From NOT A LOT OF PEOPLE KNOW THAT
By Paul Homewood
A new report, commissioned by the Tories, has found that Ed Miliband’s Clean Power 2030 Plan will cost an extra £320 billion by 2050, compared to their own watered-down proposals which prioritise gas and nuclear, rather than wind and solar.
The report by the economic think tank Onward was originally commissioned by Claire Coutinho, when she was Energy Secretary, to calculate the overall system costs of fully decarbonising the UK’s electricity supply. It was conveniently shelved by Ed Miliband, when he took office.
The extra costs are made up as follows:
· £137 billion in network spending, thanks to a higher utilisation firm power system with supply located closer to demand
· £94 billion from lower wholesale prices, thanks to the removal of carbon taxes
· £67 billion in lower spend on balancing and ancillary services
· £22 billion across generation subsidies and the Capacity Market
Some in the media have claimed that electricity bills will be cut by £540 as a result, but this is a gross misunderstanding. With the exception of scrapping carbon taxes (worth about £5 billion a year), which will have an immediate effect on bills, the “savings” refer to limiting future increases in bills as a result of Labour’s plans.
In short, Miliband’s plans, which are still official government policy, will massively increase the price of electricity. The Tories say that they can mitigate some of this, (but not all!).
We need to remember that decarbonisation policies have already cost the public well in excess of £200 billion in the last couple of decades. The cost this year alone will amount to over £20 billion, which equates to more than £700 for every household in the country.
Tim Stanley may not have an issue with this, but millions will disagree!
Labour’s response to the new Onward report has been a pitiful attempt to deflect. New Energy Secretary, Miatta Fahnbulleh, made no attempt to rebut any of the technical detail, instead offering this meaningless nonsense:
“Labour is investing in more clean energy jobs, cutting tax on electricity bills to give families breathing space this winter and we’re taking action to tackle the climate crisis and bring down bills for good. Kemi Badenoch would put jobs at risk and increase bills. As global fossil fuel prices continue to rise amid conflict overseas and wildfires rage across the UK, we can’t turn our back on clean power. That won’t bring down bills and it won’t address the climate crisis. The Tories don’t have a clue.”
A response has, though, come from the unreliable climate lobby outfit, Carbon Brief, in what they laughingly call a “Factcheck”.
They claim to have identified “flaws” in Onward’s analysis, but most of the points they make are simply frivolous; for instance, that they say it would increase carbon emissions – to which I would reply, so what?
Other criticisms include:
Gas Prices
They complain that Onward have assumed “low gas prices”. In reality, they have actually used the Government’s own assumptions, which are based on international gas prices prevailing last year.
But even at the currently inflated levels, the marginal cost of a CCGT gas power plant is still lower than the contract prices agreed for new offshore wind farms.
While nobody knows what gas prices will be in years to come, replacing existing gas power with wind power will lock in high prices for twenty years.
Cost of Building Gas Plants
Carbon Brief complain that Onward have underestimated the capital cost of building new gas power plants. But, again, the latter have in fact used the Government’s own assumptions.
They miss the point that we already have plenty of gas power capacity, which should be used to the full. The cost of building new plants is therefore not relevant in the next decade.
More to the point, the grid will still need new dispatchable capacity, in order to supply power when the wind does not blow. Under Net Zero plans, this will eventually have to come from gas and hydrogen plants with carbon capture. The CAPEX issue applies equally in either scenario.
Carbon Taxes
Onward’s figures include a saving on energy bills of £94 billion over 20 years from the scrapping of Carbon Taxes. Carbon Brief claim this is false accounting, because “£94bn is no longer going into the government coffers, so it’s not saving the country any money”.
Either they don’t understand the energy market or they are deliberately lying. It is true that the money that gas power plants pay into the UK Emissions Trading Scheme ends up in government coffers. But, crucially, the marginal cost of gas power nearly always sets the market wholesale price for all generators, (other than those on CfD subsidies).
Currently, carbon taxes are adding about £8 billion a year to electricity bills, of which £3 billion ends up in government revenues. The balance of £5 billion is windfall profit for all those non-gas generators, largely renewables.
Onward’s projection of £94 billion over twenty years is consistent with that figure of £5 billion.
Network Costs
Carbon Brief have questioned the £137 billion in transmission network upgrade costs claimed by Onward.
In fact, the potential savings are much greater. OFGEM have already budgeted £73 billion for work in the next four years, while NESO have said another £89 billion will be needed “beyond 2030”. That’s a total of £162 billion.
But worryingly, there is increasing evidence that these costs have been grossly underestimated. EDF have indicated that construction costs could end up tripling. This should surprise who has seen the budget for HS2 balloon over the years.
Nor do Carbon Brief bother to mention the hundreds of billions, which will be needed to boost capacity on the low-voltage, local distribution networks. These are the cables which bring electricity down our streets and the sub-stations and pylons that feed them.
This work will be essential if we are to charge our EVs and run our heat pumps.
Nobody in government has even attempted to put a figure on the cost of this, because the answer would be truly frightening. Instead, the can is kicked down the road!
System Balancing Costs
Carbon Brief also maintain that the potential savings of £67 billion have been overstated. But again, they are being economical with the truth.
The National Energy System Operator, NESO, have already forecast that the cost of balancing the grid will £7 billion by 2030. This includes the costs of paying wind and solar farms to switch off when they produce too much and paying for standby capacity and battery storage when they don’t produce enough.
This is an increase of £5 billion compared to current costs. As intermittent wind and solar power capacity increases, these costs will continue to grow.
The Tory plan, having said all this, is a curious hybrid.
Although they say they will scrap Net Zero, they still appear to be wedded to its aims. Hence the argument that lower electricity prices will encourage everybody to buy EVs and heat pumps.
I suspect it is a way of uniting the Lib Dem wing of the party with the rest.
As a result, they will likely fall between two stools, with a mongrel energy system which satisfies nobody. To optimise costs, the 45 GW of gas capacity demanded in their plan must run 24/7, or as close as demand allows. Running them as standby, as they want, makes them much less efficient and adds to system costs.
Meanwhile, while ever EVs and heat pumps are part of the plan, hundreds of billions will need to be spent on the grid.
Just one more factoid to finish with!
According to Carbon Brief, the Tory plan results in an extra 524MtCO2 being emitted between 2030 and 2050 – a tiny 26 MtCO2 a year.
The UK’s annual emissions are around 700 MtCO2, including those embedded in imported goods.
I find it astonishing that anybody is even thinking of wasting £320 billion, in order to reduce UK emissions by less than 4%.
Links
1) Onward report:
2) Carbon Brief response:
