Almost half (1GW out of 2.1 GW) of the capacity of the Government's auction for renewable energy has been awarded to projects based in Scotland. Lots of schemes were unsuccessful in the 'contract for difference' (CfD) auction organised by the Department of Energy and Climate Change (DECC) - but at least the ones that are successful are projects that have been granted planning permission. Hopefully these will be implemented - the onshore schemes are likely to be deployed, but there are question marks over whether the two offshore schemes given contracts will actually be installed. Solar pv farms were less successful, and some of those given contracts will not be implemented because they bid too low prices.
One thing is absolutely certain - the prices awarded to the contracts make even more clearer than it was already that renewable energy is generally a much cheaper option compared to nuclear power.
Onshore wind projects of 759 MW capacity and offshore wind projects of a total 1162 MW capacity won contracts. Altogether the capacity of the contracts in this auction will deliver around 1.5 per cent of UK electricity. But all bets are off for the moment about what will happen in the future until we know what the Government will be like after the next General Election. But another auction round will start in October 2015.
Onshore wind projects were given contracts for premium prices at around £81 per MWh, whilst offshore wind came in at just under £120 per MWh, prices varying according to the year in which they are set to be deployed (between 2016 and 2019). Several Scottish onshore wind schemes and one Scottish offshore wind scheme were among the winners.
Immediate comparisons are being made with the Hinkley C contract which was 'settled' at £92.50 per MWh in October 2013, although such comparisons grossly flatter the nuclear deal. This is because a) the renewable energy contracts last for a mere 15 years compared to the 35 years awarded to Hinkley C and b) the Hinkley C project has very valuable loan guarantees which the renewable energy projects do not possess c) the Hinkley C deal is valued in 2013 prices which are already out of date. We should also add a d) that faith in EDF in being able to deliver its project even under the current generous terms is on the low side and they are highly likely to receive further 'underwriting' commitments and, in the end, further payments for cost-overruns from one or more of the governments involved (French, British, Chinese) if the project is to be built (looking more unlikely, now - see previous blog posts). That's even before you count the cost of dealing with the waste which is always 'discounted' onto future generations.
The British are conducting a further experiment in the 'auction' method of allocating renewable energy projects. The last British experiment in the 1990s was disastrously unsuccessful under the so-called 'Non-Fossil Fuel Obligation' (NFFO). Few of the projects were actually implemented, partly because a lot did not receive planning permission and partly the developers bid in unrealistically low bids simply to get contracts.
This effort will fare better than the last (1990s) auctions for onshore wind - in that most of the onshore wind projects should get installed barring very negative shifts in currency values (the turbines are made abroad). £80 per MWh is a plausible price for onshore wind projects, even though the contracts last for only 15 years (£75 per MWh would be good for a 20 year contract). A couple of the solar farms will also be implemented at around £80 per MWh testifying to the increasing competitivity of solar pv technology. The outcome for the two offshore wind projects given contracts is less certain - the prices that have been bid have the unspoken aura that at least the developers involved expect to be awarded the loan guarantees that they have so far been denied.
But regardless of this renewable energy deployment is spurting ahead by leaps and bounds partly dues to the fact at the moment that developers have been straining at leash to get their projects in before the ending of the (relatively) generous (to the Big Six) Renewables Obligation. As has been said elsewhere, renewable energy output will very soon be more on an annual basis that nuclear power in the UK. And nuclear will have to wait an awful long time for reinforcements.
As I've said before, I really do hope I live long enough to see another nuclear power station built (a real one, not a small experimental one, note). Because then I may be immortal.
But for now let's campaign for some loan guarantees to be offered for the two offshore wind projects just given contracts (East Anglia and Neart Na Gaolthe) . Which parties will sign up to that as an election promise?...................................
You can see the UK Government's announcement at https://www.gov.uk/government/statistics/cfd-auction-allocation-round-one-a-breakdown-of-the-outcome-by-technology-year-and-clearing-price
Friday, 27 February 2015
Tuesday, 17 February 2015
British minister claims there is 'no delay' in Hinkley C construction
UK energy minister Matthew Hancock has told a Parliamentary Committee that 'We do not expect a delay' in building Hinkley C as a result of the Austrian challenge to EU Commission's consent to state aid for the power station(s). He also declared that 'the cost of nuclear is not going up'. He was being interviewed before the Environmental Audit Committee on 10th February and quizzed about nuclear funding by green MP Caroline Lucas.
Hancock's statements have some interesting implications. First, given that EDF have been announcing construction to start in early 2013, so in that sense there is already a delay, thus his answer is in formal terms, simply wrong. But one assumes that what he really means is that EDF are going to ignore the issue of the court challenge and go ahead building the power station, pronto (although, as stated in the last blog post in reality the project was falling apart anyway regardless of the Austrian challenge).
This view once again highlights the gap between government policy and reality. EDF are certainly not going to go ahead without at least a guarantee of compensation from the UK Government in the event of an adverse judgement from the EU Court of Justice judgement (final judgement taking maybe 2 years).
