By Paul Homewood
h/t Paul Kolk
For a change, let’s take a slightly more objective analysis of our energy policy from the BBC:
https://www.bbc.co.uk/news/uk-politics-63477214
It includes several key elements, such as:
- The decline of gas in the 1990s, and thus dependence on imported gas
- The failure of successive governments to build nuclear power plants
- Lack of gas storage, had to cancel the plan in 2008
- David Cameron cancels subsidies for onshore wind and solar power
The first two items are clearly making the UK more vulnerable. But quite surprisingly I cannot find any mention of the deliberate policy of phasing out coal power, which began in the time of Tony Blair. It is this more than anything that has made us so dependent on gas.
Storing gas is a minor issue because it can only help in the short term and doesn’t solve the underlying problems.
But I want to focus here on the last item on the list. This year, we’ve regularly stated that our energy bills won’t be so high if we build more renewable capacity. Here’s what the BBC has to say:
A more weighty explanation, he said, depends on the choices made by Mr Cameron’s government.
“The first and foremost thing is to ‘get rid of the green crap,'” he says.
The crude phrase, which appeared on the front page of the Sun, was “the Prime Minister’s solution to soaring energy prices” in 2013. Back then, Labor campaigned vigorously on the cost of living, promising promises to cap energy bills if the party wins. 2015 general election.
In a surprise reshuffle, Mr Hendry was replaced as energy minister by John Hayes, who swore to bring “coal back to the union”.
Mr. Hendry said: “He wants to see the huge development in coal sector. “He has really turned the low carbon agenda upside down.”
Over the next two years, subsidies for renewable energy were cut, planning rules for onshore wind were tightened, and the zero-carbon home policy was repealed.
If those green policies remain in place, annual energy bills are estimated to be £9.5 billion less under the October price cap, According to research by energy analysts Carbon Brief.
Huhne, who considers this policy one of his important legacies, disappoints him.
So what is the truth?
Below is the Table of excerpts from the carbon summary report:
Of the £9.5bn in claimed savings, £7.4bn was from onshore wind and solar projects, which are supposed to be built without the cancellation of subsidies. (They don’t explain why they weren’t built, if they were so “cheap”). I’m going to ignore the savings from “efficiency” because the report doesn’t account for the cost of installing insulation etc – they even put it in electric cars ridiculously, conveniently ignoring the fact it costs them ten thousand dollars more!)
For a start, it’s hard to argue that we would be better off now if we built more renewable energy, when no one at the time predicted that gas prices would skyrocket.. You might as well beat the wife for not picking the right lottery numbers!
The capacity gap is calculated from the 2017 capacity building process, detailed in the previous carbon summary report. here. For onshore wind, this works out at 5.4 GW between 2018 and 2021. Solar is not mentioned in the previous report, but we are looking at around 8 GW on a comparable basis. on one’s own.
If that additional capacity is built, we will get an additional 11.8 TWh from wind and 8.0 TWh from solar.
The final wind and solar farms built under the CfD subsidy system currently cost £100.31 and £96.33/MWh, respectively. There is no evidence that construction costs have decreased since they were built. However, until energy prices started to skyrocket last year, the wholesale price of electricity in the market was around £50/MWh:
https://www.ofgem.gov.uk/energy-data-and-research/data-portal/whorors-market-indicators
In other words, we’ve all been paying way too much for that wind and solar power over the past four years, up to £963 million a year, or £3.8 billion over four years. It is clear that from a purely economic point of view, the right decision was made to end the subsidy based on the facts at the time.
Even so, though, it appears that Carbon Brief has overestimated the “green waste cut bill.” Based on their own figures, savings from wind and onshore solar are 379, respectively. pounds and 368 pounds/MWh. But according to OFGEM, the full September selling price was £364/MWh and has been around £200/MWh this year.
Thus, with wind and solar costs of £100.31 and £96.33/MWh, the potential savings would be just £2 billion, not £7.4 billion. declared. (The Carbon Compendium was written in August 2022, when market prices spiked to £592/MWh).
While wholesale electricity prices may be higher next year, at this year’s levels it is clear that current savings have not yet offset the cost of subsidies between 2018 and 2021.
There is a second chart in the highly relevant Carbon Summary:
Since we still have to reserve gas and other distributed energy sources, we must continue to pay their fixed costs. Indeed, the intermittent operation of gas stations actually makes them less efficient and increases the price they charge.
The only accurate way to compare costs is to look at the avoidable marginal cost of gas, which the chart above does. Between 2018 and 2022 they think we’ll have to buy £33.5 billion worth of gas if we don’t have renewables.
Sound impressive? .
Well, not really, because over the last 5 years renewable energy subsidies have cost the UK £75.7 billion – see here. These are expenses that are officially listed by OBR as “Environmental Fees”. This really reduces costs, as it doesn’t include the tens of billions spent on infrastructure upgrades and grid balancing, both of which are needed to deal with potential power outages. renewable quantity.
Broken energy market
Instead of trying to second-guess past decision making, what both the BBC and Carbon Brief should do is address the current situation.
If they truly believe that market prices will remain high, solar and wind farms will spring up everywhere without government intervention.
But the most effective and immediate way to cut energy bills is to reform the broken energy market. It may have worked well twenty years ago, but it is actually making the energy crisis much worse.
It is ridiculous that electricity from all sources must be obtained at the price of the most expensive type of production, i.e. gas. What is even more unacceptable is that renewable generators have not only profited from this market crash but also continue to receive subsidies of up to £10 billion a year. Not surprisingly, Carbon Brief doesn’t mention any of this.
Instead of the current broken system, we should implement a system based on the Power Purchase Agreement, PPA, which is commonly used in the US. Electricity prices will be negotiated on the basis of long-term contracts from large power plants, prioritizing replaceable sources. Additional electricity for periods of peak demand/shortage will be negotiated separately.
Meanwhile, intermittent wind and solar power will be paid a much lower price, a price that is recognized as their lower value in the overall system.
One last factor, again not covered by the BBC – the carbon tax.
UK carbon prices remain at £80/tonne, about four times the historical level. This directly increases the cost of gas-fired power plants, thereby increasing their prices. And, as we have seen, this also increases the price for all generators. This carbon price could drop to zero tomorrow.
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