In these relatively hard economic times, ordinary people are understandably concerned about the relentless increases in energy prices for heating, lighting and travel. As more people struggle to pay their utility bills and the cost of filling up the petrol tank continues to rise, this is sure to become an electoral issue if any major political party chooses to make it so.
In Germany, a country which is still determined to be in the forefront of a transition to a low-carbon intensity economy, the burden is falling mainly on consumers rather than industry. Given the importance of the manufacturing sector to the German economy, this is perhaps not surprising. Nevertheless, there are rumblings of discontent; the Energiewende comes at a price, and not all are happy to pay it.
In a BBC piece this week, their Berlin correspondent asks Who pays for the greening of Germany? Already producing about a quarter of its electricity from renewables, the aim is to increase this to 80% by 2050. There has been a massive investment in solar panels, with the result that a relatively grey northern European country now has far more than any other country. In many parts of the country, visitors also find they are rarely out of sight of wind turbines.
Because so many companies have been exempted from levies paid to provide for the generous feed-in tariffs received by renewable generators, the average domestic electricity bill is now €180 higher. This charge comes on top of already high prices, and has doubled in the past year. Although much further behind in terms of renewable capacity, the UK also has ambitious plans both currently and in the longer term. The country shares with Germany the target of 80% reduction in emissions by 2050, enshrined in the 2008 Climate Change Act, which gives the government little wriggle room, given its obligation to meet independently-set ‘carbon budgets’.
Even France is pushing the same agenda. As the Guardian reported recently, the president is encouraging renewables (François Hollande: invest in renewable energy to avert ‘catastrophe’). This may seem strange coming from the leader of a country which has a thriving nuclear sector, contributing to an already modest level of per capita emissions (5.6 tonnes in 2009, compared with 9.0 for Germany and 7.7 for the UK – World Bank figures). But policymaking is rarely entirely rational. Renewable energy is the great public good to which all must be seen to aspire.
Politicians everywhere are guilty of not simply setting targets but also mandating how they must be achieved, rather than allowing others to meet them in the most efficient and economic way. Support for renewable energy has become the default position, whatever its weaknesses. The assumption is made that this is the only way forward, and that continuing large subsidies will pay dividends at some unspecified time in the future. But wishful thinking is no substitute for objectivity, and voters will not thank governments which push up bills unnecessarily.
The UK Department of Energy and Climate Change has estimated the cost impact of current policies (Policy impacts on prices and bills). The conclusion is that current policies would reduce average household energy bills by £94 annually. They arrive at what can politely be described as this surprising figure by offsetting the annual £280 additional cost of a set of nine specific policies against expected £373 savings in a range of areas. However, £158 (over 40%) of the total savings comes from ‘product policies’, which encourage the sale of more efficient electric goods. Another £89 comes from ‘previous energy efficiency policies’. Overall, fully two thirds of the total savings come from pure energy efficiency measures. These are savings which could be made without any policies to promote renewable energy generation. Householders could be saving £341 a year instead of a notional £94.
There are also reasons to be concerned about the assumptions that have been made for the costs of renewables. Government figures, by and large, fail to take into account the significant costs of integrating intermittent wind energy into the grid, an undertaking which becomes increasingly difficult as more wind farms are built. The costs of running relatively inefficient open-cycle gas turbines to balance their fast-changing output is rarely taken properly into account and the overall cost of wind (and solar) energy is therefore regularly underestimated.
A Civitas paper from last year (Electricity costs: the folly of wind power) analysed the figures, based on projections from Mott MacDonald, produced for DECC in 2010. They looked at a range of scenarios but, for example, for a start date of 2017, for the full range of available technologies (including carbon capture and storage, still far from being realisable at full scale), nuclear and combined-cycle gas had the lowest levelised cost (about £65/MWh), with onshore wind at about £85. Offshore wind came in significantly higher, at £110/MWh.
However, to this should be added a significant set of additional costs for operating wind farms, building extra reserve and building transmission lines, together estimated at £60/MWh for onshore wind and £67 for offshore. If these figures are realistic, wind energy becomes the highest cost option and certainly cannot be justified as a way of reducing future energy bills.
With looming gaps in generating capacity in some of the EU’s major economies, governments have to act now to provide a secure future. Currently, simply installing more wind turbines and solar panels would seem to be the worst of all worlds; costly, inefficient and with a decreasing marginal rate of emissions reduction. The time is ripe for a major political party to realise this and make it an electoral issue.
The Scientific Alliance
St John’s Innovation Centre
Cowley Road
Cambridge CB4 0WS
______________________________________________