But the UK Government could not, itself, give compensation without breaching the state aid rules which are the very subject of the dispute. The only way this could be done would be through the back door, through AREVA, the effectively already bankrupt (French) state owned nuclear constructor of the EPRs. But that idea doesn't seem even likely to be discussed. The French Government is distinctly unhappy already about increasing demands for the Chinese investors in Hinkley C to be insulated against cost overruns, so much so that we haven't heard much at all from the French Government complaining about the Austrian challenge. Again, see the last blog post for more comment
Hancock's statement about the cost of nuclear power not going up are also interesting, given the increases in occurred in government estimates for nuclear power since out nuclear programme was first announced in 2006. Then nuclear power was going to cost around £40 per MWh for a shorter contract length than 35 years. It is even more interesting given the fact that the costs of the EPRs being built in Finland and France (not to mention AP1000s being built in the USA) are spiralling out of control well beyond their original estimates. Of course the real central issue barring the way to building Hinkley C is which Government would provide guarantees for the cost overruns. If the answer is 'nobody', then nobody will build them!
You can see a transcript for the discussion at the Environmental Audit Committee at:
see http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/environmental-audit-committee/a-201015-progress-report/oral/18182.html
Monday, 16 February 2015
Why everybody is really pleased by Austrian challenge to Hinkley C
There's a lot of shaking of pantomine plastic swords by the British Government at the Austrian Government for launching a legal challenge to the Hinkley C 'state aid' consent made last November by the European Commission. In reality many people in British Government, the French Government and even quite a few in the nuclear industry will be quite pleased to have an excuse for the project's failure - and that they can perpetuate another myth about nuclear power - that it was the Austrian's fault that Britain's hopelessly irrational nuclear construction programme is not going ahead.
The reality is that the Hinkley C project was already falling apart at the seams. The British Government has only agreed - so far - to give partial underwriting of the construction costs. Given the near certainty of cost overruns arising in the light of the problems with the other EPRs being built in Finland, France and China, the Chinese investors have got worried that they will be exposed to a lot of cost overruns and have demanded that somebody carry the can rather than them. Ultimately it has either to be the British Government or the French Government who own EDF and AREVA who have to pay for what are likely to be very large losses. AREVA are the constructors and they are already effectively a bankrupt state company for whom the French Government is very averse to carry on supporting even more liabilities.
The result is a stand-off, a stand-off that is only being resolved by the Austrian challenge which gets everybody out of a hole. Other EU states are prevented (by the challenge) from thinking about other ruinous nuclear projects, and the British can blame the Austrians. The UK Government has made some token noises about the Austrian action, and the French Government has said very little about this.
I am also quite happy because on current form I am going to win my £100 bet, placed two years ago, with Martin Alder at a Conference in Birmingham, that construction of Hinkley C would not happen. Meanwhile Martin is quite happy because he is pleased that the UK is avoiding such a terrible deal and some money might be available in the future to support renewable energy.
The reality is that the Hinkley C project was already falling apart at the seams. The British Government has only agreed - so far - to give partial underwriting of the construction costs. Given the near certainty of cost overruns arising in the light of the problems with the other EPRs being built in Finland, France and China, the Chinese investors have got worried that they will be exposed to a lot of cost overruns and have demanded that somebody carry the can rather than them. Ultimately it has either to be the British Government or the French Government who own EDF and AREVA who have to pay for what are likely to be very large losses. AREVA are the constructors and they are already effectively a bankrupt state company for whom the French Government is very averse to carry on supporting even more liabilities.
The result is a stand-off, a stand-off that is only being resolved by the Austrian challenge which gets everybody out of a hole. Other EU states are prevented (by the challenge) from thinking about other ruinous nuclear projects, and the British can blame the Austrians. The UK Government has made some token noises about the Austrian action, and the French Government has said very little about this.
I am also quite happy because on current form I am going to win my £100 bet, placed two years ago, with Martin Alder at a Conference in Birmingham, that construction of Hinkley C would not happen. Meanwhile Martin is quite happy because he is pleased that the UK is avoiding such a terrible deal and some money might be available in the future to support renewable energy.
The curious case of different predictions by leading polling analysts
There are some quite stark contrasts between leading opinion analysts 'predictions' of the results of the May 7th General Election, the question being how this comes about. YouGov, at least in the person of its leader Peter Kellner, reckons that 'Ed Miliband's prospects of becoming prime minister are fading' (Sunday Times February 16th, 'Marauding Scots threaten to keep Ed out of No 10'). Despite the focus Kellner puts on the number of seats that might be won by the SNP, my attention is drawn to the thinking behind his projection of quite a sharp swing to the Conservatives away from Labour sometime by May 7th.
According to the article in the Sunday Times YouGov puts Labour ahead of the Conservatives by 35 to 32 per cent of votes but predicts that by the time of the election this will have reversed so that the Tories lead Labour by 35 to 30. This, he projects, would give the Conservatives 293 seats as opposed to Labour on 270. If (as he suggests) the Liberal Democrats receive 30 seats, this arithmetic might suggest that Nick Clegg in a pro-Tory mood would just about keep David Cameron in No 10, perhaps with the tacit support of the DUP. I don't know. I suppose it depends on what Vince Cable has had for dinner and whether he can keep it down in this scenario.
