Jit’s article, “In High Dudgeon”i sets out very clearly the huge value to wind turbine companies of earlier rounds of the Contracts for Difference (CfD) process, which in effect provides massive subsidies to the operators of turbines. Against that background, it’s worth noting that the latest round of CfD (“Allocation Round 4”) is now ongoing, with interested parties having recently (6th August 2021) been issued with the latest “Stakeholder Bulletin” by the Department for Business, Energy & Industrial Strategy (BEIS). This notifies them that the application opening date is 13th December 2021, and that the application window closes on 14th January 2022.

The Bulletin directs interested parties to a CfD microsite.ii The first thing I always notice when I visit these places is the number of logos at the foot of the website, these being the various parties who are being funded to be part of the process. In this case we find: Department for BEIS (not surprisingly); nationalgridESO (it seems capital letters and spaces between words are passé – ESO, by the way, stands for Electricity System Operator); ofgem (again, not a surprise); and Low Carbon Contracts Company (with a little logo of its own – “Powering Net Zero”).

I’m still learning about all these high-quality green jobs shuffling paper (or sending emails), so the Low Carbon Contracts Company is new to me. I thought I’d better look them up. Of course, they have a website.iii The website is shared by the Electricity Settlements Company. We learn that:

The Low Carbon Contracts Company and the Electricity Settlements Company are both private limited companies owned by the Secretary of State for Business, Energy and Industrial Strategy (BEIS) and established to play key roles in the delivery of Electricity Market Reform (EMR), the biggest change to the electricity market since privatisation.

The website is a pretty handy place for a newcomer to begin to learn about the complex system of subsidies and processes that are in place (oh for the days when the UK had a single state-owned energy supplier whose only concern was with supplying energy reliably and efficiently without having to worry about “net zero” and “green” targets). Anyway, back to the website:

LCCC was established to be the counterpart to Contracts for Difference (CFDs), a new incentive designed by Government to bring forward the investment needed to sustainably deliver the UK’s goals for renewable and other low carbon electricity.

LCCC’s primary role is to manage CFDs with low carbon generators throughout their lifetime, which involves management of the contracts as well as the Supplier Obligation Levy that funds CFD payments. Critical to these functions is power price forecasting and settlement activities. In all of its operations, LCCC is led by its guiding principle to “maintain investor confidence in the CFD scheme and minimise costs to consumers”. LCCC also runs Capacity Market settlement operations on behalf of the ESC.

Now we begin to have an idea of the role of LCCC. What about the Electricity Settlements Company?

ESC’s role is to oversee the settlement of the Capacity Market to ensure that regular payments are made to capacity providers who have agreed to provide capacity at times of system stress. These capacity arrangements help to keep the lights on across Great Britain.

Well, they sound jolly important. We wouldn’t want the lights to go out.

The Schemes

Now that we know that CfDs are funded by the Supplier Obligation Levy, it would help us to know what this is, and who pays for it. In fact it’s a compulsory levy on all licensed electricity suppliers in Great Britain, introduced by The Contracts for Difference (Electricity Supplier Obligations) Regulations 2014 (plus at least three sets of amending Regulations to date). Also set out in these regulations is a separate levy on licensed electricity suppliers to enable the LCCC to meet its operational costs (the operational costs levy). Well these green jobs don’t come free, you know. Somebody has to pay for all this administration.

Given that LCCC tells us:

Our key scheme objectives are to deliver low-carbon electricity at the lowest cost to consumers

and given that the licensed electricity suppliers inevitably pass the cost on to their customers (that’s you and me), it would be useful, and one might have thought a vital part of the process, for the annual cost to consumers to be totally transparent and readily available to anyone interested. So what does the website say? Nothing of any use to any end consumer (me, for instance) who wants to know just how much of my annual energy bill consists of “green” subsidies. We are told, very proudly:

Each allocation round has led to lower costs. This is shown in the graph below.

