Energy Through the Looking Glass – Part 2

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I wrote Energy Through The Looking Glass almost a year ago, before the energy crisis had reached its current severe proportions, and several months before the invasion of Ukraine by Russia. Even then it was obvious that we were running into pretty serious problems, and since then things have deteriorated greatly. At the time, it seemed clear to me that our reliance on inherently expensive and unreliable renewable energy was responsible for many of our difficulties. Yet, at the same time, the usual suspects (most obviously writers at the Guardian) were doubling down on telling us that this wasn’t the case.

I stand by everything I wrote at the time and by the arguments I then presented to undermine the claims made in the Guardian. It seems, however, that debunking the debunkers will be an ongoing task. This week the Guardian’s website included an article by Simon Evans (Deputy Editor and Policy Editor at Carbon Brief) headed “Is net zero really to blame for soaring energy bills in Great Britain?” with his negative conclusion in the sub-heading: “Despite frequent claims in rightwing media, green levies make up fraction of bills and renewables are reducing costs”.

I think it’s worth running through the points made by Dr. Evans to see how valid these claims are.

The first claim, sadly, seems to be one of traducing one’s opponents ‘arguments based on who one’s opponents are. The first few paragraphs are devoted to pointing out that the argument against renewables is” rightwing commentary”, with individuals being singled out as fitting this bill (David Frost, Nigel Farage, Allison Pearson, Tim Newark, Iain Martin, Leo McKinstry and Steve Baker, and of course Liz Truss). As if that isn’t enough to damn the argument forever, we are given the added information that Nigel Farage is apparently a self-confessed admirer of Vladimir Putin. Not that it’s relevant what Farage thinks of Putin, but it’s worth seeing just how far out of context that claim has been lifted. A link is supplied to an article in the Express which cites Farage admitting in an interview with Alistair Campbell in 2014 that he admired Putin as an operator, but in which he went on to say that he disliked him as a human being, didn’t approve of him politically, and wouldn’t want to live in Russia.

However, I digress. It’s just worth considering sometimes the extent to which the man, rather than the ball, is played.

Fortunately, the rest of the Guardian article seeks to deal with the issue of energy costs, though I think it’s fair to say that it raises a number of Aunt Sallies before knocking them down, while ignoring some inconvenient facts.

Green Levies

First the argument over green levies (based on Liz Truss ‘claims that if she becomes Prime Minister, she will suspend them). Dr Evans argues that they are playing no part in rising energy bills, indeed that the opposite is true (I struggle with that, since surely the opposite would mean that they are helping to reduce bills, or at least to reduce the amount by which they are rising, in other words, the levies would have to be negative). We are told that they have fallen since the summer to around £150 a year, an average of 8% of bills. And this may be true, but it ignores the fact that these levies are also paid by businesses (who don’t have the benefit of a price cap, unlike domestic consumers), who seek wherever possible to pass these additional costs on to their customers, and if they can’t do so they may go bust. Furthermore, while (as the linked Carbon Brief report states) green levies (including those for social policy objectives, such as the warm home discount and the energy company obligation) may be around 8% of domestic bills, they represent 12% of electricity bills, but just 3% of gas bills. Had the current spike in gas prices not occurred, then the plan was to impose significant green tariffs on gas bills too. Had it gone ahead, it would probably have added around £170 per annum to domestic gas bills. If you choose to get your information from the Office for Budget Responsibility rather than from Carbon Brief you might conclude that “green” levies will cost us £13.8 billion this year alone – (renewables obligation at £6.6Bn; CfDs at £2.1Bn; capacity market at £600M; Feed-in Tariffs at £1.6Bn; Green gas levy – assuming it goes ahead – at £100M; renewable heat incentive at £1.1Bn; and climate change levy at £1.9Bn). Although many of those costs might ultimately be borne by households only indirectly (via costs passed on to them as consumers of businesses who pay some of the levies directly) that works out at around £500 per household per annum, not £150. In addition, the OBR anticipates that they will rise to £17.5 billion by 2026/27.

