Tuesday, 30 June 2015

Treasury poised to axe renewables programme

Largely because of the very success of the renewables deployment programme and the insistence by the Treasury of a cap on levies on electricity bills needed to pay for renewable energy, the UK's renewable energy programme is likely to be brought to an effective end by 2018, if not sooner.

Calculations suggest that the budget within the Treasury's 'Levy Control Framework' (LCF) set by the Treasury will soon be spent as onshore wind and solar pv farms are installed faster than expected. Indeed Nigel Cornwall reckons it could have been spent already. See http://www.cornwallenergy.com/cms/data/files/Downloads/Levy-Control-Framework-Cornwall-Energy-analysis.pdf

Of course this spending crisis is one that is manufactured by the Treasury itself. The Treasury decided not to increase the 'carbon levy' on fossil fuel prices last year, thus meaning that its own budget for renewable energy incentives would not support so much renewable energy. In addition to this wholesale power prices have fallen, again meaning that a given amount of incentives will develop less renewable energy. It seems that not only will funding for onshore wind and solar farms be ended, but it is likely also we will hear announcements soon about the tailing off of support for small renewables in the feed-in tariff including domestic solar pv, and one or two token offshore windfarms may be left in the offing if they can achieve much reduced prices.

You would think that the Treasury, cognisant of the fact that energy prices will be much lower anyway, would increase the amount budgeted in the LCF. But no. Rather the Treasury appear to be using the situation to cut back on renewable energy. The Department of Energy and Climate Change is reduced to being little more than a public relations cover for all this in the process.

The UK will fall a long short of its EU target of supplying 15 per cent of its energy through renewables by 2020. This includes all energy, note, just just electricity, and we would need well over 30 per cent of electricity to come from renewables to meet this target. The EU target could only be met if the UK greatly accelerated its deployment of renewables in the next five years, especially in the last 2-3 years. Yet all the signs are that the Treasury will ensure that this is precisely the time when the programme will be more or less shut down.

See some details on http://www.solarpowerportal.co.uk/news/solar_subsidies_could_fall_foul_of_lcf_overspend_report_says_1891#.VZJLSpHdsSs.twitter

Wednesday, 17 June 2015

Pressure grows for blank cheque for nuclear power

Now that it is plain that nuclear power has failed miserably to compete with renewable energy even on the somewhat skewed playing field represented by the (proposed) Hinkley C deal, nuclear supporters are trying to engineer a 'blank cheque' to be given to  nuclear developers. That would be the outcome of the call, made in a report issued by the Institute for Public Policy Research (IPPR).

The IPPR favour developing nuclear power as a publicly owned development, on the same basis as projects like HS2. There would be a 'cost plus' contract given to the nuclear power developers, who could, and no doubt would, be able to waste taxpayers money on a grand scale without any risk to their own profit margins. IPPR have finally cottoned on to the fact that nuclear power stations never get built on a competitive privately owned risk basis.

The fact that that nuclear power is so uncompetitive that it needs this sort of treatment should lead us to the conclusion that it is much better to spend the money on something else, renewable energy for example, of which there is no shortage. But no, the calls of the British engineering establishment must be met, no matter how mid-20th century they may be!

Curiously the IPPR report exaggerates the prices paid to onshore and offshore wind. The latest 'contracts for difference' issues to these technologies are at £80 per MWh and £120 per MWh, yet the IPPR puts them as being more expensive (see page 29). Maybe the IPPR should get its reports peer reviewed more carefully.

More seriously the IPPR is close to the Labour Party. It would be rather unfortunate if the Labour Party supported the IPPR's approach and came out as being, in effect, more pro-nuclear than the Conservatives if it adopted a 'blank cheque' approach. Jonathan Reynolds, Labour's energy spokesperson has indeed backed the report with a twitter message. Electricity Market Reform was dreamt up to fund new nuclear. That failed. Now were going to have the spectacle, sometime in the future (if Labour gets in next time) of policy once again being distorted to give a failing dinosaur technology supposed priority over renewable energy.