The graph in question tells us that the average strike price has decreased by 69% from £138 to £43. That sounds promising, except that earlier strike prices are built in to the system for years to come. For instance, the LCCC’s first Annual Reportiv said:

Based on the 27 new CFDs awarded in March 2015 and the 12 Investment Contracts previously transferred to the company by DECC, the estimated total cash payments which the company may be required to pay out over the life of these (minimum 15 year) contracts is 18.8bn.

There is also the problem that some of the earlier strike prices (e.g. that at Dudgeon referred to in Jit’s article) were higher than the £138 per Mwh referred to by LCCC. It was around £150 at 2012 prices, and is now over £170 thanks to inflation – it’s a cost we all have to keep paying because of the length of the contract.

And finally there is also the problem that as we build more and more (unreliable and unpredictable) “low carbon” electricity supply in to the system, the other part of the subsidy equation will come in to play. You remember – the bit where the Capacity Market ensures that regular payments are made to capacity providers at times of stress to keep the lights on.

What I cannot find anywhere on the website is a simple statement as to how much the Supplier Obligation Levy costs each year, and I certainly can’t find a statement as to how much it costs each household. It’s not just households who pay, of course – businesses do too – anyone does if they use electricity (subject to some minor and temporary concessions to electricity-intensive businesses). If businesses are paying the levy (as they are), then they too will look to pass on the costs to their customers.

There are datasets on the website, and one or two of them look as though they might, in a highly inaccessible format, have the information I’m looking for. But I don’t know if they do – my laptop doesn’t seem to have compatible software. So, if the information is there, it’s not exactly in a format that the average member of the public can access and understand, and transparency certainly isn’t high on the agenda.

There is a dashboard which contains all the historical Reconciled Daily Levy Rates and the underlying Eligible Demandv and someone with more time and enthusiasm than me might find it useful, but why don’t they simply tell us how much it costs each year?

Eventually I found my way to the LCCC Annual Report for 2019/20vi where I learned that in the year 2019/20, CfDs cost £1.8151Bn, while the Capacity Market cost £1.4903Bn, making a total of £3.3054Bn. Given that ultimately, one way or the other, that falls to be paid by the citizens of the UK, and given that I can’t find the figure in a transparent way on the official LCCC website, I thought I’d work out for myself how much that cost each UK household in that year. The Office for National Statisticsvii tells me that in 2020 there were an estimated 27.8 million households in the UK. Dividing £3.3054Bn by 27.8 million gives us an annual figure per household of £117.90. Presumably that figure will increase when Allocation Round 4 is completed.

Certainly these costs are increasing rapidly. By the time of the LCCC’s 2017/18 Annual Reportviii, just two years earlier, CfDs cost £544.3 Million, and the Capacity Market cost £220.7 Million. A total of £765 Million, which LCCC calculated as being a total of £10.22 per household. Presumably (as it’s about half the cost that my style of calculation would have produced) that was the direct cost, and ignored the fact that costs paid by businesses are almost inevitably passed on to consumers. It’s interesting that they provided the information relating to household costs in an upfront and transparent way when they were still relatively modest. Two years later, when the system is costing almost five times as much, the annual household cost figure isn’t mentioned. It’s also interesting to note that as more and more unreliable energy is fed into the National Grid, the cost of the Capacity Market (the bit that “keeps the lights on” when the Grid is under stress) is rising twice as fast as the cost of CfDs.

However, subsidies paid via Cfds and the Capacity Market for “green” energy are only part of the story. Subsidies are paid by consumers in other ways.

Renewables Obligations Certificates (ROCs)

As Ofgemix tells us:

The Renewables Obligation (RO) is one of the main support mechanisms for large-scale renewable electricity projects in the UK.

It came into force in all of the UK in 2002, save for Northern Ireland, where it followed three years later. It closed to new generating capacity in 2017, but energy suppliers are still bound by its rules.

ROCs are certificates issued to operators of accredited renewable generating stations for the eligible renewable electricity they generate. Operators can trade ROCs with other parties. ROCs are ultimately used by suppliers to demonstrate that they have met their obligation.

Where suppliers do not present a sufficient number of ROCs to meet their obligation in the reporting period (one year), they must pay an equivalent amount into a buy-out fund. The administration cost of the scheme is recovered from the fund and the rest is distributed back to suppliers in proportion to the number of ROCs they produced in meeting their individual obligation.

