By Paul Homewood
h/t Philip Bratby
We’ve covered this topic before.
From the Telegraph:
Rising network expansion fees push up bills as projects suffer HS2-style cost inflation
The subsea cable known as Eastern Green Link 1 will slip into the water at Torness, east of Edinburgh, before resurfacing near the coastal town of Seaham, County Durham.
It is often referred to as a “bootstrap” by energy insiders. But that doesn’t do the project’s scale justice.
Developers say that by 2029 the 120-mile electricity “superhighway” will help unlock Scotland’s renewable energy reserves by transporting enough power for two million homes southward.
At an estimated cost of £2.5bn, it is probably one of the most expensive infrastructure schemes you’ve never heard of – perhaps because it lacks the visibility of a railway, road or bridge.
Yet amid severe delays and escalating costs, Eastern Green Link 1 and schemes like it are now beginning to attract more attention.
The cable and its sister project, Eastern Green Link 2, were originally meant to cost a combined £3.4bn, a figure that has since doubled to an estimated £6.8bn.
Elsewhere, some grid-improvement schemes have already seen their projected budgets balloon by nearly 500pc.
Against the backdrop of a wider £200bn upgrade under way across Britain’s power network, critics fear that it risks becoming a fresh HS2-style fiasco for the Government, with millions of households and businesses left to pick up the tab.
“This is going to make HS2 look like a slick, well-executed operation,” one worried energy industry source says.
Sam Richards, the chief executive of Britain Remade, a clean energy pressure group, adds: “The simple truth is that Britain is building too much grid, at too high a price.”….
Along with the Eastern Green Link cable schemes, several major projects are reporting surging cost inflation.
For example, a report quietly published by Ofgem in May revealed that a string of eight projects being built in Scotland by SSE were forecasting total cost increases of 284pc on average.
This included a staggering 467pc projected cost increase for work to upgrade transmission lines between Loch Buidhe and Spittal.
Ofgem has not disclosed the potential cost of the overruns in cash terms, or what their impact could be on bills.
Full story here.
OFCOM/NESO have already called for £169 billion of grid upgrades by the mid 2030s, but it is inevitable that these costs will balloon – public infrastructure projects always do.
But I am more interested in the continued coverage given by the Telegraph to Octopus’ boss, Greg Jackson:
“For example, Greg Jackson, the boss of Octopus Energy, Britain’s biggest energy supplier, has argued that new technologies, such as AI and dynamic line rating, which can help to squeeze more capacity out of existing power lines, should be exploited fully before consumers are tapped for costly upgrades.
He has also argued that major market reforms, such as switching from Britain’s current national electricity pricing system to a series of smaller, more localised markets, could remove the need for such massive works by forcing energy companies to be more efficient.
This is because energy producers will be encouraged to build out power suppliers in different parts of the country to support local markets, removing the need to transport energy from north to south.
In an interview with The Telegraph this year, Jackson suggested that this change could invalidate tens of billions of pounds currently set to be spent on grid upgrades.
A report produced this year for Octopus by FTI Consulting, a lobbying group, suggested that moving to locational pricing would render between £22bn and £30bn of planned transmission upgrades unnecessary.
This would potentially unlock between £55bn and £73bn in consumer bill savings between 2030 and 2050, it said.”
There is no evidence of these “potential savings”. Nor is there any evidence that regional pricing will make the slightest difference at all.
The claim that energy companies would be incentivised by higher regional prices to build local generators ignores the fact that wind and solar farms will be paid a CfD strike price – the market price is irrelevant. Higher prices meanwhile, as suggested, will go down like a cup of cold sick with electricity users, but will no doubt boost Octopus’ profits!
And, by definition, offshore wind farms are built offshore – not in the middle of Birmingham.
The argument for regional pricing is more about managing local demand. For example, surplus wind power in Scotland would lead to lower prices there and the idea is that this will increase consumption, mopping up the surplus. But demand for energy is notoriously inelastic – you could electricity prices in half and it would lead to little change in consumption. People would merely bank the saving.
And, as always, there is the other side of the coin. Shortage of electricity in, say, London would push prices up but do little to reduce consumption.
The argument goes that businesses would relocate to places like Scotland, to take advantage of cheaper power. Or that people would move home to Cowdenbeath, just to save a few quid! The whole idea is ridiculous.
But none of this fiddling around at the edges will make any difference to the underlying problems facing the grid – why hundreds of billions will have to spent on upgrading it.
There are two factors involved:
1) The need to strengthen the grid, so that it can handle the doubling of electricity supply required for Net Zero
2) To transmit the enormous amounts of new renewable generation from remote areas to the regions where people actually live.
The first is inevitable, as we electrify transport, heating and goodness knows what else. It cannot be avoided even if we do have regional pricing.
As for the second, we need to bear in mind that offshore wind capacity alone is set to increase by 50 GW or more in the next decade or so. Nearly all of this will be built around Scotland or in the North Sea. Much of the new onshore wind will also come from Scotland. The amounts are truly huge.
NESO included this chart, a Spacial Capacity Map in the Clean Power 2030 Report:
https://www.neso.energy/publications/clean-power-2030
It tells us how much transmission capacity we need on a regional basis, just for offshore wind alone. Northern England will have to carry much of the burden, bringing offshore wind power down from Scotland as well as the adjacent North Sea. Much of the North Sea generation will also flow through East Anglia.
To put these numbers into perspective, Scotland produces about 50 TWh a year, including 30 TWh of wind power. It consumes 26 TWh, the rest being exported to England & N Ireland.
If that 30 TWh quadruples, as is the plan, there is no way that the extra will be consumed in Scotland.
It’s the same in East Anglia and Northumberland – the amounts of wind power cannot be mopped up in these sparsely populated areas.
Then there is the other end of the cable – all the villages, towns and cities which use the electricity. They have traditionally got most of their power from local generators – gas and coal plants, for example.
But when these power plants are no longer available, they will rely heavily on wind power. Consequently all of that offshore wind will need to be transmitted across the country. And all of this extra transmission structure has to be paid for.
The Climate Change Committee has long stressed that if you are going to upgrade electricity networks,you should build in plenty of overcapacity. The extra cost is not significant, but if you have to go back a few years later to increase capacity further the costs will increase significantly.
There are no easy solutions, much though Greg Jackson is desperate to find one to accommodate his Net Zero fantasies. The cost will run into hundreds of billions, which the country quite simply has not got.
The only way to avoid that cost is to immediately ditch Net Zero and inform anybody planning to build a wind or solar farm that they will be switched off the grid when their electricity is not needed.
