From Climate Scepticism

By Mark Hodgson

Ofgem has opened a consultation on a rather technical but nevertheless important aspect of the ongoing madness that is net zero. As is the way of these things it runs to 83 pages, and can be found here. It seeks responses to ten specific questions, and allows only a month from the start of the consultation for submission of responses. I thought I should try to respond, since if people don’t show an interest, then Ofgem will feel free to carry on regardless (though I suspect it will do that in any event). Having ploughed my way through the whole 83 pages, and having realised that I am not qualified to respond in any meaningful way, I decided that my best strategy was simply so send them a broadside, expressing my discontent at the whole direction of what passes for energy strategy in the UK just now. I have probably wasted my time, but I felt it was the effort of letting them know that we don’t all support the expensive net zero project, and quite a lot of us are increasingly unhappy at the direction of travel. Given how much grief the new Labour government is deservedly receiving from sections of the media just now in respect of the imminent rise in the price cap and the removal of winter fuel payments from most old age pensioners in the UK, I hope that they are sensitive to complaints such as this. If not, at least I have marshalled some of the obvious arguments and rounded them up in one place. What follows is the text of my submission. If you want to do something similar you had better get your skates on – the consultation closes on Friday 30^th August 2024:

I am responding to your Consultation on the proposed regulatory funding and approval framework for onshore transitional Centralised Strategic Network Plan 2 projects, dated 1^st August 2024.

You say you would like views from people with an interest in development of the electricity transmission network and Net Zero, and that certainly includes me, albeit I lack the engineering qualifications to comment specifically on the various detailed questions you pose. I confine my observations, instead, to pointing out that Ofgem is seriously conflicted with regard to the obligations imposed on it by statute. Instead of continuing to pursue mutually contradictory objectives at significant expense to the customer and involving great harm to the environment, you would do better to speak truth unto power and point out to your political masters that the objectives they have set you cannot be met.

In your Executive Summary you point out that “Significant investment is required in the electricity transmission (ET) network to decarbonise the system and facilitate the transition to Net Zero. This is to enable connection of new renewable generation to the system, and to ensure the network has sufficient capacity to transmit the energy generated to where demand is located.” That has to be the understatement of the century. You repeat the statement at paragraph 2.3, following on from your noting that Ofgem has a statutory duty, under the Energy Act 2023, to support the government to meet its legal obligation to deliver Net Zero by 2050.

Yet you go further, and (Para 2.10) support the new Labour administration in its preposterous proposals to decarbonise the electricity system by 2030 – the 2030 Clean Power Plan (“CPP2030”). So far as I am aware, you are not (yet) legally obliged to support the plan. And yet you do, despite the fact that it should be obvious that the plan cannot be achieved and that a huge amount of money will be wasted in trying to achieve it. You say (paragraph 2.4) that “Historically, it has typically taken around 12 to 14 years to deliver large onshore ET projects, from conception through to commissioning” and go on to ignore the hard realities of the situation by supporting CP2030. Quite how the UK is to double onshore wind, triple solar power, and quadruple offshore wind by 2030 is something of a mystery given our performance to date with regard to timescales from conception through to commissioning. Furthermore, anyone with any experience in projects of this nature knows that trying to force them through in unrealistic timescales will multiply both costs and errors.

You ignore the fact that those countries with the greatest percentage of wind penetration in their electricity systems are also those with the highest household electricity prices. The UK has the dubious honour of having some of the most expensive electricity in the world, despite “leading the way” in rolling out wind farms.

Your press release of 19^th August 2024 regarding the “Strategic Innovation Fund [SIF] to drive progress to net zero by 2030” says its projects “support efforts to end the era of high energy bills, excessive carbon emissions and energy insecurity by accelerating the transition to clean, homegrown energy”. Despite your role at the heart of energy policy you seem to fail to understand that this is a trilemma, a set of mutually contradictory objectives, a triangle that cannot be squared. We cannot drive down energy bills by making ourselves dependent on technology that works only some of the time, and requires back-up, whether from astonishingly impracticable and expensive numbers of batteries, or from gas-fired power stations, which have to be run inefficiently (and therefore more expensively than necessary) due to the subordinate role they are condemned to play. The Government’s own Levelised Cost of Electricity calculation acknowledges that:

While dispatchable technologies like CCGTs and CCUS generally help to reduce system costs, they run at less than maximum load factors and therefore their levelised costs increase. In these… scenarios, generally (but not always) the system savings outweigh the load factor impacts, resulting in an overall cost reduction. Intermittent technologies (e.g. wind and solar) generally impose a wider system cost, which is more severe in scenarios with lower flexibility or a less diverse generation mix……The value of additional CCGT capacity to the system is greater in scenarios where demand increases faster or there is a higher proportion of intermittent renewable capacity…

National Grid ESO’s Future Energy Scenarios, published in July 2020, indicated that the cost of reaching net zero in the UK’s energy network will be £3 Trillion or thereabouts, a cost of around £4,000 per household every year between now and 2050. Those costs might be buried in general taxation, or may be loaded on to the price of gas to pretend that electricity is relatively cheaper, or they may be borne by businesses (which will pass them on to their customers), but however the cost is distributed, it will be borne in the end by consumers and taxpayers. Quite how that ends the era of high energy bills is beyond me, and I suggest it should be beyond you too, yet you seek to accelerate the pain by supporting CP2030. I say businesses will perhaps bear some of the costs (and pass them on to their customers) but increasingly those businesses are not manufacturing ones. I note that for the first time since the beginning of the industrial revolution, the UK is no longer among the world’s top ten manufacturing nations. No doubt the price of electricity in the UK has more than a passing role to play in this regard – businesses lack the modest and inadequate benefit of the price cap “enjoyed” by domestic electricity consumers.