By the way, they'll need a new EU state aid application for this.

The IPPR's report is couched in terms of shifting the costs of spending on non-fossil energy from electricity bills to public spending bills. Renewable energy will be hopelessly constrained by this disaster as their budgets are squeezed.

Meanwhile the Government may take little notice of this call, for the moment at least. But, alas, the Government has a different set of policy horrors. It is currently focussed on cutting opportunities for onshore wind power. I understand that an announcement bringing forward the cut-off date for new onshore wind schemes under the Renewables Obligation from 2017 to 2016 will come soon.

See the IPPR offering at:

Friday, 12 June 2015

Heat Pumps and district heating systems are essential for Scotland's low carbon heating plan

The Scottish Government is being proactive in publishing plans for decarbonising heat in pursuit of a target of substantial reductions from this sector by 2030. There is much talk of district heating systems. If the district heating systems are to be supplied by renewable energy then perhaps the most practical way of doing this is through the heat networks being supplied by industrial scale heat pumps.

Renewable energy production from wind, solar, tidal etc needs to be expanded beyond the current size of the Government's 100 per cent electricity from renewables target to supply the decarbonised heat. It will be delivered by (probably water sourced) heat pumps which are an efficient way of using the renewable electricity.

The Scottish Government has already given £20 million in grants towards installing a district heating system supplied by a heat pump in Coal, Fort William. The Aberdeen Heat and Power Company has calculated that, using the renewable heat incentive (RHI) heat pumps are an even more economical means of supplying heat compared to gas engines. In the future they will certainly be lower carbon.

See report on Scottish Government plan at http://www.scotsman.com/news/environment/scottish-government-publish-green-heating-plan-1-3799946

Thursday, 11 June 2015

How onshore wind is now quite cheap through the Renewables Obligation

Despite all the furore about alleged large subsidies being earned by onshore wind through the Renewables Obligation, the facts speak otherwise. We have heard how, under the new Electricity Market Reform 'contracts for differences',  onshore wind contracts were won in the February auction organised by the Government for a £80 per MWh for just a 15 year contract. Of course this is much less than Hinkley C is being offered for a 35 year contract.

What is less known is that even under the Renewables Obligation onshore wind is not being paid more than around that figure now (£80 per MWh). You can calculate this by inspecting the results of the auctions for renewable obligation certificates (ROCs). These come out at around £42 per MWh recently, and onshore wind receives 90 per cent of this figure, say £38 per MWh. Add to this the wholesale electricity price, which is currently running a around £42 per MWh. Add the two things together, and, bingo, you get £80 per MWh.

Compare this to the price being offered to Hinkley C, which in 2012 prices is £92.50 per MWh (for 35 years underwritten by a £10 billion loan) which in current prices is £94 per MWh.

Not much of a contest is there? - especially when you consider that Hinkley C is not actually being built for this price! (that's because its not being currently built until the French or UK Governments step up to promise to pay the inevitable cost overruns).

There is an odd debate going on in Scottish newspapers such as the 'Scotsman' which seems to ignore what should be an obvious fact that Scotland is connected to the British electricity system, so it is not relevant to argue as if it wasn't. There is much lamenting of closure or mothballing of fossil fuel power plant. The reason that power plant are ceasing operation is not because there is an electricity crisis, but a product of the opposite, ie that electricity demand in the UK has greatly fallen - so it is quite good that fossil production is being replaced by renewables. The National Grid are busy managing this system by contracting for as much reserve plant as is necessary, and not according to scare stories in the Scotsman. 

It should also be borne in mind that nuclear power plant make the task of integrating renewable energy a lot more, not less, difficult since nuclear power plant are given 'despatch priority' which means that wind power plant have to be turned off if there is too much electricity on the system. This leads leads to complaints that wind operators are being paid 'constraint payments' when in fact the fault that this is happening is because of the technical and economic shortcomings of nuclear plant (which are not going to be turned off), not the wind (or solar pv) plant.

