The current crisis has reminded governments across the world that their continuing dependence on oil and gas leaves them vulnerable to energy shocks. While the war between the US, Israel and Iran may be somewhat in abeyance, its ramifications continue to reverberate.
If the war were to restart and continue over the year, the price surge could be dramatically higher than we have seen to date. It would probably lead to a recession, leaving everyone in Europe and Asia much worse off.
All governments will now seek ways to dramatically reduce their future dependence on oil and gas. Because coal is even worse for climate than oil, the current crisis will drive significant investment in nuclear and renewables over coming decades.
Previous wars in the Middle East gave rise to massive hikes in oil prices in late 1973, and again in 1979. As the price surges affected oil users across the globe, governments sought to reduce their dependence on oil, and moderate future risks to their economies.
In 1972, then energy minister Brian Lenihan announced that the Irish government planned to build a nuclear power station, at a cost “upwards of £70 million (€88.9 million)”.
This kicked off a decade of discussions on how best to meet Ireland’s energy needs. The 1973 rise in oil prices, which cost the State 4 per cent of national income the following year, added huge impetus to this policy challenge.
A memo for government in 1973 estimated that a 600MW nuclear station would cost £126 million, and could open by 1982. A search was on for a possible location. However, while the urgency of sourcing alternative energy supplies increased over the decade, the complexity of building a nuclear plant also became apparent.
Even at only 600MW, the nuclear plant would have been so large that some of the power would have had to be sold to the North. The interruption of the North-South interconnector through terrorist action made this highly problematic. The Department of Finance then reported that Northern Ireland was planning to build a huge coal-fired plant near Larne, so that they would not need our surplus power anyway.
[ One in three Irish adults backs building nuclear power plantsOpens in new window ]
In opting to consider such a large nuclear plant, the Department of Energy was relying on the very optimistic economic forecasts emanating from the government. However, correspondence from Maurice Doyle (a future secretary of the Department of Finance) to the Department of Energy in March 1978, stated that the government’s economic forecasts were wildly optimistic. He said electricity demand would grow much more slowly than forecast, requiring less new generation capacity.
The Department of Finance letter also recommended raising electricity prices to reflect the full cost to society of energy, thus encouraging energy savings. It argued that insulation standards for housing should be improved to cut energy waste, and policies to conserve energy should also be prioritised – still a good prescription for today.
By 1981, the estimated cost of a nuclear plant had ballooned to €1 billion. Given nuclear was not now affordable, and without feasible alternatives at the time for renewables, the decision was taken to reduce oil dependence by building the coal-fired Moneypoint power station.
Ignoring the Department of Finance’s more realistic projections for electricity demand, it was built too large. Irish consumers paid dearly over the following 15 years for this oversized plant. It was also a major carbon dioxide emitter.
Today, the same energy security issues arise as in the 1970s, with the added imperative of tackling climate change. That means coal is off the menu as an alternative. But we are likely to see an increased interest across the globe in nuclear power, as happened in response to the 1970s oil shocks.
However, a nuclear power station – now a minimum of 1200MW or more – remains too large for our island’s electricity system. We would also need huge emergency backup capacity in case that plant failed.
[ Ireland’s future energy needs must be met by renewables and nuclearOpens in new window ]
While the technology for smaller reactors is being developed, it could be 2040 before they become readily available. That’s too late to meet our climate targets or reduce our vulnerability to energy shocks.
Because we have already invested so much in renewables, going nuclear now would be a very poor match. We need supplementary power sources when the wind doesn’t blow or the sun doesn’t shine. However, nuclear, being so expensive, needs to run full-time to recoup its costs – switching up and down to match the wind would not make sense.
Nuclear isn’t a magic bullet. Instead, we need to electrify transport and accelerate investment in renewables if we want energy security.