Working out what all this costs the consumer is again far from easy. However, trying to make sense of it, we learn that in 2019/20, UK energy suppliers were confronted with an obligation to source 130,183,968 ROCs in the year. They could meet this obligation by proffering ROCs to Ofgem or by making a buy-out payment to the extent of any shortfall, which would cost them £48.78 per ROC. It is possible, in order to encourage full compliance with renewable obligations, that the ROC buy-out rate is set at a penal level. However, if it actually represents the “market value” of ROCs, then the price per ROC multiplied by the required number of ROCs in the year, amounts to £6.3504 Billion. Divided by the number of households in the UK, that amounts to £228.30 per household. Of course this is a crude calculation, and assumes that the entire cost falls on consumers (though given that businesses will seek to pass the cost on to consumers, I think that’s a not unreasonable assumption, in broad brush terms at least).

Feed-In Tariffs

Again, according to Ofgem:

The Feed-in Tariffs (FIT) scheme is a government programme designed to promote the uptake of renewable and low-carbon electricity generation technologies.

Introduced on 1 April 2010, the scheme requires participating licensed electricity suppliers to make payments on both generation and export from eligible installations.

Barring some exceptions, the scheme closed to new applicants from 1st April 2019.

The FIT scheme is available for anyone who has installed, or is looking to install, one of the following technology types up to a capacity of 5MW, or 2kW for CHP:

Solar photovoltaic (solar PV)

Wind

Micro combined heat and power (CHP)

Hydro

Anaerobic digestion (AD)

Once more, finding the cost to the consumer of FITs is anything but easy. A useful websitex provides more information:

It [the payment] comes out of the pockets of the supply companies because they are really nice guys!

No seriously…

The suppliers pass on the cost of the Feed-In Tariffs scheme to all their electricity customers.

The scheme includes a fairly complex levelisation process so that the overall costs are spread uniformly across all companies.

They can even charge for the costs of administering the scheme.

Payment is made in two different ways – a generation tariff, and an export tariff. The generation tariff is payment simply for generating the electricity, whether the generator uses it themselves or not. In addition, if they generate surplus electricity, they “export” it to the National Grid, in return for an export tariff. The rates vary depending on the type of generation method (e.g. solar panels are paid a different generation tariff to anaerobic digestors and so on), but the export tariff is paid at the same level for all forms of generation.

It took quite a while to find out how much FITs are costing us all, but I eventually tracked the figure down. Anyone would think the powers-that-be don’t really want us to know. Ofgem’s Feed-in Tariff Annual Report 2019-2020 tells us that

The value of generation payments made grew from £1.41 billion in Year 9 to £1.5 billion in Year 10.

So now we know. We can add an extra £1.5 Billion to our growing list of subsidy costs, or £53.96 per household, a figure which is likely to continue growing for a while, since Ofgem’s report also tells us:

In response to the unprecedented circumstances faced by prospective FIT generators at this time, the government has amended the Feed-in Tariffs Order 2012 to grant a 12-month extension to validity periods for all pre-registrations for community energy solar photovoltaic (PV) installations and all preliminary accreditations which originally expired on or after 1 March 2020.

Gas

Not content with forcing consumers to pay hidden subsidies for “renewable” electricity, the Government has now come up with a plan to do the same with regard to “renewable” gas. We have to get used to more acronyms. Ofgem has been named as the intended administrator of this latest scheme, and so it is to Ofgem’s websitexi that I turn for a description of what this will involve:

The Green Gas Support Scheme (GGSS) is a government environmental scheme that will provide financial incentives for new anaerobic digestion biomethane plants to increase the proportion of green gas in the gas grid.

The scheme will be open to applicants in England, Scotland and Wales for four years from autumn 2021.

Registered participants will receive quarterly payments over a period of 15 years. Payments will be based on the amount of eligible biomethane that a participant injects into the gas grid.

The Green Gas Levy (GGL) will place obligations on licensed gas suppliers, including a requirement to make quarterly levy payments, in order to fund the GGSS.