For ROC prices see
http://www.epowerauctions.co.uk/eroclatest.htm about £42 per MWh

For wholesale power prices see:
power exchange prices http://www.apxgroup.com/

solar pv deployment https://www.gov.uk/government/statistics/solar-photovoltaics-deployment
about 6.5 GWe

Thursday, 4 June 2015

Wind incentive cut is against the wishes of almost all Scottish MPs - Govt faces legal challenge

RenewableUK's threat to take the Government to court if they cut off incentives for onshore wind early evokes memories of the 'indyref' debate about what would happen to financing of Scottish windfarms after independence. The rumoured threats also goes against the opinions of almost every Scottish MP - bar one - a Conservative!

It has been rumoured that Amber Rudd will bring forward the cut-off date for the planned closure of the Renewables Obligation to new projects from March 2017 to  March 2016. If this were to happen and significant numbers of wind projects were lost then this would trigger  claims against the Government for 'retrospective action'. Retrospective action includes measures by the Government to damage people's rights or economic interests by punishing people for taking decisions under laws that existed at the time they took the decisions.

This issue arose during the Scottish independence referendum debate when the Westminster Government implied that it would discontinue incentives for windfarms in Scotland that had already been developed at the time of independence. I commented then that this threat was empty since it would be challenged by the electricity companies (who would be the main losers of such action) as a piece of retrospective governmental action. I remember being challenged at a hearing of the Scottish Parliament's Select Committee on Economy  Energy and Tourism when I made gave this opinion. Murdo Fraser (the Conservative Chair of the Committee) asked me  whether it was a legal opinion. 'No. it's my opinion', I replied, feeling confident that the lawyers would confirm this in the event. Well the lawyers for the wind industry are now making their own challenges, in this case over the issue of wind turbines that the developers hope to build soon  and the developers have my great sympathy. See http://www.ft.com/cms/s/0/71680764-09d9-11e5-a6a8-00144feabdc0.html#axzz3c5DLQih5. You can see me appearing before the Scottish Select Committee (last year) at https://www.youtube.com/watch?v=OBVr08JYHgM&app=desktop

Of course, in reality what we might be seeing is mainly a lot of what Simon Bullock, the FOE Campaigner has described as a lot of unhelpful confusion. The Government will try and assuage its backbench anti-wind MPs by saying it will cut off subsidies early whilst at the same time negotiating 'grace periods' for the windfarm developers that will, give or take a load of pointless paperwork allow most of the developers to go ahead as planned. meanwhile Amber Rudd will hope that this satisfies the wind people enough not to make her look daft in the run-up to the Paris Climate talks.

But Amber Rudd has another problem - The Treasury. The Treasury is capping the additions that can be made to electricity bills to support renewable energy - the so-called 'Levy Control Framework' (LCF for those in the trade). Most of the money has already been spent. Ironically the money would go further in terms of developing more renewable energy production if a lot of it was spent on onshore wind rather. But that's politically taboo for the Tories - although, more strangely still,

Any cutbacks in wind incentives will affect Scotland much more than England. The bulk of the windfarms will be built in Scotland, a few in Wales and Northern Ireland, not many at all in England! Yet, incredibly, the Conservatives have just one MP in Scotland out of 59 (56 now being held by the SNP, one by Labour and one Liberal Democrat).

But then, in terms of manifesto commitments, the Scottish Tories are even more viscerally anti-wind than what was said in the main Conservative manifesto! Of course, they have just one seat in Westminster compared with a total of the other 58 Scottish MPs who do not want the cut in onshore wind incentives. Fergus Ewing, the Scottish Energy Minister has complained that they are being 'frozen out' of decisions about the wind incentive - they do not want the cut of course, but then their opinions, as the constituted Scottish Government, appear to count for rather less than the opinion of the Scottish Tories (as represented by just one Conservative MP in Scotland)! See http://www.bbc.co.uk/news/uk-scotland-scotland-politics-33001263

See also (by me): "The only way to meet green energy targets is to hand some power back to Scotland" 

Monday, 1 June 2015

Urgent! Write now to your MP to urge them to stop the Government's windfarm massacre!

