So-called cleaner energy has in reality created a dirtier, costlier and less reliable electricity industry. The government must make a U-turn or get the blame itself.
Suppose that a government policy had caused shortages of bread, so the price of a loaf had shot up and was spiking even higher on certain days. Suppose that the high price of bread was causing massive job losses. Suppose that the policy was justified on the grounds that the bread was now coming from farmers whose practices were better for the environment, but it turned out they were probably worse for the environment instead. There would be a rethink, right?
For bread, read electricity. The government needs to rethink its electricity policy. Last week’s emergency was a harbinger of worse to come: because the wind was not blowing on a mild autumn day, the National Grid had to call for some large electricity consumers to switch off, and in addition offered to pay up to £2,500 a megawatt-hour — 40 times the normal price — for generators capable of stepping into the breach at short notice.
Among other lessons, this teaches us that letting Liberal Democrats run the Department of Energy and Climate Change (DECC) for five years was an expensive mistake. What puzzles me is how little the current government seems to realise it must make a U-turn or get the blame itself.
The coalition promised secure, affordable and low-carbon power, but instead gave us unreliable, expensive and high-carbon power. What is worse, this outcome was “wholly predictable but wholly unanticipated by policymakers”, in the words of Rupert Darwall of the Centre for Policy Studies, speaking to a House of Lords committee (on which I sit) earlier this year.
Mr Darwall’s argument is that wind farms, which cost a lot to build and maintain but pay nothing for fuel, can sell electricity for very low prices when the wind’s blowing. Being intermittent, this power therefore destroys incentives to invest in highly efficient “combined-cycle” gas turbines (CCGTs).
If, when the wind blows, a new gas plant has to switch off, then the return on investment in gas is negative. Combined-cycle plants are sophisticated machines and don’t like being switched on and off. Therefore the gradual replacement of coal-fired power by much more efficient gas-fired power has stalled as a direct result of the wind-power boom.
To solve this problem, the government came up with a “capacity mechanism”, a fancy name for subsidising fossil fuels. But this further impost on the hard-pressed bill payers (likely to exceed £1.3 billion by 2020), instead of bringing forward new gas turbines, last year went mostly to keep old coal-fired stations going. The next auction, due in December, has brought a rash of bids from diesel generators. This is madness: wind power has made the country more reliant on dirty, high-carbon coal and diesel. (I declare my usual interest in coal, but note that coal has probably benefited from the policy I am criticising.)
Meanwhile, the old coal stations that have not attracted a subsidy are closing because of the coalition’s unilateral carbon tax (sorry, “floor price”). Eggborough, for instance, tried to switch to subsidised biomass, better known as wood — a fuel that emits even more carbon dioxide than coal per unit of energy — but was refused and so is closing. Thus, when the wind drops, we are plunged into crisis.
Wind’s advocates have long argued that cables to Europe would help on windless days because we could suck in power from Germany when the wind’s blowing there but not here. Yet last week, as we were debating this very issue in the Lords, I checked and wind was generating about 1 per cent of our electricity, and even less of Germany’s. Studies by the Renewable Energy Foundation published as long ago as 2008 have shown that wind speeds are well correlated across Europe most of the time. Was anyone listening?
Prices charged to electricity consumers have been rising because of the high cost of subsidies for wind power, especially offshore wind. The DECC’s numbers show that small businesses will be paying 77 per cent more per unit for electricity by 2020 than they would be if we were not subsidising renewables. The cost of the subsidies is on track to hit roughly £10 billion a year in 2020 and that’s before paying for the fleet of diesel generators being subsidised under the capacity mechanism and extra grid infrastructure costs. What are we getting for that money? A less reliable electricity system, a big increase in cost, lost jobs in the aluminium and steel industries and no discernible cuts in carbon dioxide emissions. If that last claim seems far fetched, consider the following calculation. According to the wind industry, a 2-megawatt onshore wind turbine could cut emissions by about 1,800 tonnes a year in average conditions, offshore a bit more. With about 13 gigawatts of wind now in service, that would mean the total wind fleet can displace at most 15 million tonnes, or 2 per cent of our 700 million tonnes of total annual emissions.
But, since the effect of the wind boom (solar production, by the way, is an irrelevance lost in the decimal points) has been to deter new gas and prolong the life of inefficient coal, and since it wastes power to get a fossil-fuelled power station up to speed when the wind drops, and since expensive wind power has driven energy-intensive industries abroad to more carbon-intensive countries, the actual emissions savings achieved by wind are lower and probably negative. We would have been far better off buying new gas or “clean-coal” capacity instead: replacing coal with gas more than halves emissions.
After Wednesday’s near emergency, ministers must surely realise that we cannot rely on the weather to produce the right amount of electricity, and gas is far cheaper and more environmentally friendly than the DECC’s dirty diesel solution. As for nuclear power, Hinkley C was supposed to help with the supply crunch, but it will only come on stream in the mid-2020s, and at a gigantic cost.