As with the subsidies for “green” electricity, charged to the companies who supply energy to us, the end-user, I think it’s safe to assume that this subsidy will be paid by the companies (because they will have no choice) but will then be passed on to the end-user too. How much it will add to the energy bills of households remains to be seen. It is significant that registered participants are to receive guaranteed payments for 15 years, so if this ends up being an expensive mistake, it will be an expense that households will be stuck with until the late 2030s.

Conclusions

This consideration of subsidies for renewable energy started with the news that the latest auction round for CfDs is almost upon us. The scope of the article inevitably increased, as there is no point in looking at one expensive form of subsidy, with related costs to every business and household in Britain, without looking at the others. I fear I may have missed some. However, I think it’s safe to say that so far this is costing, one way or another, every household in the UK around £400 p.a., and as the “net zero” agenda intensifies, those costs are only going to rise, and will probably do so rapidly, unless a public outcry causes politicians to reconsider. For this to happen, however, the public first need to realise what the agenda is costing them. As things stand, the information is opaque to say the least, and I can’t help wondering if that is intentionally so.

I should stress that my figure of £400 p.a. per household is based on the assumption that businesses pass on to their customers the entire amount of the energy subsidies they have to pay, in the form of higher prices charged to their customers. On the assumption that domestic electricity use is 37% of the total generated in the UK (as the National Grid tells us), then the direct cost to each household in the UK will be nearer £150 p.a., and the remainder of the annual subsidies (equivalent to £250 p.a. per household) is being borne by businesses. We can, in fairness, only speculate as to how much of that is passed on to their customers, but it’s probably a fair chunk of it, and to the extent that commercial business users absorb those costs rather than pass them on, it makes them less competitive internationally.

Finally, on the subject of transparency, if you burrow for long enough into the depths of Ofgem’s website, you may find your way to a pie chart providing their breakdown of an electricity bill, with the information stated to be correct as at 1st January 2021. It states that 22.9% of the bill is attributable to environmental and social obligation costs, which is a bigger proportion than that attributable to either operating costs or network costs. If the British public were presented with this pie chart on every electricity bill they received, I suspect they wouldn’t be happy. Perhaps that’s why it isn’t featured on our bills. So much for transparency.

i https://cliscep.com/2021/08/10/in-high-dudgeon/

ii https://www.cfdallocationround.uk/news/key-dates-allocation-round-4

iii https://www.lowcarboncontracts.uk/index.php/

iv https://www.lowcarboncontracts.uk/index.php/publications/low-carbon-contracts-company-annual-report

v https://www.lowcarboncontracts.uk/dashboards/cfd/actuals-dashboards/reconciled-daily-levy-rates

vi https://www.lowcarboncontracts.uk/index.php/publications/low-carbon-contracts-company-lccc-annual-report-201920

vii https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/families/bulletins/familiesandhouseholds/2020

viii https://www.lowcarboncontracts.uk/index.php/publications/low-carbon-contracts-company-lccc-annual-report-20172018

ix https://www.ofgem.gov.uk/environmental-and-social-schemes/renewables-obligation-ro

x https://www.fitariffs.co.uk/FITs/principles/funding/

xi https://www.ofgem.gov.uk/environmental-and-social-schemes/green-gas-support-scheme-and-green-gas-levy

38 Comments

  1. Hi Mark

    “(oh for the days when the UK had a single state-owned energy supplier whose only concern was with supplying energy reliably and efficiently without having to worry about “net zero” and “green” targets)”

    Old codgers remember those days as when we had the National Coal Board, the Gas Council, and the Electricity Council. 😀

    Like

  2. Joe Public,

    It’s a fair cop – I over-simplified in my nostalgia for the past. 😉

    However, life was certainly simpler then. The more I delve into the complexity of the arrangements that have been set up in the wake of successive Governments’ efforts to encourage “renewables” the more astounded I am. I think it’s fair to say that if one started with a clean sheet and was asked to devise an energy generation and transmission system that was as cheap and efficient and reliable as possible, what we have now is most definitely not what would be chosen.