As you have no doubt seen in the press, the Government has announced that it is pressing ahead with plans to stop incentives being paid to onshore wind. The cutting edge of the current threat is to 'close' the Renewables Obligation (RO) to new windfarms from April 2016. Currently many windfarms are planned to be installed in the final year of incentives being available for wind power (2016-2017), so this action will waste a lot of cheap low carbon energy. RenewableUK, the trade body representing wind power, has threatened to take legal action against the Government over this issue. We can support them by writing to our MPs to urge the Government not to scrap incentives for onshore wind.

We need to write to our MPs to stress how important it is to keep funding onshore wind not just until 2017 under the RO but also in the longer term through the continued issue of what are called long term power purchase agreements (PPAs). These include so-called 'contracts for difference' (CfDs) being issued under Electricity Market reform (which replaces the RO). Renewable energy sources need PPAs. Unlike fossil fuels, most of the costs of the the schemes come when they are installed, meaning that investors need long term guarantees about prices of sales of electricity produced.

It is truly an absurd sight seeing DECC Secretary Amber Rudd swanning off to Paris to pronounce about how much our Government is keen on reducing carbon emissions when at home it is effectively banning new onshore windfarms. Ironically they are one of the few of its energy policies that is actually being implemented in pursuit of its much proclaimed 'decarbonisation' strategy. The Government is failing to get either carbon capture and storage (CCS) or nuclear power stations built. So what is it doing? Why, making a priority of stopping a major solution - onshore windfarms - that are most easily deployed! Currently there are over 5GW of onshore windfarms, that is over 3 per cent of UK electricity generation, that has planning consent but will not be built if incentives are cut off for onshore windfarms from 2016.

Onshore windfarms are the cheapest widely available low carbon energy source. It is important to stress this. It is not widely reported, but the way the RO is structured now means that windfarm operators will get no more than around £80 per MWh for 20 years if they set up in April 2016, and after that just the wholesale electricity price (currently under £50 per MWh) afterwards. Compare this with what is now worth around £94 per MWh for 35 years that is being offered to EDF for Hinkley C with a £10 billion loan guarantee thrown in!

So, it is very important that windfarm supporters urgently write to their MPs to try to stop this piece of ecological vandalism.

Why the oil companies' call for carbon pricing may not be what it seems

It may seem quite a breakthrough to get a bunch of oil companies to sign up to climate action, but I would definitely  look this gift horse in the mouth. This is for the simple reason that the policy instrument to which they give so much prominence (carbon pricing) is one that will act more in their interests rather than the interest of implementing energy efficiency and renewable energy. Examine the key phrase in the document, issued by the Climate group, namely:

'If governments act to price carbon, this discourages high carbon options and encourages the most efficient ways of reducing emissions widely.....' See http://www.theclimategroup.org/what-we-do/news-and-blogs/europes-largest-oil-companies-call-for-carbon-price-g7-and-policymakers-should-be-encouraged-to-up-ambition-says-mark-kenber/

Now I'm not saying carbon pricing is a bad thing, but it is very tendentious to suggest that it will lead to 'the most efficient ways of reducing emissions widely'. That, most certainly, will not happen! It is paraded as a 'market based' instrument but in fact has three fundamental market 'inefficiencies' built into it.

 First, it increases the price of energy for everybody regardless of whether they are in a position to replace their existing energy equipment with equipment that produces lower carbon energy services - so it angers people who have to make their savings simply by cutting their levels of energy services. As a result it builds pressure to limit the extent of carbon pricing.In that sense it is politically self-defeating. I have heard energy establishment figures call for carbon pricing before rather than embrace technology-specific measures that would advantage techniques (such as energy efficiency and renewable energy) that would not benefit the fuels and power stations with which they are associated. 

