Monday, January 03, 2022

Myopic politicians are wilfully blind to the truth about green energy

How bizarre that politicians will lecture us on poverty, and will then propose to drive up household bills to reach carbon reduction targets

In June 2011, 18 months before going off to serve Her Majesty in another capacity, former energy and climate change secretary Chris Huhne made a remarkable speech in which he asserted that the Government’s green policies, far from costing households, would actually save us money. “Green growth,” he said, can protect the economy by “reducing our exposure to price shocks”. Moreover, the cost of low carbon policies up to 2020 would amount to “just one per cent on the average household energy bill” – and even that assumed that we could always buy oil at “last year’s cheap rate of $80 a barrel”. If, as he expected, oil prices stayed high and gas prices rose to meet them “then our consumers will be winning hands down from our energy policy”.

To be fair to Huhne, he was not the only minister to hold this conceit. It has been a received wisdom among many in government, opposition and in the great green blob that switching from fossil fuels to renewable energy would make us better off. How laughable that claim seems now.

We have had the green energy revolution which Huhne advocated. Last year the Government claimed that for the first time more of our electricity was generated by renewables than by fossil fuels (although only if you count as “renewable” the filthy practice of burning wood chips to generate electricity – an industry which Huhne himself went off to promote post-prison). Coal-fired power stations which in 2011 were still generating 31 percent of our power are now down to 2.1 percent, and will be gone for good by 2024.

But where is the green dividend? Adjusted for inflation, average household electricity bills rose by 19 percent between 2011 and 2020 – from £451 to £571 per year at 2010 prices. But that is just for starters. Far from being protected against price shocks in global energy markets, consumers are looking at their bills possibly doubling in April when the Government’s price cap is revised upwards.

As for the claim that green polices would only add one percent to our energy bills, Ofgem calculates that 25 percent of our electricity bills are now made up of social and environmental levies – ie subsidies for green energy as well as insulation schemes for low income households. We pay a further 2.5 percent on our gas bills.

It is true that the current energy crisis is a global phenomenon precipitated by rising demand from a rebounding global economy. But in Britain it has been made much worse by energy policies which for a decade and a half have doggedly pursued the objective of cutting carbon emissions without any regard to the costs. For years, Conservatives, Labour and the Lib Dems have all attempted to blame rising energy prices on greedy, profiteering energy companies. It never was true – deregulated gas and electricity markets have always run on tight margins – but with dozens of energy suppliers having gone bust in recent months it is an argument that has become impossible to sustain. Neither can you blame fossil fuel markets for rising bills – a barrel of crude oil costs less now than it did when Huhne made his speech, even before adjusting for consumer inflation.

We are paying more than we need be for our energy because the Government has loaded fossil fuels with carbon levies, switched electricity generation to much more expensive renewables, and deprived Britain of what could have been by now a very productive native shale gas industry. The government folded in the face of environmentalists who were determined to squash the nascent industry by ramping up fears of ‘earthquakes’ – or rather minor tremors, most of which cannot even be sensed by humans on the Earth’s surface.

Traditional oil and gas extraction, too, is being deterred by subjecting listed companies to punitive decarbonisation targets. Shell, which should have been developing the Cambo field off the Shetlands, has been driven to pursue other avenues, like providing my broadband. The result is that we are becoming ever more dependent on imported gas – shipping in refrigerated shale gas from Qatar that we could have been producing ourselves. The trouble is that in recent months energy-hungry China has been outbidding us for it, driving up prices.

Ministers love to point out that the unit cost of generating electricity from wind and solar has fallen over the past decade, but that ignores the intermittency problem. Consumers are having to pay through the nose to fire up dormant gas and coal plants to provide power at times when, as in recent weeks, the sun hasn’t been shining and the wind hasn’t been blowing. At one point in November, energy suppliers were forced to stump up £2000 per MWh for electricity – around 40 times the usual wholesale price.

Conversely, when the wind does blow we are forced to shell out to compensate wind farm-owners ordered to turn their turbines off – last year we collectively paid £282 million in so-called ‘constraint payments’ when the national grid was unable to absorb all the electricity they were producing.