And of course, no mention whatsoever is made of the way in which renewable energy destabilises the grid, nor of the fact that every bit of green energy coming on-stream reduces not one jot the need for reliable back-up power (to cover the unreliability of renewables). Why, for instance, no mention of this?

In Great Britain, we are in the middle of a transformation, with the energy we use increasingly coming from cleaner greener sources. In 2019, for the first time since the industrial revolution, most of our electricity came from low carbon sources [sic]. National Grid is at the heart of that energy transformation – investing around £1.3bn each year to adapt and develop our transmission network to connect new sources of low carbon and green energy to our homes and businesses.

Or this?

National Grid reveals £54bn wind power network upgrade plan

I reckon that alone isn’t far shy of £2,000 per household.

Almost a year ago I wrote this:

It’s also worth looking at the relative cost of electricity and gas in the UK. Admittedly the price of gas has shot up over recent days, and my domestic energy tariff is five months old, but even after recent gas price rises, gas is still cheaper than electricity, not least because – thanks to the unreliability of renewables – electricity costs have also shot up. My current domestic tariff is 14.795p per kWh for electricity, but a mere 3.921p per kWh for gas, making electricity almost four times more expensive than gas. Interestingly, the tariff it replaced had electricity at 10.269p per kWh and gas at 2.752p per kWh. Both had increased by close to 40%, but that wonderful renewable electricity hadn’t seen my electricity tariff rise by less than my gas tariff (actually, the electricity tariff rose by 44% while my gas tariff rose by 42.5%). What was that about renewables not suffering from from market-led problems? What was that about renewables being cheap? Surely, as the system relied more heavily on renewables when I renewed my tariff than when I signed up to my earlier one, that should have been reflected in my electricity tariff either having gone down, stayed stable, or at least not having gone up at the same rate as my gas tariff? Yet it wasn’t.

Since then, sadly, both my gas and electricity tariffs have increased substantially. Electricity is now charged at 28.02p per kW/h, while gas is 7.34p per kW/h. Electricity is now costing me 89% more than then, while gas is costing me just under 88% more. Gas continues to cost a little over a quarter of the cost of electricity. Shockingly, however much we all try to economise on our energy use, we will still now face significant bills, since the daily standing charge has risen (in my case) to 42.24p per day for electricity and to 27.22p per day for gas. As Carbon Brief acknowledges, these costs represent this:

Another 3% is due to the collapse of multiple energy suppliers last winter. The cost of managing the customers of these failed businesses is being passed on to households via their bills.

Of course, almost without exception, those energy suppliers claimed to supply “100% renewable electricity”. Note well also:

The National Audit Office estimates this will add £94 per household to annual bills, some £2.7bn overall. This excludes the cost [of] bailing out major supplier Bulb, which could reportedly reach £2bn.

Why are gas prices so high?

The next argument discussed is the suggestion that the net zero agenda has led to higher gas prices. A Daily Telegraph article is put up to be knocked down, it is having made the claim that “‘a conscious decision was taken to rapidly reduce the supply of fossil fuels ‘in the UK.”

This argument is dismissed in a number of ways, some good, some less so. First of all, we are told that the rising gas prices are a function of market fundamentals, and to a large extent that is undeniably true (though I struggle with the irony that, as Dr Evans tells us, cold winters have led to a surge in demand).

We are then told, less convincingly I think, that although UK gas production has been holding steady, reserves are running out (and we are here offered a link to a National Audit Office report). That report tells us that what used to be called “[t]he OGA [Oil & Gas Authority] estimates that the UK has 10 billion–20 billion barrels of recoverable oil and gas reserves”. However, (and here’s the rub), the report also tells us that:

It is primarily a commercial decision for operators as to whether they continue to extract oil and gas using existing assets or invest in constructing new assets to extract new reserves.

In a market economy, no sane managers of a fossil fuel company would invest large amounts of money in the construction of new assets to extract new reserves when they are being told that:

The Department projects that electricity generation from natural gas will fall by 63% between 2017 and 2035, although there is uncertainty around this as it will depend on the availability of alternative generating sources such as renewables and nuclear power.

