When the wind doesn’t blow, thousands of diesel generators will have to do the job
Occasionally, one comes across a story so mind-blowingly unexpected and out-of-left-field that it seems hard for readers to take on board that it is true. Such is the story I first reported here last month, under the heading, “Our lights will stay on, but it’ll cost us a fortune”, about the scheme being devised by the National Grid to solve what has long been the most intractable problem created by the Government’s plan to see the best part of £110 billion spent in seven years on building tens of thousands more wind turbines – namely, how to keep our national grid “balanced” when it has to cope with all those unpredictably wild fluctuations in the speed of the wind.
The answer National Grid has come up with, only made possible by the latest computer technology and “cloud software”, is to hook up thousands of diesel generators, remotely controlled by the grid, to provide almost instantly available back-up for when the wind drops. As we can see from recent reports, such as the National Grid’s draft consultation on “Demand Side Balancing Reserve and Supplemental Balancing Reserve”, this is now taking off into the weirdest and most ambitious scheme yet called into being by our politicians’ obsession with wind turbines. As uncovered by the tireless research of my colleague, Richard North, on his EU Referendum blog, owners of diesel generators are being incentivised with offers of astronomic fees to make them available to the grid – subsidies equivalent to up to 12 times the going rate for conventional electricity, and even, on very rare occasions, up to £15,000 per megawatt hour (MWh), or 300 times the normal rate of £50 per MWh.
Initially, this “short-term operating reserve” only envisaged relying on existing standby generators, many owned by public bodies such as hospitals, prisons and military installations – which stand to earn hundreds of millions of pounds from the Government, paid for by the rest of us as a “stealth tax” through our electricity bills. But so lucrative is the subsidy bonanza now being proposed that dozens of private firms, with names such as Renewable Energy Generation and Power Balancing Services, are flocking to cash in by building dedicated “virtual power stations”, capable of generating up to 20MW or more, knowing that they can expect up to £47,000 a year in “availability payments” for each MW of capacity, even before they have generated a single unit of power.
This solution to the “grid balancing” problem created by wind was pioneered in the US. The first firm to set up a “virtual power station” in Britain was UK Power Reserve, run by a former governor of Oklahoma, who was amazed to find the British offering subsidies seven times larger than those available in his native state. When last week I asked National Grid, Ofgem and others for an estimate of how much we will all be having to pay for this “balancing” scheme, the general response was that this is still too much a “work in progress” to allow for overall cost estimates – although National Grid has been quoted as suggesting that within two years it could be £1 billion a year, adding 5 per cent more to our already soaring electricity bills. But, without question, we are looking here at one of the most sure-fire moneymaking wheezes of our time – what one firm happily describes as “money for nothing”.