But what is interesting is the disparity between YouGov and other pollsters projections, and also his notion that the Tory-Labour balance of votes will shift quite significantly this close to the election (in contrast to the relative stability in 2010).
Paul Whiteley, the much-respected and longstanding University of Essex elections analyst projects rather less change in the Labour-Tory balance of votes, and projects that Labour will get 291 seats compared to Tories 281. Surprisingly ( to many) he suggests that the Liberal Democrats will get 48 seats and that the SNP will make few gains. See http://www.theguardian.com/politics/2015/feb/01/2016-general-election-prediction. Government result: Labour minority Government?
Meanwhile Chris Hanretty, the new boy on the election forecasting block, is putting the Conservatives and Labour close in terms of seats, but in the context of the SNP winning over 30 seats and the Liberal Democrats not quite 30. Hanretty's analysis is altered daily, or rather his software alters the findings, as the polls shift. Today (Feb 17th) Labour were half a dozen seats ahead of the Conservatives and the SNP were projected a dizzy 38 seats, Lib Dems a sad 26. I must say I think the Lib Dems will pick up more than 26 and I would be gobsmacked if the SNP get as many as 38 - I know they will make some gains, but given that the pollsters tend not to use the actual candidates names, given the likelihood of a differential turnout (converts to SNP may be less likely to vote) I suspect that on May 8th Jim Murphy will get some plaudits for minimising the scale of Labour losses (whether deserved or not). Under Hanretty's current arithmetic a Labour minority government would most likely result. See http://www.electionforecast.co.uk/. Certainly in any scenario where the Tories plus Lib Dems plus DUP add up to less than 323, Cameron would be likely to be heading to the Palace to hand in his resignation after the weekend.
I would like to ask Peter Kellner, writing in the Sunday Times, how he projects the polls to shift rather more dramatically between Labour and Conservatives more than happened in the run-up to the 2010 election. YouGov's own analysis shows that the polls hardly changed between Labour and Conservatives in the last 2-3 months before the election. You can see this by going to the webpage https://yougov.co.uk/news/2010/05/06/eve-election-predictions/ - you have to scroll down to see the chart.
Maybe Kellner thinks the UKIP tide will melt away leaving a lot of Tory votes on the beach ready to be scooped up? Not that the weakening of the UKIP vote in the last few weeks has led to Conservative gains, and Nigel Farage may now emerge from his trench in South Thanet to sally forth around the country tilting at windmills, solar panels and the EU.
It should be pointed out that all of these pundits (to a lesser or greater Kellner extent) seem to be assuming that come election day Labour will have lost their lead, and that the Tories will get most votes. Maybe. Turnouts in Labour areas are usually lower than in more well-heeled Tory shires. Certainly if Labour did maintain a 1 or 2 point lead then Red Ed wouldn't take long to move into No 10. But the difference with Kellner is that he seems to be assuming a relatively radical shift in votes towards the Tories. This will keep Tory spirits high, and they live in hope that the same syndrome that appeared to affect Neil Kinnock in 1992 will fell 'Red Ed' (he looks rather pinkish to me, though) in May. But this shift did not happen in 2010 - the relative Tory-Labour positions remained remarkably static and typical of the final result. Why should there be a big shift to the Tories now ?
But Kellner is a skilful analyst, so I wouldn't want to rule his predictions out entirely. But I am intrigued. It's all good fun of course. Although Kellner might be keeping Tory spirits up by suggesting that they are still likely to end up in government, his predictions won't actually help David Cameron. Indeed they might even encourage people to try that bit harder to get out to vote Labour (or Green or even Liberal Democrat).
According to the article in the Sunday Times YouGov puts Labour ahead of the Conservatives by 35 to 32 per cent of votes but predicts that by the time of the election this will have reversed so that the Tories lead Labour by 35 to 30. This, he projects, would give the Conservatives 293 seats as opposed to Labour on 270. If (as he suggests) the Liberal Democrats receive 30 seats, this arithmetic might suggest that Nick Clegg in a pro-Tory mood would just about keep David Cameron in No 10, perhaps with the tacit support of the DUP. I don't know. I suppose it depends on what Vince Cable has had for dinner and whether he can keep it down in this scenario.
But what is interesting is the disparity between YouGov and other pollsters projections, and also his notion that the Tory-Labour balance of votes will shift quite significantly this close to the election (in contrast to the relative stability in 2010).
Paul Whiteley, the much-respected and longstanding University of Essex elections analyst projects rather less change in the Labour-Tory balance of votes, and projects that Labour will get 291 seats compared to Tories 281. Surprisingly ( to many) he suggests that the Liberal Democrats will get 48 seats and that the SNP will make few gains. See http://www.theguardian.com/politics/2015/feb/01/2016-general-election-prediction. Government result: Labour minority Government?
