As the FT reported on Friday, negotiations on the terms for new nuclear have advanced and there is increasing optimism that a deal can be done. The meeting between David Cameron and Francois Hollande in Paris two weeks ago amounted to a declaration of agreement in principle. Just three issues remain to be resolved. Read more

The announcement that the Department of Energy and Climate Change – along with half a dozen other Whitehall ministries – has accepted another reduction in its budget under the latest spending review will be celebrated only by the energy companies and their lobbyists. A weak department has been weakened further with its negotiating capability undermined at a critical moment.

Most of DECC’s £3bn budget goes to meet its statutory obligations – including nuclear decommissioning costs. Those obligations can’t be cut so the burden falls on the “discretionary” areas of policy making which include negotiations around the vexed issue of Electricity Market Reform. Cuts and natural wastage, which leaves a significant number of posts unfilled, mean that the department is now seriously understaffed for these negotiations. There is big money at stake and for the companies no expense on staff and lobbyists is too great. The secretary of state has been supine in accepting the cuts without challenge. Read more

Success always brings its own burdens. The Chinese economy has grown in real terms by around 8 or 9 per cent a year since 1980. Some 800 million people have been lifted out of subsistence. Dozens of new cities have been built. The country is now one of the world’s great economic powers even if it is still not allowed to join the G8. And growth continues. China is the world’s biggest building site.

One of the burdens which has come with economic success is the need to import oil. China has found very little oil, despite extensive exploration efforts – especially in the South China sea. Net imports have therefore risen steadily from zero twenty years ago to 5.6m barrels a day last month. Read more

The news that Exxon is to build a $10 bn LNG export facility in Texas marks another significant step forward in the story of shale gas and its disruptive impact on the world energy market. Those who want a parallel for the painful process through which so many of the established forces of the industry on one side and the lobby groups on another have struggled to come to terms with the reality of shale gas over the last three years should read John Heilbron’s fascinating book on GalileoRead more

The problems facing the Government’s plan to reform the UK’s electricity market go well beyond the departure of two of the limited number of civil servants who actually understand the proposals. The reality is that the Government is losing its appetite for a scheme which is liable to disintegrate under the weight of its own complexity. Read more

Those who think that the best responses to the risks of climate change are ever stronger regulation, complex international agreements and higher energy prices should take a look at what is happening in America.

In the US, carbon emissions have fallen by 13 per cent in the last five years and are at their lowest level since 1994. Energy demand is flat even though the economy is growing. The key statistics to watch are oil demand, which is at a 15 year low, and coal demand in the power sector, which is down by more than 20 per cent since 2008.

Furthermore, energy prices are also falling thanks to shale gas. They have yet to stabilise and there will have to be a shakeout within the gas sector. But prices will settle in the range of $4.50 to $5 – sustaining development but also providing a sharp reduction in input costs for consumers including manufacturing industry. Shale gas, however, is not the whole story. Next will come tight oil, which is oil from shale rocks. Then and potentially most important of all will come advances in energy storage. Bill Gates has just made his third major investment in an energy storage technology business. Read more

The news of another excellent year for investment in the North Sea will come as a surprise only to those who do not understand the dynamic relationship between economics and technology.

The original predictions were that North Sea oil and gas – certainly in the UK sector – would be exhausted by 1990. A strict depletion policy in Norway might keep production running for a few more years. That was the received wisdom of the 1970s.

Now, 56 years after the first gas was produced at the West Sole field, the prospect for the whole province is for at least two more decades of production. Total output is down but there is a long tail. Resources which were once thought inaccessible are now being brought onstream thanks to advances in drilling and reservoir management technology. Read more

Sizewell A (left) and Sizewell B (right), two generations of British nuclear power on the Suffolk coast

Sizewell A (left) and Sizewell B (right), two generations of British nuclear power generation on the Suffolk coast

Why is it proving so difficult to close the deal on new nuclear in Britain? In part, of course, there is the normal arm wrestling negotiation. This is focused on the so called “strike price” – an energy price below which the suppliers will get compensation from the state – and on the allocation of risk around a £14bn construction contract.

The UK government wants a strike price of around £65 to £70 per MWh which is high but probably politically defensible. They well remember that in 2008 EDF talked about a price of £45 per MWh. EDF now wants something between £95 and £100, but they can probably afford to accept the Government’s figure and still make a reasonable profit.