We are in this position because we have built more and more wind and solar farms without properly addressing the issue of energy storage. The Government set up so-called “capacity auctions” in 2014 to try to create a market for energy storage by offering subsidies to anyone who can supply large amounts of energy at short notice. But the lucky winners have tended to be owners of gas and coal plants, with just a handful of battery installations.

Why? Because storing energy is horribly expensive. The Pacific Northwest National Laboratory in the US puts the “levelised’ cost of storing energy in large lithium battery installations (that is taking into account capital investment and running costs over the lifetime of an installation) at $336 (£260) per MWh. That is five times as much as the usual wholesale price of electricity – and we have to pay it on top on the cost of generating electricity in the first place. There are times in winter when our wind turbines and solar panels produce next to no power for days on end, yet we only have enough storage capacity to meet 38 minutes’ worth of national electricity demand.

But if consumers are heading for an energy shock in April when price caps are raised it is nothing compared with what is coming later. In 2026 installations of new oil boilers will be banned, followed in 2035 by new gas boilers. From then on, the only practical way to heat most homes will be in the form of electric heat pumps, which cost £10,000 a time, are more expensive to run than gas and which won’t succeed in keeping many older, less-well insulated homes warm.

Motorists, too, will be prohibited from buying new petrol and diesel cars from 2030 – forced to buy electric vehicles which currently cost around half as much again. Forget the spin that they will be on a parity with petrol and diesel cars by 2024 – that’s just another piece of Huhne-style optimism. Surging prices of rare metals needed for their batteries have already led to one Chinese manufacturer jacking up the price of electric vehicles by 20 percent this month.

With living costs creeping up on all fronts, there could not be a worse time to jack up taxes. In April, just as higher energy bills are landing on our doormats, National Insurance rates will rise by 1.5 percent. Labour did at least oppose that, but otherwise where is the opposition? All that Keir Starmer, Ed Davey and Nicola Sturgeon are offering are even more expensive energy policies. Ever desperate to make herself look more “progressive” than Westminster, Sturgeon has committed to cutting emissions by 75 percent on 1990 levels by 2030 – a target which could only be met by a massive replacement of existing domestic heating systems.

How bizarre that politicians who on one day will lecturing us on poverty, and energy poverty in particular, and on the next day will be proposing to drive up household bills to reach carbon reduction targets. The only way they can try to square this impossible circle is to pretend, like Chris Huhne did, that reaching zero carbon will actually save us money. Or by trying to dismiss the issue of cost by claiming that climate change is so serious it will kill us all unless we eliminate all carbon emissions by 2050 sharp.

Sorry, but no. As most people will correctly work out for themselves when they receive their inflated energy bills this spring, the biggest danger they face is not being fried or drowned in a slightly warmer world – it is succumbing to hypothermia because they cannot afford to heat their homes.


‘Energy costs could be the breaking point’: UK’s small businesses being pushed to brink

Thousands of small business owners across the UK will bear the brunt of the national energy crisis that risks driving the UK to a cost of living catastrophe within the next year.

“The future is far from certain,” says Julian Pariera, the owner of Beauchamp Laundry Services in Birmingham. “I’m extremely concerned at how things are panning out.”

Pariera is one of thousands of small business owners across the UK who will bear the brunt of the national energy crisis that risks driving the UK to a cost of living catastrophe within the next year. Before next winter, he will need to renegotiate an energy deal to run the washers and clothes dryers that his customers rely on after a record surge in energy market prices.

“We fix our energy tariffs for up to five years, and every time we renew a deal it seems to double. This time I won’t be surprised if our energy costs quadruple. It’s madness,” he says. “These costs can’t be reflected in our charges because if we put up our prices by this much our customers wouldn’t be able to afford it. So the question I have to ask myself is how we can manage while still protecting our customers?”

“The government talks about getting business back on track after Covid – and I’m not saying they’re doing a bad job – but with these cost pressures it’s just ridiculous. We’ll carry on somehow because this business has been in place for the last 30 years – we’re established – but if we were just starting out we wouldn’t manage,” Pariera says.

For now, it is still more affordable for many of Beauchamp Laundry’s customers to bring in damp clothes and linen to be tumble dried during the winter than to run their own dryers at home, Pariera says. But at some point in the next year he may need to adjust his dryers to offer fewer minutes for each pound spent.