Meanwhile Chris Hanretty, the new boy on the election forecasting block, is putting the Conservatives and Labour close in terms of seats, but in the context of the SNP winning over 30 seats and the Liberal Democrats not quite 30. Hanretty's analysis is altered daily, or rather his software alters the findings, as the polls shift. Today (Feb 17th) Labour were half a dozen seats ahead of the Conservatives and the SNP were projected a dizzy 38 seats, Lib Dems a sad 26. I must say I think the Lib Dems will pick up more than 26 and I would be gobsmacked if the SNP get as many as 38 - I know they will make some gains, but given that the pollsters tend not to use the actual candidates names, given the likelihood of a differential turnout (converts to SNP may be less likely to vote) I suspect that on May 8th Jim Murphy will get some plaudits for minimising the scale of Labour losses (whether deserved or not). Under Hanretty's current arithmetic a Labour minority government would most likely result. See http://www.electionforecast.co.uk/. Certainly in any scenario where the Tories plus Lib Dems plus DUP add up to less than 323, Cameron would be likely to be heading to the Palace to hand in his resignation after the weekend.
I would like to ask Peter Kellner, writing in the Sunday Times, how he projects the polls to shift rather more dramatically between Labour and Conservatives more than happened in the run-up to the 2010 election. YouGov's own analysis shows that the polls hardly changed between Labour and Conservatives in the last 2-3 months before the election. You can see this by going to the webpage https://yougov.co.uk/news/2010/05/06/eve-election-predictions/ - you have to scroll down to see the chart.
Maybe Kellner thinks the UKIP tide will melt away leaving a lot of Tory votes on the beach ready to be scooped up? Not that the weakening of the UKIP vote in the last few weeks has led to Conservative gains, and Nigel Farage may now emerge from his trench in South Thanet to sally forth around the country tilting at windmills, solar panels and the EU.
It should be pointed out that all of these pundits (to a lesser or greater Kellner extent) seem to be assuming that come election day Labour will have lost their lead, and that the Tories will get most votes. Maybe. Turnouts in Labour areas are usually lower than in more well-heeled Tory shires. Certainly if Labour did maintain a 1 or 2 point lead then Red Ed wouldn't take long to move into No 10. But the difference with Kellner is that he seems to be assuming a relatively radical shift in votes towards the Tories. This will keep Tory spirits high, and they live in hope that the same syndrome that appeared to affect Neil Kinnock in 1992 will fell 'Red Ed' (he looks rather pinkish to me, though) in May. But this shift did not happen in 2010 - the relative Tory-Labour positions remained remarkably static and typical of the final result. Why should there be a big shift to the Tories now ?
But Kellner is a skilful analyst, so I wouldn't want to rule his predictions out entirely. But I am intrigued. It's all good fun of course. Although Kellner might be keeping Tory spirits up by suggesting that they are still likely to end up in government, his predictions won't actually help David Cameron. Indeed they might even encourage people to try that bit harder to get out to vote Labour (or Green or even Liberal Democrat).
Saturday, 24 January 2015
Labour throws out green energy titbits - but would they do it without Green Party votes?
For Green energy supporters, both large and small, Labour seems to be a much more appealing prospect than the Conservatives. But only because there are other parties also offering a greener agenda than the Tories - and the Green Party is important here.
The Lib Dems support onshore wind - in contrast to the Tories - so it's a no-brainer here for Labour to back plans for more onshore wind. Labour's energy spokesperson Tom Greatrex (who is beginning to demonstrate that he has some ideas of his own) has taken three further useful steps. One is that he has backed the campaign to stop the corporate neo-liberals ban ordinary people raising ethical investment for renewable energy projects. He evidently wants to reverse the Financial Conduct Authority's drive to effectively ban renewable energy cooperatives. There's an article about this in The Guardian.
http://www.theguardian.com/environment/georgemonbiot/2015/jan/23/community-energy-companies-big-six-big-society.
Greatrex has also distanced himself from the latest piece of largesse being handed to EDF in respect of the capacity mechanism payments their nuclear power plant output will receive as a consequence of the capacity auctions. There's sense in that. Why on earth people want to pay nuclear power stations for keeping running at peak times of the day when they would want to keep running anyway beats me. See:
http://www.ft.com/cms/s/0/91987576-8795-11e4-bc7c-00144feabdc0.html
Of course this falls a long way short of doing the UK a great service by avoiding the coming nuclear construction disaster that is Hinkley C.
Third, Labour has been making supportive sounds about the notion of a 'community feed-in tariff''. Now, that's a good idea (even if it falls short of the real feed in tariff that this blog was founded to promote!). Labour has allowed its long standing (and long suffering!) SERA to get some mileage in pushing this one. See http://www.independent.co.uk/news/uk/politics/community-energy-would-bypass-the-big-six-under-labour-9923413.html
So, Labour is giving us green titbits - but how come all of a sudden! Well, the Green Party is getting a lot of votes. Labour of course will argue that green votes often come at Labour's expense, but the trouble is, that without the Green Party votes, and for that matter some distance between even the Lib Dems and the Tories on renewable energy, Labour would probably offer nothing new.
But it's worse for the Tories. I remember one officer of a (actually rather conservative) countryside pressure group telling me that if the Tories were to win power they had to gain the support of 'the NGOs'. I am sure he meant the green lobby that David Cameron is now feeling necessary to ignore in order to pacify his right wing who threaten defection to UKIP. But the price is very high. A party like the Tories that can't even offer a few scraps to the green lobby looks like one that is heading out of office.......
