian
physics is a special case of relativistic physics theory. In many cases,
indeed, Newtonian physics is all we need. After all, why am I sitting on
the terrace under the cherry trees in the hot (28 °C) late September
sunshine at Grayssas? Because this article will pay for about three dinners
for my friends and myself at Tout va Bien just down the road in Valence;
the market is a powerful driving force.

But it will not cope with pollution; polluters will pay only if they
are made to pay and then they will choose the cheapest option open to them.
Electricity generators will choose gas to fuel new power stations to avoid
the cost of flue-gas desulphurisation on oil- and coal-fired plant, thus
leaving the next generation to cope as gas supplies dwindle.

And even this has come about only because the European Community has
imposed limits on sulphur emissions. Familiar names in the chemicals industry
continue to pour chemical waste into the North Sea because weak legislation
and penalties make that the cheaper option and consequently the most profitable
course of action. Councils continue to tip municipal waste into landfill
sites because that is the cheapest option; as the sites become used up and
more expensive then the market will come into play and more incinerators
will be built. But the market forces are altogether too sluggish if we are
to clean up the polluted landscape in our lifetime.

A new theory which incorporates the power of the market place but transcends
it is required. Adam Smith, thou shouldst be living at this hour.

Ian Fells is professor of energy conversion at the University of Newcastle
Upon Tyne.