From NOT A LOT OF PEOPLE KNOW THAT
By Paul Homewood
h/t Paul Kolk
For a change, a barely extra goal evaluation of our power coverage from the BBC:
https://www.bbc.co.uk/information/uk-politics-63477214
It covers among the major elements, akin to:
- The sprint for fuel within the Nineteen Nineties, and consequent over reliance on imported fuel
- The failure by successive governments to construct nuclear energy stations
- Lack of fuel storage, going again to cancellation of plans in 2008
- David Cameron’s cancelling of subsidies for onshore wind and solar energy
The primary two objects are clearly making the UK extra weak now. However fairly astonishingly I can discover no point out at all the deliberate coverage of phasing out coal energy, begun in Tony Blair’s day. It’s this which greater than something which has made us too reliant on fuel.
Fuel storage is a little bit of a pink herring, as it will possibly solely assist in the brief time period, and doesn’t tackle the underlying issues.
However I wish to focus right here on the final merchandise on the record. We have now seen frequent claims this yr that power payments wouldn’t have been so excessive if we had constructed extra renewable capability. That is what the BBC say:
One other rationalization with extra weight, he mentioned, hinges on decisions made by Mr Cameron’s authorities.
“The primary and most vital one was ‘eliminating the inexperienced crap’,” he mentioned.
The crude phrase, splashed on the entrance web page of the Solar newspaper, was the “PM’s answer to hovering power costs” in 2013. Again then, Labour was campaigning arduous on the price of residing, promising to cap power payments if the occasion gained the 2015 normal election.
In a shock reshuffle, Mr Hendry was changed as power minister by John Hayes, who vowed to place “coal again into the coalition”.
“He wished to see an enormous progress in coal,” Mr Hendry mentioned. “He did actually throw the low-carbon agenda into reverse.”
Over the following two years, subsidies for renewables have been lower, planning guidelines for onshore wind have been tightened, and a zero-carbon houses coverage was scrapped.
Had these inexperienced insurance policies remained, estimated annual power payments would have been £9.5bn decrease beneath the October worth cap, in line with analysis by power analysts Carbon Temporary.
The culling of the inexperienced deal for dwelling insulation was notably disappointing for Mr Huhne, who sees the coverage as one in all his key legacies.
So, what’s the fact?
Beneath is the Desk from the Carbon Temporary report quoted:
Of the £9.5 bn saving claimed, £7.4 bn is from onshore wind and photo voltaic tasks, which might supposedly have been constructed with out the cancelling of subsidies. (They fail to clarify why they weren’t constructed anyway, in the event that they have been so “low-cost”). I’ll ignore the financial savings from “effectivity” because the report fails to calculate the price of becoming insulation and many others – they even ludicrously embody electrical vehicles on this, conveniently ignoring the actual fact they price ten grand extra to purchase!)
For a begin, it’s puerile to argue that we might be higher off now if we had constructed extra renewables, when no one on the time forecast that fuel costs would rocket.. You may simply as effectively beat the spouse for not choosing the proper lottery quantity!
The lacking capability is calculated from 2017 capability building, detailed in an earlier Carbon Temporary report right here. For onshore wind, this works out at 5.4 GW over the interval 2018 to 2021. Solar energy shouldn’t be talked about in that earlier report, however we’re about 8 GW on the identical foundation.
If that further capability had been constructed, we might be getting an additional 11.8 TWh from wind and eight.0 TWh from photo voltaic.
The final wind and photo voltaic farms constructed beneath the CfD subsidy system are presently priced at £100.31 and £96.33/MWh respectively. There is no such thing as a proof that building prices have come down since they have been constructed. Nevertheless till power costs began spiking final yr, the wholesale market worth for electrical energy has been round £50/MWh:
https://www.ofgem.gov.uk/energy-data-and-research/data-portal/wholesale-market-indicators
In different phrases, we might all have been overpaying for that wind and solar energy for the final 4 years, to the tune of £963 million a yr, or £3.8 billion over the 4 years. It’s painfully apparent that from a purely financial view, the suitable resolution was made to finish subsidies given the details on the time.
Even then although, it could seem that Carbon Temporary have grossly overestimated their “invoice for reducing the inexperienced crap” Primarily based on their very own figures, the financial savings from onshore wind and photo voltaic are £379 and £368/MWh respectively. However in line with OFGEM, complete sale costs in September have been £364/MWh, and have been round £200/MWh this yr.
Subsequently, with wind and photo voltaic prices of £100.31 and £96.33/MWh, the potential saving would solely have been £2 billion, not the £7.4 billion claimed. (The Carbon Temporary was written in August 2022, when market costs spiked at £592/MWh).
Whereas electrical energy wholesale costs could also be larger subsequent yr, at this yr’s ranges it’s clear that present financial savings wouldn’t but have offset the price of subsidies between 2018 and 2021.
There’s a second chart in that Carbon Temporary which is extremely related:
As we nonetheless should maintain fuel and different dispatchable sources of energy as again up, we nonetheless should carry on paying their mounted prices. Certainly the intermittent working of fuel energy stations truly makes them much less environment friendly and places up the costs they should cost.
The one appropriate technique to examine prices is to take a look at prevented marginal prices of fuel, which the above chart does. Between 2018 and 2022, they reckon we might have had to purchase a further £33.5 billion price of fuel, if we had not had renewables.
Sounds spectacular? .
Properly, not likely, as a result of within the final 5 years, subsidies for renewable power have price the UK £75.7 billion – see right here. These are the prices formally listed by the OBR as “Environmental Levies”. This truly understates the true price, because it doesn’t embody the tens of billions spent on upgrading infrastructure and balancing the grid, each vital to deal with the intermittency of renewables.
The Damaged Power Market
As an alternative of making an attempt to second guess previous resolution making, what each the BBC and Carbon Temporary must be doing is addressing the present scenario.
In the event that they actually consider that market costs will keep excessive, then wind and photo voltaic farms will spring up in all places, with out the necessity for presidency intervention.
However the simplest and quick technique to lower power payments is to reform the damaged power market. It could have labored effectively twenty years in the past, however it’s truly making the power disaster a lot worse now.
It’s ridiculous that electrical energy from all sources must be sourced on the worth of the most costly era, ie fuel. It’s much more unacceptable that renewable turbines mustn’t solely make windfall earnings from this market malfunction, however that in addition they proceed to obtain subsidies price as much as £10 billion a yr. Unsurprisingly Carbon Temporary fail to say any of this.
As an alternative of the present damaged system, we must always implement one based mostly on Energy Buy Agreements, PPAs, that are generally used within the US. Costs for energy could be agreed on a long run contractual foundation from main turbines, with choice given to dispatchable sources. High up energy for durations of peak demand/energy shortages could be individually negotiated.
In the meantime, intermittent wind and solar energy could be paid a a lot lower cost, one which recognised their decrease worth inside the total system.
One remaining issue, which once more shouldn’t be talked about by the BBC – carbon taxes.
UK carbon costs are nonetheless round £80/tonne, about 4 instances historic ranges. That is straight growing prices for fuel turbines, thus placing their costs up. And, as now we have seen , this additionally places up costs for all turbines. These carbon costs may very well be decreased to zero tomorrow.