Thursday, 15 January 2015
Why the SNP will have to moderate its demands on Labour in a hung Parliament
According to at least one election forecast (at the time of writing this post) the only Government with a majority that could be formed after the May 7th election would be a Labour led one, but one that would involve Labour having some sort of agreement with both the Liberal Democrats and the Scottish National Party (SNP). But if you think that this would mean it is open season for the SNP to make Labour bow to a lot of demands, think again! That's because the SNP would have no credible alternative to providing Labour with a 'supply and confidence' majority. So in order to gain any political concessions the SNP would have to ensure that demands were both moderate and not incompatible with Labour's overall programme. They could do best by allying with existing interest groups within the Labour Party who favour certain priorities.
This emphasises the importance and usefulness of renewable energy in party political terms as something Labour could take on board and demonstrate that the SNP is gaining political benefits from any alliance with Labour. See my earlier post http://realfeed-intariffs.blogspot.co.uk/2014/12/renewable-energy-near-top-of-snp.html
In theory the Government's existence would be in the hands of the SNP. But in practice the SNP would face severe damage (and lose many seats it is likely to gain in May 2015) at the following election if its actions resulted in the actuality or greater prospect of a Conservative Government at Westminster. They would simply confirm Labour propaganda about the SNP letting the Tories in to power at Westminster.
However, unless the Conservatives make significant gains by May 2015 on what the polls are at the moment, a Labour Government with pacts with the Lib Dems and SNP seems the most likely outcome. Many commentators seem to be saying that so long as the Conservatives emerge as the largest party, then they will form the Government. That's not necessarily the case at all. The Conservatives need to be able to mobilise the largest block of MPs, which is not the same as being the largest party. The SNP will not support a Conservative Government, and the SNP need to be seen to be backing a Labour administration as an alternative.
If Labour, together with the SNP (and others such as PC, SDLP and Greens) achieves a larger number of seats than the Tories, DUP (and maybe UKIP) then the Lib Dems are likely to back a Labour minority government. The Lib Dems have a preference for Labour. See, for example: http://labourlist.org/2014/10/further-poll-finds-lib-dem-members-would-prefer-a-partnership-with-labour-over-tories/. The Lib Dems would, if Conservatives were the largest party, follow convention and talk to them first about forming a Government. But if the Conservatives end up with less than 300 seats that could be a very short conversation. Instead they would have more serious talks with Labour.
Imagine the following scenario of parties and seats:
Conservatives 290
Labour 271
SNP 32
Lib Dems 30
DUP 8
PC 3
SDLP 3
UKIP 3
Greens 1
SDLP 3
Sinn Fein 5
This is a variation on the numbers coming out of the website: http://www.electionforecast.co.uk/
which in fact at the time of writing gives Labour a seat lead. Even this calculation by Hanretty et al assumes that the Conservatives will be doing better in the polls at the time of the election than they are now. - so the seat scenario I make above assumes that there is a significant swing towards the Conservatives between now (Jan 16th) and the election to give them a lead of 2.5- 3 per cent in votes cast over Labour.
At least 323 seats are needed for a practical majority in the Commons since Sinn Fein do not attend the Commons votes (otherwise it would be 326 out of 651 MPs). Using my scenario the Labour 'bloc' (Lab plus SNP, PC, Green, SDLP) will be 310. On the other hand the Tory bloc, even if we were to include DUP and UKIP (the latter being a questionable ally for the Conservatives in practice since they would repel the Lib Dems) would be only 301. Who would the Lib Dems go with in that scenario? Well the arithmetic favours going with the Labour bloc since that gives a more secure majority anyway, but the party political preferences also make Labour a more attractive option.
Note I am talking about supply and confidence pacts here as the mode of forming and sustaining a Government (perhaps for no more than 1 year). Coalitions seem much less likely (and not at all involving the SNP).
This emphasises the importance and usefulness of renewable energy in party political terms as something Labour could take on board and demonstrate that the SNP is gaining political benefits from any alliance with Labour. See my earlier post http://realfeed-intariffs.blogspot.co.uk/2014/12/renewable-energy-near-top-of-snp.html
In theory the Government's existence would be in the hands of the SNP. But in practice the SNP would face severe damage (and lose many seats it is likely to gain in May 2015) at the following election if its actions resulted in the actuality or greater prospect of a Conservative Government at Westminster. They would simply confirm Labour propaganda about the SNP letting the Tories in to power at Westminster.
However, unless the Conservatives make significant gains by May 2015 on what the polls are at the moment, a Labour Government with pacts with the Lib Dems and SNP seems the most likely outcome. Many commentators seem to be saying that so long as the Conservatives emerge as the largest party, then they will form the Government. That's not necessarily the case at all. The Conservatives need to be able to mobilise the largest block of MPs, which is not the same as being the largest party. The SNP will not support a Conservative Government, and the SNP need to be seen to be backing a Labour administration as an alternative.
If Labour, together with the SNP (and others such as PC, SDLP and Greens) achieves a larger number of seats than the Tories, DUP (and maybe UKIP) then the Lib Dems are likely to back a Labour minority government. The Lib Dems have a preference for Labour. See, for example: http://labourlist.org/2014/10/further-poll-finds-lib-dem-members-would-prefer-a-partnership-with-labour-over-tories/. The Lib Dems would, if Conservatives were the largest party, follow convention and talk to them first about forming a Government. But if the Conservatives end up with less than 300 seats that could be a very short conversation. Instead they would have more serious talks with Labour.