    Liked by 1 person

  3. “Again, according to Ofgem:

    The Feed-in Tariffs (FIT) scheme is a government programme designed to promote the uptake of renewable and low-carbon electricity generation technologies.”

    FiTs are also handed out BioGas Anaerobic Digestion factory owners.

    Between April 2011 and March 2012 they hit 18.14p/kWh at a time when retail prices of natural gas were of the order of 2 – 2.25p/kWh. i,e approx 7x the retail price of the natural product.

    https://www.ofgem.gov.uk/publications/feed-tariff-fit-tariff-table-1-april-2021

    Liked by 1 person

  4. Joe Public

    Thanks for the information. This is a huge subject. When I started writing, I intended to discuss only the Contracts for Difference auction process. Instead I talked about that less than intended, and digressed into discussing other subsidy arrangements. I worried that at a 12 minutes read it was already getting a bit long.

    However, this is what is good about the opportunity to leave a reply at the foot of an article. There’s no doubt lots more to be said about this crazy set-up, so please do feel free to mention things I’ve overlooked. It would be good to have it all logged.

    Liked by 1 person

  5. Great effort Mark. Nigel Lawson was Secretary of State for Energy under Thatcher from 1981 to 1983 – a controversial time, given that he was preparing for the 1984 miners strike, which was seen as inevitable. Let me allow Wikipedia to take up the story:

    He was a key proponent of the Thatcher Government’s privatisation policy. During his tenure at the Department of Energy he set the course for the later privatisations of the gas and electricity industries and on his return to the Treasury he worked closely with the Department of Trade and Industry in privatising British Airways, British Telecom, and British Gas.

    Yet Lawson has said that it would be better for the UK to go back to the nationalised state he tried to liberalise than perpetuate the current mess. I need a link there! Apologies in advance to Lord Lawson or anyone at the GWPF who happens to read this. But I’m sure I’m not totally imagining it.

    Like

  6. Thanks Richard. I must acknowledge Jit’s assistance in supplying some useful information that improved the final version.

    As they say, however, any faults or errors that remain are mine alone.

    Liked by 1 person

  7. Great work Mark! I admire your perseverance – it really is a nightmarish tangle. The sceptic in me sees that as deliberate.
    If you want to cross-check your calcs, you could look back through posts on Paul Homewood’s site. He has done quite a lot of analysis in the same area. From memory he came up with a figure for all of the subsidies of around £12 bn for the latest year available.
    Out of curiosity I looked back through my own ‘leccy bills. Until 2018 they gave a breakdown of the cost. The last one I found gave a figure of 12% for “Government environmental and social programmes”.

    Like

  8. If you wanted to validate the assumption that businesses pass on to their customers the cost of subsidies I’d have a look at financial statements and historical EBITDA profit of electricity generating companies.

    If costs are passed on to consumers you’d see profits remaining stable (/rising). Given the lack of electricity generating companies in financial distress I expect your assumption to be correct.

    Liked by 1 person

  9. Mike Hig, thanks for those comments. Paul H also has a follow-up article, which I’ve now just find:

    https://notalotofpeopleknowthat.wordpress.com/2020/06/16/dummies-guide-to-renewable-subsidies-part-ii/

    My figures are conservative, since I didn’t include the £1Bn or so paid for out of general taxation for the RHI (which spawned its own scandal in Northern Ireland). Jit suggested I might include it, but as I couldn’t see it passed on directly to customers, I played safe and left it out.

    Like

  10. The biggest irony & annoyance is that ‘OFGEM’ was originally set up to protect the interests of consumers.

    Now, its management has ‘hijacked’ the organisation for political purposes, to push renewables which are against nearly all consumers’ financial interests.

    Your efforts at explaining the deliberately obfuscated world of energy subsidies are greatly appreciated! Many, many thanks.

    Liked by 2 people

  11. Hi Mark

    Regarding Paul Homewood’s efforts, the “March 2021 Economic and Fiscal outlook: Fiscal supplementary tables: receipts and other – Table 2.7 Environmental levies” provides the nitty-gritty.

