Cost of UK Government’s Green Energy Policy

Key Facts and Data for UK General Election 2015

The cost of levies on the average family’s energy bill was estimated in 2011 by Cameron’s own senior energy advisor, Ben Moxham, to be 30% by 2020 or about £300 on a 2010 bill of £1,100 per annum[1].

1          This policy has been operative since the passing of the CLIMATE CHANGE ACT (CCA) 2008[2] and the consequent RENEWABLE ENERGY STRATEGY (RES) issued by the Department of Energy and Climate Change (DECC), headed by the LibDem Ed Davey, in 2009.

2          The RES is being paid for by levies on the private consumer’s gas and electricity bills and a cat’s cradle of levies on industrial businesses.

3          We are seeing about 11% or £120 per annum by 2013/14, i.e. about a third of the way along.

4          A recent (2015) estimate[3] puts further cost by 2020 at £214 per annum.  Both figures are consistent with Moxham’s 2011 estimate of 30% for the whole decade.

WHAT IS THE THINKING BEHIND THE CCA AND RES?

1          This seems to be that “climate change” is caused by “global warming” in turn caused by an increase in the atmospheric carbon dioxide concentration from about 250 parts per million (ppm) at the beginning of the industrial revolution in the 1750s to about 450-480 ppm in the post Second World War period.

2          Up to the 1980s, carbon dioxide was customarily referred to as an unremarkable trace gas with no special function in the atmosphere.  480 ppm is still less than 0.05%.

3          Nonetheless on the strength of a single correlation by a junior American academic allegedly connecting a 0.8 oC increase in global temperatures in the 60 years to 1980 to a 30% increase in atmospheric CO2 concentration over the same period, the Blair, Brown and Cameron governments have all bought into the idea that reducing CO2 emission through the CCA and RES is an absolute priority for the United Kingdom.

CURRENT UK EMISSIONS TARGETS[4]

1          By 2020, 34% reduction below 1990’s level (770 million tonnes of CO2 equivalents).

2          By 2027, 50% reduction below 1990.

3          By 2050, 80% reduction below 1990.

4          By 2020 raise the proportion of electricity generated from low carbon sources[5] to 40% (2009 figure 20%).

HOW ARE THESE TARGETS TO BE ACHIEVED?

1          By shutting down industrial oil and coal-fired boilers, through requiring them by 2015 to meet totally uneconomic sulphur emission targets set by the EU Large Combustion Plant Directive (LCPD).

2          Requiring operators of all carbon-using industrial plant to purchase Renewables Obligation Certificates (ROCs) from non-carbon-using operators and to pay to the Treasury a separate escalating carbon tax in £s per tonne of CO2 emitted[6].  (This from a Chancellor, Osborne, always pledging to support the “March of the Makers”.)

3          By giving to the operators of windmills and solar panels guaranteed contract prices for the electricity they supply to the National Grid two to three times the price charged to the consumer, and up to six times the wholesale price of electricity generated by gas-fired stations.

4          These charges are recovered by the electricity distribution companies through the levies placed on their customers’ bills and through excess payments they make to the electricity generating companies, which are reflected in customers’ bills.

WHAT DOES THIS MEAN FOR THE SECURITY OF OUR ELECTRICITY SUPPLIES?

1          Our IT based economy is now more dependent on electricity security even than in 2010.  The current policy of depending on wind is actually driving away from energy security, because wind power is highly variable.  In January 2015 wind delivered only about 1% of its claimed capacity.  This is not exceptional: in February 2010 and 2011, wind usage factors dropped to below 1% also[7].

2          The Treasury, through the National Grid, is paying out hundreds of millions of pounds to oil and gas-based generators to keep their plants on stand-by to counteract periods when the wind operators can’t supply.  Even more insane, wind operators are paid to shut down when they deliver too much in the spring and summer months.

IS THERE A BETTER POLICY?

1          Yes, there certainly is – the Secure Energy Strategy4.

2          This does 3 things:

  1. Keeps coal stations going until they are replaced by new nuclear-based electricity;
  2. Expands gas-based electricity to cope with increased demand and to replace wind turbines as they reach the end of their lives (15-20 years);
  3. Removes subsidies in new contracts for renewables[8].

3          We must abandon the 2050 emission targets 1, 2, and 4 above.  But the 2050 target 3 will be more easily achieved with the SES gas/nuclear strategy than with the government’s present green strategy.  There are signs that the National Grid, for one, recognises this.

End Notes

[1] Ben Moxham of the Number 10 Policy Unit.

[2] This was passed in the House of Commons with only 5 (mainly DUP) out of 650 voting against

[3] From the Centre of Policy Studies – the Conservatives own think tank on 15th March 2015.

[4] National Grid Consultation Paper from Prosyma Research Ltd, 12th August 2009: Maintenance of UK Electricity Supplies to 2020 and a Secure Energy Strategy to 2050.  Available at http://britain-watch.co.uk/energy-and-environment/secure-energy-strategy-ses/

[5] Principally nuclear, wind, hydro, solar.

[6] Michael Fallon – as Energy Minister – in 2014 promised to “protect” UK heavy industry from these changes as the German government has for German industry (of course).

[7] “Squaring the Circle” by Stephen Bush and David MacDonald in The Chemical Engineer 2011 (10) pp 30-34.  This is available at http://stephenbush.net/2011/11/squaring-the-circle/

[8] To avoid legal challenges we have to maintain subsidies on existing contracts.


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