Imagine the following scenario of parties and seats:
Conservatives 290
Labour 271
SNP 32
Lib Dems 30
DUP 8
PC 3
SDLP 3
UKIP 3
Greens 1
SDLP 3
Sinn Fein 5
This is a variation on the numbers coming out of the website: http://www.electionforecast.co.uk/
which in fact at the time of writing gives Labour a seat lead. Even this calculation by Hanretty et al assumes that the Conservatives will be doing better in the polls at the time of the election than they are now. - so the seat scenario I make above assumes that there is a significant swing towards the Conservatives between now (Jan 16th) and the election to give them a lead of 2.5- 3 per cent in votes cast over Labour.
At least 323 seats are needed for a practical majority in the Commons since Sinn Fein do not attend the Commons votes (otherwise it would be 326 out of 651 MPs). Using my scenario the Labour 'bloc' (Lab plus SNP, PC, Green, SDLP) will be 310. On the other hand the Tory bloc, even if we were to include DUP and UKIP (the latter being a questionable ally for the Conservatives in practice since they would repel the Lib Dems) would be only 301. Who would the Lib Dems go with in that scenario? Well the arithmetic favours going with the Labour bloc since that gives a more secure majority anyway, but the party political preferences also make Labour a more attractive option.
Note I am talking about supply and confidence pacts here as the mode of forming and sustaining a Government (perhaps for no more than 1 year). Coalitions seem much less likely (and not at all involving the SNP).
Wednesday, 31 December 2014
So why is renewable energy so much more expensive in the UK compared to other countries?
British renewable energy is a lot more costly compared to renewable energy in other European countries, according to a recently published report. You can see this on: http://www.wua-wien.at/images/stories/publikationen/renewable-energy-versus-nuclear-power.pdf
Now, I don't doubt the reports general findings. Indeed my own research prompts me to say that renewable energy in the UK is not only rather more expensive compared to the rest of Europe, but also most of the rest of the world! But, the question is, WHY? A colleague recently popped me this question and it is one I have been asked before. One German renewable energy official commented to me a couple of years ago: 'How do you (Brits) manage to make renewable energy so expensive ?'
I don't think it has anything to do with 'purchasing power parity', that is what a pound will buy here as opposed to somewhere else when converted into the local currency (just look at the comparisons to see what I mean), so other factors will be in play, and my own studies of the energy point me very firmly in one direction:
The system of financing renewable energy schemes in the UK is designed (whether by intention or otherwise) to give a very large proportion of the income stream, earmarked for renewable energy and financed by effective levies on consumer electricity bills, to the major electricity suppliers rather than pay the renewable energy schemes themselves.
Under the Renewables Obligation (RO) (to cut a longer story short) the renewable energy (RE) generators are dependent on the major electricity suppliers to give them the long term contract they would need to raise the necessary bank loans and satisfy equity investors. They (the Big Six) take a big cut for doing this 'service' - which can amount to around 30 per cent of the income stream dedicated to renewable energy. In other words, if we had a system of German style 'feed-in tariff' contract that was available to anybody the money needed to pay for a given amount of renewable energy would be up to 30 per cent less. Yes, if RE was financed this way RE would be at least 25 per cent cheaper. Well, certainly for onshore schemes. The offshore wind picture is a bit more complicated since there are more uncertainties involved in that (eg you don't know how much the ships you need are going to cost to hire in advance), but the Germans still manage to do this a lot more cheaply!
Ah, you might say, the Government, under Electricity Market Reform (EMR) is introducing precisely this sort of system now. But, if you said that, you'd be dead wrong (admittedly a common fallacy). The 'contract for differences' (CfD) system being introduced is only available to electricity suppliers, or companies who can effectively act like electricity suppliers by trading on the UK electricity markets. Even then banks will tend to lend money at reasonable rates only to projects that are backed by the biggest electricity companies.
So, in short, the new CfD system replicates the existing ability of the electricity majors to siphon off up to 30 per cent of the incomes supposedly paid by electricity consumers for renewable energy.
You would be very welcome to ask why this is tolerated. Perhaps the simple answer is twofold. First, in the UK the Government has, by design or at least in effect, allowed the major electricity companies to cream off what economists call an 'economic rent' from renewable energy in order to compensate for the lost production from their power stations. I mean 'lost' in the sense that the power stations would be generating more if it was not for the renewable energy production. - A sort of Faustian bargain. I have heard it said that RE is practically the only thing the Big Six can earn profits from now. Quite. This doesn't happen in Germany of course,where the electricity majors, as we hear, are suffering very badly indeed!
This leads us onto the second reason why this is happening. Now one can write lots of stuff about interest group theory to explain how this happens without there being any public discussion, but, again, the short answer is that it does not serve any of the major interest groups to raise the issue. Obviously the electricity majors like it; the Government is happy so long as they are happy and nobody else is able to make a big enough fuss, and the renewable energy industry is tolerant so long as they can carry on with their projects. The anti-windfarm/solar farm lobby won't be very interested in going on about how windfarms/solar farms could be a lot cheaper if the Government organised things differently.