    NB The compilers of the actual table “forgot” to include a Feed-In Tariff row. As FiTs continue to be paid out, that row was added for completeness, in the image below. 😉

    Liked by 1 person

  12. Joe Public:

    The biggest irony & annoyance is that ‘OFGEM’ was originally set up to protect the interests of consumers.

    Now, its management has ‘hijacked’ the organisation for political purposes, to push renewables which are against nearly all consumers’ financial interests.

    Economists have a name for this: regulatory capture. (Thanks to Bret Weinstein for banging this drum recently and reminding me of this important concept.) It’s a general problem but energy is a glaring case in point in the UK at present.

    Liked by 2 people

  13. MikeHig at 8.58pm yesterday, thanks for digging out your old bill. Interesting to learn that the proportion of bills going to subsidies et al has increased in just 2-3 years from 12% to 22.9%, not least as today’s bills are bigger than the bills of 2-3 years ago.

    Like

  14. If oil and gas went up in price, doesn’t it make the subsidies paid to renewables seem a smaller percentage
    but if your energy bill is £40 in green subsidies per month that physical amount would be the same

    There is a complication that the value of green subsidies depends on oil prices
    If gas-powered-leccy went up to from £40 to £60/KWh the subsidy a £130 KWh wind farm gets moves from £90 to £70

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  15. One of the forms of subsidies that I didn’t cover in this article is constraints payments – though it’s well worth remembering them, when considering what the road to net zero costs us all. However, it would have been doubling up if I’d mentioned them here, as I discussed them in Money for Nothing:

    Money For Nothing

    Like

  16. It’s early days yet, but as stewgreen drew attention to it and Richard Drake suggested it might be a useful addendum here, I’ll make a note of it – another potential huge subsidy to be paid by UK households as part of the “net zero” strategy:

    “Billions to be funnelled into hydrogen subsidies as UK races to hit net-zero”

    https://www.carbonbrief.org/daily-brief/billions-to-be-funnelled-into-hydrogen-subsidies-as-uk-races-to-hit-net-zero

    “Manufacturers could be guaranteed a price by the government for the low-carbon hydrogen they produce so that they do not sell to consumers at a loss, according to plans subject to consultation reported by the Daily Telegraph. The newspaper adds that these subsidies would be funded “through either higher bills or with money from the public purse”, and that officials are “hoping to replicate their success in wind power, which has grown rapidly over the latest decade after the state guaranteed electricity prices to developers”. It notes that the plans are part of the government’s hydrogen strategy, the latest document released this year as part of the government’s push to achieve net-zero emissions by 2050. The strategy says that hydrogen could meet 20-35% of the UK’s energy demand by 2050, the newspaper adds. ”

    It’s a report of a report, since the original report was in the Telegraph, and is behind a paywall. Also, the numbers are vague (“billions” are mentioned), and nothing definite has been announced by the Government – yet. However, watch this space.

    Liked by 1 person

  17. So hydrogen could be subsidised in a similar fashion to wind power…..a double-dip bonanza for the troughers: get subsidies for wind power to generate more subsidies for generating hydrogen.
    Next step: set up power plants that can be subsidised for burning hydrogen?

    Liked by 1 person

  18. A few very relevant tweets from Andrew Montford today, regarding the balancing mechanism and the problems (and costs) the National Grid is experiencing at the moment (during a nice warm spell in early autumn) to keep the lights on:

    “Day-ahead prices at £867/MWh, and we still have a risk of blackouts.”

    and

    “Interestingly, the risk of blackouts appears not to have been completely eliminated by grid managers today. Balancing mechanism prices at £1400-1500 during the middle of the day, so presumably higher during the evening peak.”

    Like

  19. More tweets from Andrew Montford regarding yesterday’s National Grid shambles:

    “Whoa! Balancing mechanism prices hit £4000/MWh. It has cost an extraordinary £33m to balance the grid today.”

    and

    “Interestingly, £33m is only the cost to around 6pm. The Balancing Mechanism data feeds seem to have gone down at that point.

    For context, we used to be able to balance the system for the whole year for £400m.”

    I should have thought that was a pretty big story, yet so far as the MSM are concerned…..tumbleweed. Not a word anywhere, so far as I can see, least of all (naturally) at the Guardian or the BBC.

