Consciousness of Sheep
Related Articles
|
|
Concern over the steep rise in the price of electricity this winter has paved the way for rehashing the old misinformation about the relative cost of generation. So it is that Carbon Tracker – a non-profit which seeks to focus financial investment on non-renewable renewable energy-harvesting technologies (NRREHTs) – reports that electricity bills are far higher than they might have been because they are based on expensive gas generation. As Andy Verity at the BBC explains:
“The way electricity prices are set has pushed UK household bills up by £7.2bn over two years… Under existing rules, energy suppliers pay the highest price for wholesale electricity no matter how it is made.
“Gas-fired power stations are the most expensive way to generate electricity, but only make about 40% of all electricity used by UK homes. That means homes pay over the odds for power generated any other way…”
Taken at face value, this is broadly correct. But there is a great deal which needs unpacking here. Most notably, the way in which “green” energy policy has had a negative impact on the wholesale gas market. Because, while Verity points to the post-lockdown shortages and energy self-sanctioning (he misspells it “Russia’s war in Ukraine”) as the cause of the recent price spikes, these are only proximate triggers. The deeper cause was environmental policy which drove energy companies out of long-term gas supply deals in favour of the – far more volatile – spot market. In effect, having been told by the state that your industry is being phased out, why bother with long-term investment? One result was the closure of the massive Rough storage facility in the North Sea – which the state is now pledged to reopen – which would have provided the buffer to iron out most of the upward spike in gas prices in 2021.
Less obviously, gas generation suffers from the environment policy which privileges renewable energy generation – primarily wind in the UK. This makes wind appear cheaper – because its sales are guaranteed – while leaving gas generators with all of the overheads, but no guarantee of sales – on a windy day, a large part of the gas infrastructure is idle despite the gas generating companies having to pay the overheads. And these costs have to be factored into the price charged for the gas-generated electricity which is sold. It is also worth bearing in mind that some 8 percent of household energy bills provide a hidden subsidy to NRREHTs generators which would otherwise have to be added to the cost of wind generation… as, of course would the direct subsidies provided by the state.
The big show-stopper with wind though, is simply that it doesn’t always blow. It might be that British households would be content to shiver in the dark during high-pressure cold snaps in order to keep their electricity bills down. But for the most part, consumers expect – and in very cold weather, genuinely need – a firm, 24/7 supply of electricity… without which, by the way, many gas central heating systems won’t work either. But, of course, wind generators cannot provide a firm supply of electricity. And so, the grid managers have to turn to gas generation – and on very still days, the remaining coal power stations too – to keep Britain’s lights on. While this may not be reflected in the quasi-market pricing system, it is a de facto subsidy from the gas – and coal and nuclear – generators to the wind generators.
If, like Carbon Tracker, you have already bought into the net zero energy transition, then none of this matters, because the coal and gas generators will have closed in the course of the next decade or so anyway. If, on the other hand, you would prefer a firm electricity supply – especially on cold winter nights when there is no wind – then it presents a serious challenge. Because without the gas – and occasionally coal – back-up, the additional pumped hydro – the only viable grid-scale energy storage option – would add thousands of pounds to domestic bills. Nevertheless, without those additional storage charges, and with coal and gas generation bankrupted, NRREHTs are simply not fit for purpose.
This was something Dieter Helm warned about in his 2017 energy review for the UK government:
“It is not particularly difficult to set out what an efficient energy system might look like which meets the twin objectives of the climate change targets and security of supply. There would, however, remain a binding constraint: the willingness and ability to pay for it. There have to be sufficient resources available, and there has in a democracy to be a majority who are both willing to pay and willing to force the population as a whole to pay. This constraint featured prominently in the last three general elections, and it has not gone away.”
It is worth re-stating that last point – energy costs were already a political issue as far back as 2010… although we would grasp with both hands the prices charged back then. Thirteen years on and with prices far too high for the economy to bear, there is growing support for a referendum on net zero. As Philip Pilkington at UnHerd reported in December:
“Net Zero policies are enormously popular with the media and political elites, but this enthusiasm seems to have, thus far, shielded the idea from scrutiny. That looks set to change. A poll run by YouGov shows that 44% of the British public support ‘holding a national referendum to decide whether or not the UK pursues a net zero carbon policy’. Only 27% opposed. Excluding the ‘don’t knows’, 62% of voters support such a referendum.”
As with those who spent decades campaigning for a Brexit referendum, it is unlikely that there are many pro-net zero voters among those calling for this referendum. Nor, indeed, do we see many Extinction Rebellion or Just Stop Oil supporters rallying behind the call in order to – as the remainers miscalculated in 2016 – bury the issue for a generation. The bottom line – which is why the establishment media dare not ask the question – is that if NRREHTs were as cheap as their proponents keep mendaciously claiming, electricity prices would have gone down rapidly over the past two decades.
In fact, it was gas which held prices down as a result of the German deal to power its industry with cheap and abundant gas from Russia, thereby lowering the cost of gas across Europe. With that option off the table for years to come, energy prices will have to stabilise at a new and far higher price than they were pre-pandemic. This, in turn, means that economies as a whole must rebalance away from discretionary spending in order to adapt to the new high energy cost environment.
The proponents of NRREHTs might – correctly – argue that in the end, the price issue is of secondary importance, simply because fossil fuels are a finite resource, and so we will have to forego them at some point anyway. But this is not the basis of their green spinning. The snake oil they are trying – and increasingly failing to sell – is that the transition to NRREHTs is a positive choice which is both beneficial to the environment and an improvement to our standard of living. But neither claim is true. NRREHTs have yet to replace a single BTU of fossil fuel energy – they have merely been added to the global energy mix. And far from being cheaper, the greater their penetration of energy grids – such as in the UK – the higher the overall cost of electricity becomes.
More profoundly, at the household and national levels, the biggest energy/carbon reduction gains are to be made from conserving energy rather than attempting to generate it in new ways. That is, if the global economy had maintained energy consumption at its 2015 level, then we would have saved more energy than the output from all of the NRREHTs deployed thus far:
But this is the truth about climate change and resource limits that the NRREHTs lobby refuses to acknowledge – that in the absence of a raft of yet-to-be-invented energy-harnessing technologies – the only viable option before us is to massively shrink the economy by doing less and conserving more… and nobody is going to get rich from that!
As you made it to the end…
you might consider supporting The Consciousness of Sheep. There are seven ways in which you could help me continue my work. First – and easiest by far – please share and like this article on social media. Second follow my page on Facebook. Third follow my channel on YouTube. Fourth, sign up for my monthly e-mail digest to ensure you do not miss my posts, and to stay up to date with news about Energy, Environment and Economy more broadly. Fifth, if you enjoy reading my work and feel able, please leave a tip. Sixth, buy one or more of my publications. Seventh, support me on Patreon.