The only interest groups that have tried to do anything about this are some independent renewables companies and some environmental groups. To give them their proper due. Friends of the Earth (FOE) actually published (two years ago) a report I wrote calling for German style feed-in tariffs (available to all-comers) to be established. See www.foe.co.uk/sites/default/files/downloads/david_toke_fits.pdf
I am very grateful to FOE for doing what they could here (it was certainly worth a try), but the report actually got rather more interest from abroad than it did in the UK! Some independent renewable energy companies tried pushing the boat out in the direction of looking for a broadly comparable solution, but sadly, they have too little political clout to make a crucial difference in political competition with the Big Six.
You have to remember that in Germany the independent renewables sector runs the RE industry. There the political interest group pressure is almost 180 per cent different to the UK. In this country it is the Big Six, give or take a couple of other multinational energy corporations, who will influence contractual terms. They are not too keen on opening up the market to real competition; indeed much nonsense is spouted in support of the the CfD system in that it is integrated to the British electricity market. Preserved for the sole indulgence of the big companies you mean! The biggest prize of course is to pay whatever it takes to preserve the idea of nuclear power, hence the likely bottomless incomes stream that will be opened up for Hinkley C and which will wipe out RE funding in the future. You can read my other posts on this I am sure.
I am not going to be completely pessimistic though. Smaller suppliers are entering the market, maybe even some ones backed by local authorities under what OFGEM calls its new 'supplier lite' scheme. That might change things. If we get Labour in power we might get a dedicated 'community feed-in tariff' - although that wouldn't apply to all independents, just ones owned in some sense by a community. But change in the UK is likely to come only slowly, and then under the impact of people doing things on the ground and building up the pressure that way. Small projects can gain funding under the small renewables feed-in tariff (in effect up to a MW or so). But that's only a start.
See below for some links to various recent argument on the subject. Note that there are a couple of comments below on the Government's new capacity mechanism. This now looks ever much more like a PR device that does little more than give more money to the Big Six and conventional power generators to try to keep them afloat from the threat of RE and other new technologies for that little but longer...........
http://www.independent.co.uk/news/uk/politics/community-energy-would-bypass-the-big-six-under-labour-9923413.html
http://www.theguardian.com/business/2014/dec/14/edf-3bn-windfall-existing-power-plants
http://projects.exeter.ac.uk/igov/britains-dinosaur-capacity-market-will-worsen-energy-trilemma/
http://www.intelligentutility.com/magazine/article/382571/are-virtual-power-plants-future-european-utilities
http://www.carboncommentary.com/blog/2014/12/22/the-uk-capacity-auction-a-backdoor-way-of-staving-off-the-utility-death-spiral
http://www.ft.com/cms/s/0/91987576-8795-11e4-bc7c-00144feabdc0.html#axzz3NCIJOIK2
19th December Tom Greatrex, Labour’s shadow energy minister, welcomed the broad framework of the policy. However, he repeated his argument that existing nuclear power stations — which cannot vary output in response to short-term peaks and troughs in demand — were being unnecessarily subsidised by the scheme.
http://www.theguardian.com/environment/2014/aug/15/green-energy-co-ops-blocked-by-government-regulator
http://realfeed-intariffs.blogspot.co.uk/2014/10/hinkley-c-deal-likely-to-wipe-out-uk.html
http://party.coop/wp-content/blogs.dir/5/files/2014/12/next-gen-final-web.pdf?8b5145&8b5145
Now, I don't doubt the reports general findings. Indeed my own research prompts me to say that renewable energy in the UK is not only rather more expensive compared to the rest of Europe, but also most of the rest of the world! But, the question is, WHY? A colleague recently popped me this question and it is one I have been asked before. One German renewable energy official commented to me a couple of years ago: 'How do you (Brits) manage to make renewable energy so expensive ?'
I don't think it has anything to do with 'purchasing power parity', that is what a pound will buy here as opposed to somewhere else when converted into the local currency (just look at the comparisons to see what I mean), so other factors will be in play, and my own studies of the energy point me very firmly in one direction:
The system of financing renewable energy schemes in the UK is designed (whether by intention or otherwise) to give a very large proportion of the income stream, earmarked for renewable energy and financed by effective levies on consumer electricity bills, to the major electricity suppliers rather than pay the renewable energy schemes themselves.
Under the Renewables Obligation (RO) (to cut a longer story short) the renewable energy (RE) generators are dependent on the major electricity suppliers to give them the long term contract they would need to raise the necessary bank loans and satisfy equity investors. They (the Big Six) take a big cut for doing this 'service' - which can amount to around 30 per cent of the income stream dedicated to renewable energy. In other words, if we had a system of German style 'feed-in tariff' contract that was available to anybody the money needed to pay for a given amount of renewable energy would be up to 30 per cent less. Yes, if RE was financed this way RE would be at least 25 per cent cheaper. Well, certainly for onshore schemes. The offshore wind picture is a bit more complicated since there are more uncertainties involved in that (eg you don't know how much the ships you need are going to cost to hire in advance), but the Germans still manage to do this a lot more cheaply!
