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Why Won’t The Government Admit The True Cost Of Renewable Energy?

Harry Wilkinson, CapX

Flexibility measures have been presented as a saving. But that is illusory

Everyone knows that renewable power is inherently unreliable, or as engineers put it: “intermittent”. Nonetheless, there is a plan in place to become ever more reliant on these technologies for our electricity supply.

This has forced the government into taking a risky bet on unproven “flexibility measures”, in a desperate attempt to try and manage this huge technical challenge.

These measures will have hefty upfront costs of up to £20 billion, but the benefits are uncertain, spread over many years and will be outweighed many times over by the cost of renewable subsidies. Once again, the government is failing to be honest about the significant costs involved in switching from fossil fuels to renewables.

The measures come in a package of 29 separate actions to be undertaken by government, the energy regulator Ofgem and industry, as part of a “Smart Systems and Flexibility Plan”, published by the Department for Business, Energy and Industrial Strategy in July. These actions support two key objectives: offering greater incentives to businesses to develop energy storage facilities, and making it easier for businesses to be paid for reducing their energy usage when capacity margins are particularly tight.

The shift towards a greater number of small-scale energy suppliers will force the National Grid to invest far more in the transmission and distribution networks which transport power from supplier to consumer. According to Npower this will add £114 on the average domestic bill by 2020, a 124 per cent increase compared to 2007.

An example of such an investment is the recently constructed Beauly-Denny power line, which cost £820 million and cut a horrible steel swathe through the Highlands. Time and again, promoting renewables comes at the cost of protecting the environment.

A report on system flexibility by green energy consultants Carbon Trust has led to many headlines suggesting such measures will save the country up to £40 billion. This is misleading. The Government’s own policy paper reveals the saving may only be £17 billion and is spread all the way until 2050, which equates to a more modest-sounding saving of between £500m and £1bn per year on average.

But there is a bigger problem with these calculations. The supposed savings are calculated against the cost of continuing to be straight-jacketed by draconian climate change targets, but without investing any new resources in flexibility measures. An alternative approach could be much cheaper, but it would need to deviate from the inflexible stipulations of the Climate Change Act. Indeed, the cost of meeting the Act is now running at upwards of £10bn a year, and is likely to be at almost £30bn a year by 2030. Any illusory savings from flexibility measures will be dwarfed by the cost of renewable subsidies.

This is nothing more than yet another bill for hard-pressed consumers to support “clean” technology. It has been wilfully and misleadingly trumped up as a saving, by assuming that adherence to the Climate Change Act is some sort of immovable fact of life. The truth is that it is a choice, and politicians should start being upfront about the costs of that choice.

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