These concerns are shared by small business owners across the country, which employ almost 13 million staff and make £1.6tn in turnover every year. The Federation of Small Businesses has warned that energy costs are the top concern of its members and could prove to be “an existential threat”, particularly for the fragile end of the small business sectors that were hardest hit by Covid-19 restrictions.

Ibrahim Dogus, the owner of three restaurants near the London Eye, says a “vicious circle” of rising costs and falling revenue endemic across the hospitality industry means even longstanding eateries in prime locations are struggling to secure affordable energy deals. Many suppliers refuse to offer contracts to restaurants without a hefty security deposit, or charge eye-watering rates to guard against the risk they might go under, he says.

“Before the recent price hike I’d pay between £2,500 and £3,000 a month for energy at one restaurant. But my latest bill for November was £5,600. At the same time, turnover has fallen to between 10% and 15% of what it used to be. Before the pandemic we might serve 600 people; these days it’s closer to 60. But our costs are still climbing. We’re quite worried,” he says.

Dogus has already cut his staff from 60 to 25, made use of the government’s support schemes, and negotiated payment plans to manage the debt he owes to his landlords and pay business rates. But energy companies are the exception, he says, and this could prove the difference between whether his chain survives or not.

“Energy companies are not interested in helping at all. If you don’t pay in full for a couple of months someone comes to turn off your lights. Never mind that you can’t pay them if you can’t serve customers. It would be over,” he says.

“It’s a very difficult moment for small businesses. There’s been Brexit, there’s been Covid. But on top of everything else, energy costs could be the breaking point,” he says.


The climate backdowns begin

It’s New Year’s resolution season, and don’t be surprised if politicians world-wide settle into the same informal pledge: Talk as little as possible about climate change in 2022. They’ve gotten a head start on that resolution, working hard at it even before Friday night’s socially distanced parties begin.

The biggest, most entertaining and also most telling climb-downs are happening in the U.K. Prime Minister Boris Johnson in October unveiled an ambitious policy program to get Britain to net-zero carbon-dioxide emissions by 2050. It was Mr. Johnson’s public-relations coup ahead of the COP26 global climate conference he hosted in Glasgow. It also was unusual in its honesty about what such environmental ambitions will cost individual households and businesses—a point politicians usually avoid for all the obvious reasons.

Sure enough, the backtracks and U-turns began before that document was written. The most controversial component of Mr. Johnson’s net-zero boondoggle concerns an attempt to steer households away from the gas boilers on which 86% of them rely for hot water and central heating.

Mr. Johnson said in October he hopes that by 2035 the government will be able to phase out installation of new natural-gas heating units. That represents a step back from earlier plans to require carbon-efficient heat pumps in new homes as early as 2025, and the extended deadline still faces stiff opposition stemming from the high cost of heat pumps.

And “boiler-gate” is only the beginning of the reversals great and small. Among the great, count the delay to next year (at least) of a formal public-comment process for a beefed-up emissions-trading system. One reason for the holdup, the Telegraph reports, is that Mr. Johnson’s colleagues can’t agree on which corners of the economy should become newly subject to the rules—although apparently they now agree that car and home fuels should be excluded.

Among the smaller reversals, the Transport Department in November backtracked from a plan to require small businesses with parking lots on their premises to install electric-vehicle charging points. The proposed rules governing other structures such as new housing, residential conversions, and new mixed-use developments are so porous as to resemble a well-aerated Swiss cheese, with cost limitation emerging as the primary concern. This difficulty installing charging stations augurs the collapse, sooner or later, of Mr. Johnson’s announced plan to ban new internal-combustion cars by 2030.

Nor is this only a British phenomenon. Set aside the brouhaha surrounding green provisions in Democrats’ Build Back Better spending extravaganza in America. Some of the most surprising climate realism is now emerging in Europe.

French President Emmanuel Macron faces a campaign for re-election in 2022, and he learned the hard way in 2018 how higher fuel prices can trigger debilitating popular protests. His solution is to double down on traditional French industrial policy, especially concerning support for nuclear power. At Mr. Macron’s behest, the European Commission in Brussels may be on the verge of including both nuclear and natural gas on a list of environmentally friendly energy sources eligible for “green investment” from governments and private investors. Swedish teen activist Greta Thunberg is dismayed, but she also doesn’t need to persuade anyone to vote for her.