The allocation of the risks is even more important than the strike price. Unless the Government is careful it could end up pay enormous sums for capacity which is underused because cheaper supplies will be available to consumers. If the company gets it wrong, a bad deal would overhang its finances for decades. Read more

Ed Davey, secretary of state for DECC

Ed Davey, secretary of state at DECC, outside his ministry

The UK’s Department of Energy and Climate Change is about to publish forecasts suggesting that gas prices could rise by up to 70 per cent over the next five years. This is scaremongering nonsense, and shows just how out of touch the Department is with the realities of the international energy market. Officials appear not to have consulted the industry or the traders. In reality the odds are that prices are just as likely to fall as to rise for three distinct reasons. Read more

How do short term warnings of gas supply shortages, and a 50 per cent spike in same day delivery costs, sit with the general acceptance across the energy sector and government that gas will – and should be – the next big source of supply for power generation ? Read more

Climate pessimists, shale gas deniers, Opec ministers and (most important of all) investors in the energy sector should read the new Energy Outlook to 2040 produced by Exxon Mobil. It is an excellent piece of work, even if there is one important omission. Read more

A number of well-sourced reports over the past two days suggest that, as predicted, we are on the edge of a deal for the construction of new nuclear power stations in the UK.

The champagne corks however are not quite popping either in Whitehall or in Paris. Read more

The rumours that Vladimir Putin is about to replace Aleksey Miller as the chief executive of Gazprom continue to swirl around the markets across Europe. As usual it is hard to know what is true and what is dreamt up by Mr Miller’s enemies. Removing Mr Miller would not, however, solve Gazprom’s problems. What the company really needs is a new strategy. What should it be. ? Read more

Having been pretty critical of the Department Of Energy and Climate Change in the past it is time to come to its defence.

It seems that Mr Francis Maude the Cabinet Office Minister and effectively head of Britain’s civil service has told his cabinet colleagues in the last few days that a further £8bn of “efficiency savings” can be found from Whitehall and local government. Read more

The death of Hugo Chávez and the prospect of a regime change in Venezuela will cause no more than a momentary blip in the oil market. This is a remarkable change from the situation a few years ago, when developments in Carcacas would have destabilised prices across the world.

In reality, Chávez diminished Venezuela’s potential role in the international oil business by undermining the status of the state company Petróleos de Venezuela SA and excluding major international investment. Production and exports from Venezuela are now well below their potential levels.

To restore PDVSA to its former glory will take time. Many of the people best able to build the company and the country now live comfortably in London or New York and will take some persuading to go back home. Oil industry investors will be circling the airport in their private jets, but there is no new consensus as yet as to the terms on which they might be allowed to return. That too will take time. Read more

There is absolutely no need for an energy shortage in the UK, but the indecision of policy makers is making serious problems over the next few years ever more likely. There is no shortage of supply – but the raw materials of the energy business – such as gas and coal, or for that matter wind – have to be converted into power to produce the electricity which is essential for a complex modern economy. If the power stations are not in place electricity can’t be produced. Read more

Getty Images

The negotiations between the UK government and EDF over the contract terms for new nuclear development continue. As well as a sizeable gap on the strike price there is also disagreement on the distribution of risks. In some ways this is just a normal negotiating process but behind the meetings and the attempts at news management are two questions.

The first is whether the UK really needs new nuclear. Read more

Ofgem warns bills could rise as UK may need to import more gas. Getty Images

Alistair Buchanan’s warning about the vulnerabilities of the UK energy supply system is serious and timely. The absence of a clear overall policy for energy supply and consumption means that in his words consumption levels are likely to be dangerously close to maximum capacity at times over the next few years and that UK consumers face the risk both of steadily rising prices and interruptions of supply.

It is impossible to disagree with these conclusions from Ofgem’s report. They are based on facts and hard analysis. Read more

How will Barack Obama tackle climate change? Getty Images

The comments in President Obama’s second inaugural speech on climate change have encouraged campaigners to think that something substantive is about to happen. It is always good to be optimistic, but the hard question is what exactly is he going to do and what will it achieve. Read more

The World Economic forum is getting underway in Davos, Switzerland. Getty Images

Fashions come and go and the agenda for the annual meeting of the World Economic Forum in Davos is usually a pretty good guide as to whether skirts are long or short this year. This year’s title for the meeting is “Resilient Dynamism”, which is very cool. But the issues that have slipped down the agenda are energy security and climate change.

There are a few odd sessions, but the focus has shifted and apart from one brief reference to natural resources, neither energy nor climate are mentioned on the web page setting out this year’s themes. This is a very big change from only four or five years ago, when both were prominent topics at every meeting. Read more