    Like

  20. “Did the PM tell the truth about Net Zero?”

    https://thecritic.co.uk/did-the-pm-tell-the-truth-about-net-zero/

    “…As a matter of fact, renewable energy in Britain has not, as the Prime Minister suggests, been getting cheaper. Subsidies to renewable electricity generators cost consumers over £10 billion a year at present, and the average subsidy on top of the wholesale price can be conservatively calculated at about £80/MWh, making it extremely expensive by any standard.

    The Prime Minister specifically claims that the cost of offshore wind power has dropped by 70 per cent in the last decade. That is untrue. Actual subsidies paid per MWh generated have not fallen, but as a matter of public record costs have increased sharply since their introduction in 2002, when they stood at just over £40/MWh, right up to the present when they stand at just over £110/MWh.

    Perhaps the Prime Minister has been misled by his officials by the low offshore wind bids for non-binding “Contracts for Difference”. Most of these low-price contracts have not yet been taken up, and few if any seem likely to survive since, again as a matter of fact, there is no evidence that the underlying cost of offshore wind has fallen sharply. The real-life experience of offshore wind companies has been of higher maintenance costs and a shorter working life of equipment than the original business models planned for.

    Audited accounts show clearly that offshore wind capital costs remain high and that their operation and maintenance costs are rising rapidly….

    …And then on top of all this, we have the network and system costs of connecting and managing uncontrollable renewables, which are high and have already affected consumers. In 2002, before renewables, the cost of National Grid’s “Balancing Services” were about £400m per year. They now stand at about £1.8 billion a year with gas and, just this week, coal powered traditional power stations stepping in to keep the lights on, and the trend is upwards, very largely due to renewables….”

    Like

  21. “Britain can’t rely on France and Ireland to keep the lights on
    We can avoid the impending energy crisis only by generating our own power and fixing our chaotic domestic market”

    https://www.telegraph.co.uk/business/2021/09/11/britain-cant-rely-france-ireland-keep-lights/

    “Power prices are soaring. Domestic suppliers are going broke. And blackouts are threatening to close down the economy….

    …It is only September, and already the supply of gas and electricity over the winter looks perilous. Just take a selection of headlines from the last week alone. Ireland has frozen power exports to Britain after unpredictable weather sparked a squeeze on supply.

    We have had to ask the French to send less power across the Channel after technical problems with a trading platform threatened a surge in supplies. Two energy suppliers, PfP Energy and MoneyPlus Energy, stopped trading after struggling to cope with rising power prices, and a whole string of smaller suppliers may collapse before the autumn is over. Two coal power plants were taken off standby amid soaring prices, while nuclear power, long dismissed as a relic of the 1960s and 1970s, was given a boost as its green credentials were re-evaluated. The list goes on and on…

    …There are two big issues disrupting the market. First, unreliable weather is hitting the renewable energy sector. Next, the domestic market is a mess, with lots of different suppliers, any of which could disappear at any time.,,,

    …Organised? Reliable? It doesn’t sound like it. In truth, add it all up and the supply of power looks precarious.”

    Like

  22. “When the wind stops blowing, an energy storm brews
    Last week’s heatwave showed the UK still struggles to make green electricity in all weathers, writes Jon Yeomans”

    https://www.thetimes.co.uk/article/energy-price-surge-spells-stormy-winter-for-bill-payers-dqmhpjf92

    “It was 3AM on Monday and staff at National Grid’s central control room had a problem. Arrayed before them were dozens of computers tracking the UK’s energy supply and demand. Overhead was a huge screen displaying, second by second, Britain’s whole electricity generating and supply network. The giant bear pit of a room is the nerve centre of Britain’s complex power grid. Its precise location – somewhere near Wokingham – is kept under wraps for national security reasons. That morning, a message flashed up, telling them that a gas-powered electricity generator with a chunky 800MW capacity had to go offline because of a fault.

    Such outages, as they are known in the industry, are not uncommon.