Even in Germany politicians are starting to change course. Households and businesses there pay some of the highest electricity prices in Europe in service of former Chancellor Angela Merkel’s aggressive shift toward renewable power. German voters believe in these goals more than most other electorates, and they elected the environmentalist Green Party into the new governing coalition in September.

But even in Germany there appears to be a limit. The deal cementing the coalition between the Greens, the larger Social Democrats and the smaller Free Democrats hedges its climate commitments. A coal phase-out will happen ideally by 2030—with the newly inserted word “ideally” blunting Green ambitions by marking the whole project as tentative. Carbon neutrality will wait for 2045, if it ever comes, and more-aggressive limits on aviation and automotive emissions are missing.

The net-zero gimmick will be with us for a long while yet, alas. The green true believers (or are they bitter clingers?) are busy devising rear-guard actions by which to insulate environmentalism from real-world political pressures, not least by enlisting gullible or cynical titans of finance to do via pension-fund investment allocations what can’t be done honestly via legislation. The political class remains rhetorically wedded to its earlier foolhardy promises, and the media is too enamored of reality-detached activists such as Ms. Thunberg.

All the smarter then for politicians to resolve to discuss the matter as little as possible in the year ahead. As starving the atmosphere of carbon dioxide becomes a political liability, starving the issue of political oxygen will become the electoral tactic of choice.,COP26%20global%20climate%20conference%20he%20hosted%20in%20Glasgow .


Desperate measures being used to keep Australia's eletricity flowing

Unpredictable output from "renewables" is the problem

Australia’s most powerful energy companies have sounded a warning over the increasing need for intervention to safeguard the power grid, saying the national energy market is being undermined to secure supplies in renewable-rich regions.

The Australian Energy Market Operator, which runs the electricity system, is being forced to intervene at record rates, issuing directions to energy generators and users to ensure grid stability on a daily basis. The Australian Energy Council – which represents the country’s biggest power and clean energy companies including AGL Energy, Origin Energy, EnergyAustralia, Alinta, Snowy Hydro, CleanCo and Iberdrola – said it held serious concerns over the practice.

“Since 2017 AEMO directions have run into the hundreds per year. Particularly concerning is the repeated circumstances of the directions and cursory reporting of them,” AEC general manager of policy Ben Skinner said.

“Current practice suggests some parties now consider direction a legitimate long-term alternative to commercial arrange­ments to procure essential power system services. The AEC considers this practice entirely inconsistent with the intent of the power, and if allowed to continue, will undermine the market.”

AEMO has been forced into increasingly frequent and expensive market interventions, such as leasing diesel back-up generators and ordering expensive gas-fired plants into the market to guard against the risk of a thermal generator failing or a change in the weather, such as a lack of wind, knocking out renewable generation.

The Australian Energy Regulator should focus on the extent and cost of directions in its 2022 monitoring, the AEC said in a submission to the national body.

“A matter which has not been mentioned in the focus paper, but in AEC’s view is a serious and immediate concern of wholesale electricity market performance, is the ongoing excessive use of AEMO’s intervention powers under Section 116 of the National Electricity Law to maintain a secure system,” Mr Skinner said.

“Prior to 2017, the use of this power was a rare event and consistent with its intent as a last-resort action in exceptional circumstances where, for whatever reason, market or contracting mechanisms failed to obtain the services required to maintain a secure or reliable system.”

Experts have been warning for several years about the risks posed by the issue.

South Australia’s electricity system was in the spotlight back in 2019 for increasingly operating under the direct intervention of the grid operator, with last-ditch interventions normally reserved for emergencies becoming a default way of managing the network, as large amounts solar generation tested the system’s strength.

However, the reduction in the strength of the electricity network – most pronounced in South ­Australia – has also spread to southwest NSW, northwest Victoria and north Queensland, adding to wholesale costs incurred by users.

Big swings in the energy supply mix over the New Year period in South Australia underscored the issue of variability in a high-renewables system that needs to be managed, according to electricity market designer Jess Hunt.

“Over the course of the week we went from over 130 per cent ­renewable energy to less than 4 per cent, with everything in between.

“The challenge for policymakers is to design a market that can mix and match different types of supply-side resources to meet demand across the full spectrum of conditions,” Ms Hunt wrote on LinkedIn.




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