As for energy security, we seem to be importing more and more electricity via the interconnectors (I regularly spot imports of around 15% of our needs, and have seen them as high as 25%). The interconnectors on which we seem to be increasingly reliant are vulnerable to accidents or to malfeasance by bad actors (whether terrorists or hostile states). A few reminders might be in order before you continue down the road of more and more cables between various parts of the UK and from offshore wind farms to the main land. Numerous problems with the Western Link cable led to an Ofgem probe into what went wrong, and resulted in National Grid ESO paying almost £31m for wind farm operators to curtail output. At one point, average constraint costs arising from these failures rose to £6.1 million per day. Then there was the failure of the BritNed cable between the UK and the Netherlands in 2021. How about the failure of the Orkney-Pentland East cable (which cost £30 million)? One of the most spectacular and long-running failures was in respect of the Western Isles cable. Things have been so bad that in 2021 the company that owns the link to Gwynt y Môr wind farm argued that a series of repair outages required following a cable failure in October 2020 should be underwritten by consumers because insurers are leaving the market. The company noted at the time that the cost of insurance had risen 40 per cent in the past two years and many insurers were declining to provide cover.

I appreciate that interconnectors are generally promoted as an enhancement to our energy security by allowing the UK to export surplus electricity to the continent and by allowing us to import it when we are short. But a well-run system wouldn’t have regular surpluses and shortages that makes us dependent on offloading to, or importing from, foreigners. That isn’t what energy security looks like. The problem is compounded by the fact that as the UK’s electricity production is increasingly weather-dependent, it suffers from the fact that when it’s excessively windy here it usually is on the near continent too; and when the UK sits becalmed under an anticyclone so, often, do our European neighbours. This results in us seeking to offload our electricity when there isn’t a market for it, and needing to import it when it’s in short supply. As David Turver has pointed out:

We typically pay more than the market price for buys and accept less than market price for sells. Looking at the detailed data, the maximum purchase price was £6,599.98/MWh on 20^th July 2022 when the reference price was £247.91/MWh. The minimum sale price was £-404.71/MWh on 29^th May 2023 when the reference price was £63/MWh. It is also interesting to note that for the whole of 2023, the average sale price was slightly negative (£-0.22/MWh). These negative sales prices mean we paid others to take this electricity off our hands….Again, [referring to the graph accompanying his analysis] we can see the blue buy-prices are generally above the market reference price and the orange sell prices are generally below the reference price. In fact, for part of 1^st December, we had to pay over £700/MWh for interconnector supplies when wind generation was low and demand was high. We also paid over £400/MWh on 6^th December even though wind was generating over 6GW. Whereas, over the Christmas period we were paying people to take surplus generation off our hands…As we can see, most of the electricity sold is from 22:00-06:00. There is also a residual tail of sales from 07:00-14:00, reflecting the demand lull in the middle of the day. Most is bought in the morning peak from 05:00-07:00 and then again during the evening peak from 16:00-21:00…As might be expected we are selling most when demand is low and buying when demand is high, reflecting the fact that we are not really in control of generation and cannot use it to match demand….Even though the volumes sold during sleeping hours are high, the value of that electricity is low. In aggregate, the electricity sold during the middle of the day has negative value, so we pay others to take it off our hands. By contrast, we pay through the nose for the electricity we buy at peak hours.

Constraints payments represent another cost that only seems to grow, an inevitable consequence of increasing the number of wind farms without having in place an adequate system to cope with the wild fluctuations in power they generate. A couple of shocking news reports have come to light in just the last few days – the Scottish Daily Mail reported that Scottish wind farms have received £205 million in constraints payments so far this year, with £45 million being paid this month alone. Today the Shetland News reported that SSE “has already claimed more than £2 million in constraint payments this month and ahead of the multi-million pound project [Viking Energy on Shetland] switching on.” Ahead of its switch-on! How can that be?

In conclusion, you are presiding over the destruction of an energy system that worked cheaply and efficiently and its replacement by one that is inefficient, expensive, and dependent on the kindness (or avarice) of strangers and the weather. I appreciate that Parliament has imposed this destructive task upon you, but you do not have to be enthusiastic about an acceleration of the task that is not yet a statutory duty on your part. Until these basic points are addressed, Ofgem consultations will continue to amount to little more than an exercise in futility.