Ah, you might say, the Government, under Electricity Market Reform (EMR) is introducing precisely this sort of system now. But, if you said that, you'd be dead wrong (admittedly a common fallacy). The 'contract for differences' (CfD) system being introduced is only available to electricity suppliers, or companies who can effectively act like electricity suppliers by trading on the UK electricity markets. Even then banks will tend to lend money at reasonable rates only to projects that are backed by the biggest electricity companies.
So, in short, the new CfD system replicates the existing ability of the electricity majors to siphon off up to 30 per cent of the incomes supposedly paid by electricity consumers for renewable energy.
You would be very welcome to ask why this is tolerated. Perhaps the simple answer is twofold. First, in the UK the Government has, by design or at least in effect, allowed the major electricity companies to cream off what economists call an 'economic rent' from renewable energy in order to compensate for the lost production from their power stations. I mean 'lost' in the sense that the power stations would be generating more if it was not for the renewable energy production. - A sort of Faustian bargain. I have heard it said that RE is practically the only thing the Big Six can earn profits from now. Quite. This doesn't happen in Germany of course,where the electricity majors, as we hear, are suffering very badly indeed!
This leads us onto the second reason why this is happening. Now one can write lots of stuff about interest group theory to explain how this happens without there being any public discussion, but, again, the short answer is that it does not serve any of the major interest groups to raise the issue. Obviously the electricity majors like it; the Government is happy so long as they are happy and nobody else is able to make a big enough fuss, and the renewable energy industry is tolerant so long as they can carry on with their projects. The anti-windfarm/solar farm lobby won't be very interested in going on about how windfarms/solar farms could be a lot cheaper if the Government organised things differently.
The only interest groups that have tried to do anything about this are some independent renewables companies and some environmental groups. To give them their proper due. Friends of the Earth (FOE) actually published (two years ago) a report I wrote calling for German style feed-in tariffs (available to all-comers) to be established. See www.foe.co.uk/sites/default/files/downloads/david_toke_fits.pdf
I am very grateful to FOE for doing what they could here (it was certainly worth a try), but the report actually got rather more interest from abroad than it did in the UK! Some independent renewable energy companies tried pushing the boat out in the direction of looking for a broadly comparable solution, but sadly, they have too little political clout to make a crucial difference in political competition with the Big Six.
You have to remember that in Germany the independent renewables sector runs the RE industry. There the political interest group pressure is almost 180 per cent different to the UK. In this country it is the Big Six, give or take a couple of other multinational energy corporations, who will influence contractual terms. They are not too keen on opening up the market to real competition; indeed much nonsense is spouted in support of the the CfD system in that it is integrated to the British electricity market. Preserved for the sole indulgence of the big companies you mean! The biggest prize of course is to pay whatever it takes to preserve the idea of nuclear power, hence the likely bottomless incomes stream that will be opened up for Hinkley C and which will wipe out RE funding in the future. You can read my other posts on this I am sure.
I am not going to be completely pessimistic though. Smaller suppliers are entering the market, maybe even some ones backed by local authorities under what OFGEM calls its new 'supplier lite' scheme. That might change things. If we get Labour in power we might get a dedicated 'community feed-in tariff' - although that wouldn't apply to all independents, just ones owned in some sense by a community. But change in the UK is likely to come only slowly, and then under the impact of people doing things on the ground and building up the pressure that way. Small projects can gain funding under the small renewables feed-in tariff (in effect up to a MW or so). But that's only a start.
See below for some links to various recent argument on the subject. Note that there are a couple of comments below on the Government's new capacity mechanism. This now looks ever much more like a PR device that does little more than give more money to the Big Six and conventional power generators to try to keep them afloat from the threat of RE and other new technologies for that little but longer...........
http://www.independent.co.uk/news/uk/politics/community-energy-would-bypass-the-big-six-under-labour-9923413.html
http://www.theguardian.com/business/2014/dec/14/edf-3bn-windfall-existing-power-plants
http://projects.exeter.ac.uk/igov/britains-dinosaur-capacity-market-will-worsen-energy-trilemma/
http://www.intelligentutility.com/magazine/article/382571/are-virtual-power-plants-future-european-utilities
http://www.carboncommentary.com/blog/2014/12/22/the-uk-capacity-auction-a-backdoor-way-of-staving-off-the-utility-death-spiral
http://www.ft.com/cms/s/0/91987576-8795-11e4-bc7c-00144feabdc0.html#axzz3NCIJOIK2
19th December Tom Greatrex, Labour’s shadow energy minister, welcomed the broad framework of the policy. However, he repeated his argument that existing nuclear power stations — which cannot vary output in response to short-term peaks and troughs in demand — were being unnecessarily subsidised by the scheme.
http://www.theguardian.com/environment/2014/aug/15/green-energy-co-ops-blocked-by-government-regulator
http://realfeed-intariffs.blogspot.co.uk/2014/10/hinkley-c-deal-likely-to-wipe-out-uk.html
http://party.coop/wp-content/blogs.dir/5/files/2014/12/next-gen-final-web.pdf?8b5145&8b5145
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