In other words, it’s a little more complicated than simply saying that reserves are running out, so there’s nothing to see here. Campaigners regularly go to Court to try to obstruct new oil and gas field developments. There are precious few incentives and plenty of disincentives in the “net zero” environment to seeking to bring new gas reserves in the North Sea on stream.

Next we are told that fracking in the UK has experienced a decade of failure, so that’s rapidly dismissed. This equally ignores the relentless campaigning against fracking and the borderline absurd rules imposed on fracking companies (but on no other industry so far as I am aware) regarding the limits on permissible earth tremors. In addition, an effective moratorium on fracking has been in place in the UK for almost three years now, while fracking is banned completely in Scotland to all intents and purposes.

Ironically, on the same day as the Guardian article appeared, we also learn from the Telegraph that an “[e]nd to drilling ban could produce much-needed supplies as early as January, according to government source”.

There is even one fracking company who reckons they could even get some energy into the market by next winter if they were allowed to get cracking straight away,” said a senior Government source.

The firm, based in the north of England, has told the Treasury that if it is granted a fracking licence immediately, it is likely to be able to inject new supplies into the market by January.

Finally, regarding security of gas supply and price, the closure of the Rough storage facility some years ago is dismissed even more casually:

For the record, the decision to close Rough, formerly the UK’s largest gas storage site, was “nothing to do with net zero”, according to a government adviser at the time.

That may or may not be true, but I’d like more than a link to a tweet from Guy Newey (“helping clean tech companies thrive in the future energy system. Ex-PAD, SPAD, wonk, hack”) on 18th August 2022 saying “It has nothing to do with net zero” by way of substantiation. And whether the claim is right or wrong, the closure of Rough has undoubtedly left the UK seriously exposed, and a Government that wasn’t obsessed with net zero might surely have had a bit more to say about it at the time.

Renewables are “unreliable”

The final argument raised, only to be knocked down (albeit very unsatisfactorily) is the argument that renewables are unreliable and that they leave the UK exposed and dependent on foreign providers.

Well, they are unreliable, and unpredictable too. 2021 saw a wind drought, remember. Solar panels are little better than useless in winter, when energy demand is at its highest. As I write (it’s now after dark), the live status of the National Grid shows the UK’s electricity demand being supplied by coal (1.7%); gas (59.4%); pumped storage (2.3%); biomass – which many of us don’t consider to be “renewable” (10.2%); nuclear (15%); solar (0%, obviously); wind (3.1%); hydro (0.7%); and 4.6% via the interconnectors (with 2.9% attributed to “other”). Yes, you read that right – the much-vaunted wind was supplying 3.1% of our electricity. Not a terribly impressive performance on the part of renewables, in summer, when demand is low – hydro, solar and wind together currently supplying just 3.8% of our electricity needs, and therefore less than 1% of our total energy requirements. Sometimes, of course, renewables supply rather more. Reliable fossil fuel power plants are expected to ramp up and down at short notice to cater for the primary place given to renewables. It all adds to the cost. That extra cost never seems to be counted.

How does Dr Evans deal with the unreliability point? Well, he doesn’t. Instead he side-steps it. He simply states:

Yet renewables have generated enough electricity in 2022 to avoid the need for five times as much gas as the UK imported from Russia last year. Pearson is not only upside down but back to front: the more renewables the UK builds, the less “dependent on foreign providers” it will become.

No, Allison Pearson doesn’t have it upside down, or back to front. The electricity generated by renewables in 2022 has been generated unpredictably and unreliably. The existence of those renewables does not enable us to close our fossil fuel facilities – we still need them as back-up to cover the unreliability of renewables. I repeat, this doesn’t save us money; it adds to the costs, since we effectively need duplicate power-generating systems. The more renewables we have, the greater the costs.

If Alice’s adventures were written today, she would inhabit another looking-glass world.

via Climate Scepticism

August 27, 2022

Energy Through The Looking Glass – Part 2 – Climate Scepticism (