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Solar Farm
Image: Rainer Lippert

Energy volatility signals the death of the fossil fuel economy

We’ve all seen those Facebook posts about how this or that country just produced all of its energy from renewables.  That has to be a good thing doesn’t it?  Well, it turns out that, no, it is not a good thing after all.  Why?, because having too much electricity is as much of a problem in its way as having too little.

National Grid – the organisation charged with keeping the lights on – has been warning for several years that the UK lacks sufficient generating capacity to keep the lights on in the winter.  This is partly because the solar farms that make up an increasing part of our electricity mix produce relatively little output in the short days of winter.  As if this wasn’t bad enough, National Grid have now issued a warning of a new threat – summer overcapacity.  As Emily Gosden at the Telegraph explains:

“The boom in solar panels in recent years, fuelled by subsidies, has far exceeded expectations. These panels feed the power they produce directly into homes or the local electricity grid, reducing demand on the national system to what is expected to be a record low this year.”

Because effective electricity storage technology has yet to be invented, there is no mechanism for balancing supply and demand – a problem that can only worsen as old coal and nuclear capacity is retired, and more renewables are deployed to fill the gap.  So National Grid is now obliged to extend its unsustainable compensation scheme to cover both winter and summer.

In recent years, when winter demand outstripped supply, National Grid has been paying large industrial users to power down their businesses.  And since National Grid has no direct income of its own, this means that the cost of this compensation is born by ordinary energy consumers.  To cope with summer over-supply, National Grid intends paying businesses to shift their activities to times of day when supply is high.  However, because most businesses will already be working during the middle of the day, National Grid will also have to pay energy generators to switch off production – something that will add significant operational costs for so-called ‘inflexible’ power plants (primarily coal and nuclear plants that take time to shut down and restart).  In the end, this means that energy bills will have to increase to cover the additional compensation costs.

What we are actually witnessing are the early death throes of an ideology-driven 35 year experiment in running public utilities through the creation of an entirely artificial market that has all of the harms of political interference, but none of the benefits.  As Jon Ferris, of energy consultants Utilitywise points out:

“The energy system has grown without strategic planning.  We have too much inflexible generation for summer demand, [and] dangerously little flexible generation for winter demand.  Current policy isn’t going to resolve this dilemma, yet the solutions – more interconnectors, demand response, storage and flexible generation – have been known for years.”

In truth, the failure is much deeper.  In the mid-1970s, Western governments were warned that there would come a time when our dependence upon fossil fuels would reach the point where we could no longer pump the oil and mine the coal fast enough and cheaply enough to maintain our lifestyles.  They were also warned that if they attempted to do so, the environmental consequences of pumping all of that additional carbon dioxide into the biosphere would have so catastrophic an effect that this, too, would bring our lifestyles to an end.  Margaret Thatcher – a chemist prior to becoming a politician – was aware of this, but believed private markets would provide a better solution that states.  Ronald Reagan – a second rate actor prior to becoming a politician – simply didn’t believe the warning; and the Western electorates chose to believe what Reagan was telling them rather, even, than what Thatcher had to say.

So, symbolically, Reagan had the solar panels torn down from the White House roof, and the western world went on a 40 year debt bonanza, blindly pretending that our problems had gone away.  So we never quite got around to inventing the clean energy generation technologies that would wean us off fossil carbon.  The international grid interconnectors stayed on the drawing board.  Energy storage was limited to a handful of man-made lakes powering hydroelectric turbines.  And, of course, we built our businesses and homes as if we would always have access to cheap coal, oil and gas at no cost to the environment.

The stopgap National Grid approach of paying businesses to stop doing business is no more than an expensive work around.  Since it does nothing to address the underlying problems, as the years go by, the volatility in the system will grow until it inevitably breaks.

There is a limit to how much more can be added to customer bills.  Big industrial users are already threatening to follow Tata Steel’s lead and shut down their operations entirely.  At the same time, one in ten UK households is already in fuel poverty – a number that will inevitably grow if the cost of over- and under-supply continues to be added to customer bills.

A public ownership solution would be fairer, insofar as funding compensation schemes through taxation means that the costs would be borne proportionately according to income.  However, this is merely an argument about who pays for a broken system.

The question we have been avoiding for the best part of 40 years is the only one that actually matters – what kind of economy can we have when we switch to renewables?  The longer we put it off, the more painful the answer is going to be.

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Let us not forget that beyond hard-pressed bill-payers are thousands more who can no longer afford electricity at all