From STOP THESE THINGS
The value of subsidies to wind power is falling, while the cost of erecting and operating these things has skyrocketed. The result is a complete collapse in wind power capacity investment in Britain, and elsewhere. The usual suspects are running a mile from projects that were (on paper) worth billions.
While the wind industry pretends not to worry about pedestrian matters such as profit margins, the bottom line is starting to bite back. To date – whenever the money looked like running out – the rent-seekers have simply dropped the begging bowl in front of the government concerned, scooped up another round of taxpayer-funded subsidies, and carried on.
The Brits under Boris Johnson went all in with wind power, at the expense of the reliable and affordable stuff. Now the chickens are coming home to roost, as Jeremy Warner explains below.
The real costs of wind power prove the sums don’t add up
30 August 2023
Someone get a grip. UK energy policy is once again coming apart at the seams, with growing doubts over whether net zero or even energy security goals can be met.
Only now are the true economic costs and practical difficulties of going carbon-free becoming fully evident, and it’s not a pretty sight. Yet still policymakers don’t seem to get it; either that or they are being deliberately misleading on the ease with which it can be delivered.
All pretence at “leading the world” in the application of renewables is meanwhile going up in smoke, as one-time champions pare back their ambitions for the UK market in the face of rising costs, more sensible planning laws, and better opportunities elsewhere. Rival jurisdictions, particularly the US and EU, are beginning to offer far superior incentives.
If you cannot beat them, do the opposite. Slowly, but surely, the Government is watering down its environmental agenda, which sadly but inevitably frequently clashes with the parallel goal of enhanced economic growth – the latest example being so-called “nutrient neutrality” water pollution rules which act as a barrier to more housebuilding.
Yet on paper at least, and indeed legally, the overarching environmental goal of net zero by 2050 – together with the staged targets set for getting there – remains sacrosanct, even though most practically minded people have long thought there is not a snowball’s chance in Hades of actually meeting it. A giant leap of faith in the transforming powers of technology is demanded to think it can be.
As if to confirm the gaping chasm between ambition and reality, the latest round of auctions for UK renewable energy licences, the outcome of which is due to be announced late next week, has plainly hit the rocks.
Having already abandoned a key UK offshore wind development because of rising costs, the Swedish utility Vattenfall has indicated that it won’t be participating in the Government’s so-called Auction Round Five.
Similarly with the UK energy group SSE, which has said it will not be entering its Seagreen offshore development into the auction, citing a low, officially set, strike price, and dramatically rising costs.
Under pressure from the renewables industry, the Government has announced a slight increase in the promised subsidy below strike prices, but it’s unlikely to make a difference.
Presumably there are at least some bidders still in the running; even so, officials will struggle to get the capacity hoped for, putting in jeopardy the target of 50GW of offshore wind by 2030. Current capacity stands at just 14GW, so there is a way to go.
This in turn raises doubts about the Government’s separate target of complete decarbonisation of the electricity network by 2035. This, too, looks unrealistic. British energy policy is once more in a chaotic mess. It was ever thus.
As it is, policymakers have set strike prices so low that investors are struggling to see how they might make a return. No surprise that prices should be forced down like this, for the green energy transition is not just about saving the planet. It is also meant to deliver much lower energy costs.
This, too, is turning out to be a pretence. It’s true that in the past seven or eight years, the notional cost of renewable energy has plummeted. The price of offshore wind output has, for instance, fallen by around two thirds, from £100 per megawatt hour to less than £40. There you go, say ministers in response to net zero sceptics; it’s cheaper than coal.
Would that it was, but the claim is in fact a statistical illusion. The manufacturing, installation and maintenance costs alone have been surging since long before the war in Ukraine. To these we must also add the costs of upgrading the National Grid to bring the new sources of electricity from where they are generated to where they are used.
Littering the countryside with pylons is understandably running into local opposition. Billions may have to be forked out to compensate affected communities, or in finding alternative, more expensive, transmission routes. It could make HS2 look cheap by comparison.
But to gain a proper understanding of the real costs of wind, and to a lesser extent, solar, we need to factor in another of their characteristics – that they are intermittent.
In order to function effectively, the grid needs a constant balance between supply and demand; if the wind isn’t blowing, or even if it is blowing too strongly, thereby overloading the grid, there is a problem.
Lots of conventional backup capacity is required to deal with the shortfalls that result from intermittency – capacity that can be brought online quickly at the flick of a switch when needs arise.
The upshot is likely to be a high degree of duplication in generating capacity. This will obviously very considerably add to the costs of the renewable element. It’s disingenuous to say wind is cheaper than fossil fuels.
Potentially, storage could provide a solution to the intermittency problem, yet for the moment it doesn’t exist at the scale needed to do the trick. If Britain cannot guarantee to keep the lights on, nobody is going to want to set up shop here.
What about batteries? This may seem unduly pessimistic, but it stretches credulity to believe that they can ever really be the solution. Is there even enough lithium in the world to provide the level of battery power needed to supply the National Grid when the wind stops blowing?
There are alternatives, nuclear being the most obvious, but many environmentalists are as opposed to it as they are to coal, gas and oil, and here in the UK, policy on new nuclear capacity, as on much else, falls woefully short.
It is as much as we can do even to get the money-eating leviathan of Hinkley Point C up and running. Next comes Sizewell C, which scarcely promises to be much better. As Britain’s ageing fleet of existing nuclear power stations reaches the end of its life, merely replacing what’s closing down seems to be beyond us.
And to phase out the 80pc of UK energy demand currently satisfied by fossil fuels, we would need far, far more. Yet the Government continues to procrastinate. Shamefully, it is still faffing around with an international competition to decide who gets to build Small Modular Reactors, never mind how to finance them.
The last two auction rounds lulled the Government into a false sense of security on the economics of renewables. Both were hugely successful in attracting bidders at apparently highly competitive prices.
But things have changed. Having been ahead, Britain is slipping behind. Next week’s announcement on the outcome of the fifth round auction threatens to be a rude awakening.