Second, carbon pricing is a very short term device because nobody can be certain that a given carbon price will be in place long enough to justify people spending lots of money on desirable types of new low carbon equipment. (Just look at the variations in recent UK policy on carbon pricing!). Desirable low carbon technologies are usually capital intensive meaning that you have to spend most of the money at the start to install the equipment (rather than fossil fuel intensive operations). Examples of capital intensive low carbon plant include replacement lighting systems, more energy efficient new buildings than would otherwise be built, a windfarm, a solar farm etc. 

Instead, and here's the third fundamental flaw, in practice carbon pricing encourages switching to different fossil fuels rather than energy efficiency or renewable energy. Carbon pricing encourages short term thinking of saving fuel costs in the short term - in particular from coal to oil and gas. And here is the rub, that can explain why the oil (and gas corporations) have a keen interest in carbon pricing rather than various other techniques. 

In the short term you can fuel switch from coal to oil and gas, especially in the power sector. Carbon pricing discriminates in favour of such superficial short term changes and against investments with a longer term payback such as energy efficiency and renewable energy. This is because there is uncertainty in the longer term about the level of the carbon pricingIn order to incentivise energy efficiency and renewable energy you need to change regulations and give renewable energy schemes local term contracts to be paid guaranteed levels of return for energy produced- power purchase agreements (PPAs). 

Regulations and instruments such as feed-in tariffs are much more efficient means of promoting decarbonisation since 1) They encounter much less political resistance because for a given addition of low carbon technology they involve much lower general increases in energy prices compared to just using carbon pricing.  Hence a lot more actual decarbonisation can be achieved. 2) They encourage much more systemic change through encouraging new capital intensive technologies. Third they incentivise much greater carbon reduction as opposed to mere short-term fuel switching between different fossil fuels (often simply between existing fossil power power plant)

I don't see any reference to this type of policy instrument in the oil company statement, which is not a surprise. 

What we do often see quite a lot is a lot of nonsense about how using natural gas reduces carbon emissions in sectors like the British power sector. So the argument goes, it is cheaper than renewable energy (energy efficiency usually doesn't get a mention here by the way). The gas lobby get away with this by finessing away the fact that the average carbon content of British electricity supply is about the same as that from a natural gas power station. They manage to avoid the obvious fact that adding another gas fired power station will not reduce the carbon content of the electricity supply. 

The gas lobby manage to achieve this sleight of hand by always comparing the carbon content of their gas power station with that of an existing coal fired power station. But this is an arbitrary, self-serving, comparison. In practice people are choosing to 'replace' their existing lighting systems, choosing whether to have a more or less energy efficient new building, whether to replace a nuclear power station (let's leave aside the arguments about that for a moment) or even whether to repower an existing windfarm etc. So the point is that your new gas fired power stations might just as easily be replacing an alternative investment in a low carbon energy technology as much as coal. The choice, in effect, is not between replacing an old coal fired power station with a gas power station (or anything else) but with replacing the average carbon content of the electricity services with something else. So in these terms replacing the average carbon content of electricity services that is consumed with average carbon content (the gas power station) doesn't reduce carbon content at all. 

The French philosopher Foucault argued, essentially, that truth is created by power, and clearly power in our society is dominated by the energy establishment. They will always insist that their truth is disseminated in periodicals, reports etc influenced by the establishment. Getting an alternative, in this case ecologically sustainable, truth into power is a struggle, and involves creating alternative centres of power. That is what we should do and we should treat the oil companies apparent conversion to climate action as simply a manifestation of where their best interests lie - to sell more oil and gas.

Whilst I realise that there is a lot of sincere endeavour amongst participants in the Climate Group, I feel they may be placing too much reliance on the the oil companies' statement. We are taking one step forward, but three steps back.  Instead of focussing the real measures to promote clean technologies we are being railroaded into what is at best an irrelevant discussion about a carbon pricing system that will, if anything, delay the adoption of clean energy systems and benefit the oil and gas companies.