    But last week, there was another problem to compound it. As weather forecasters had told viewers on the evening news shows a few hours earlier, an area of high pressure was coming in to sit over the UK, temporarily bringing summer back from the dead. While this would give Britons one last chance to break out their sun hats, it also meant wind turbines up and down the land had slowed to a crawl in the still air.

    The 20 engineers on shift in the ESO (electricity system operator) control room realised there would be a shortfall of power before the morning rush. They sprang into action.

    Standard procedure if an “event” occurs is to opt for the next most cost effective option. And with wholesale gas prices currently at a record high, firing up more gas-powered generators was not it.

    The solution was to turn to a rather unloved power source – coal. Having studied weather forecasts for weeks, ESO had already asked EDF to warm up the 55-year-old West Burton A coal plant in Nottinghamshire in readiness. “We could see a while in advance that we’d need to warm some coal units in case we lost other generators on the day,” explained Rob Rome from ESO. Now the order to fire up the station, one of only two remaining coal plants in the UK, was sent electronically from Wokingham. Just in case the message didn’t get through, operators still have a green phone on their desks to send instructions the old fashioned way.

    The upshot was that for several hours on Monday last week, coal went from zero to more than 5 per cent of the UK’s energy mix, its highest level since the winter. Wind power dipped to just 2.5 per cent, down from 21 per cent at the same time the week before.

    Coal remained in use for several days last week, highlighting the challenges in the UK’s energy system and posing difficult questions for ministers touting the country’s green credentials ahead of the COP26 climate summit in Glasgow later this year.
    Meanwhile, as wholesale energy prices rise, suppliers are struggling to make ends meet: two smaller energy companies stopped trading last week. So what does the future hold for UK energy, how green can it be, and will consumers simply have to get used to higher prices?…”

    Like

  23. “UK to offer £265m in subsidies for renewable energy developers
    Wind, solar and tidal projects will compete for contracts, including funding for onshore schemes”

    https://www.theguardian.com/environment/2021/sep/13/uk-to-offer-265m-in-subsidies-for-renewable-energy-developers

    “Renewable energy developers will compete for a share in a £265m subsidy pot as the government aims to support a record number of projects in the sector through a milestone subsidy scheme later this year.

    Under the scheme, offshore wind developers will compete for contracts worth up to £200m a year, and onshore wind and solar farms will be in line for their first subsidies in more than five years.

    Alongside the £200m funding pot for offshore windfarms, there will be a further £55m available to emerging renewable technologies such as tidal power, of which £24m will be earmarked for floating offshore wind farms.

    The government will also make £10m available to developers of onshore wind and solar farms for the first time since it slashed subsidies in 2015, or enough to deliver up to 5GW of renewable energy capacity.”

    Like

  24. A Tweet and a Re-Tweet from Andrew Montford today:

    “The Hornsea 1 offshore windfarm was paid £377m in subsidy in 2020 (LCCC data). Strangely, the windfarm’s 2020 accounts reveal turnover of just £340m, and an operating loss of £233m(!).”

    and

    “UK day-ahead baseload electricity prices jump to a fresh all-time high of £354 per MWh on N2EX. Intraday prices for peak demand are much, much higher.

    To put into perspective, that’s 700% higher than the ~£45 average 2010-2020 price”

    Like

  25. “Britain’s last coal power stations to be paid huge sums to keep lights on
    Plants called on to supply electricity amid fall in wind generation and surge in price of gas”

    https://www.theguardian.com/business/2021/sep/13/britain-last-coal-power-stations-to-be-paid-huge-sums-to-keep-lights-on-record-energy-prices

    “Owners of the UK’s last remaining coal power stations are in line to be paid record sums to keep the lights on as energy prices reach fresh highs, and could be pushed even higher by lower wind power.

    Coal plants have been called on to supply power steadily in recent months, through one of the least windy summers on record since 1961 and sharply rising prices in the wholesale energy market.

    The UK’s electricity system operator (ESO) spent more than £86m last week alone to keep the lights on, which involved making payments of up to £4,000 per megawatt-hour for fossil fuel power stations to generate electricity at short notice, including the West Burton plant in Nottinghamshire and a coal unit at the Drax site in North Yorkshire.

    Britain has largely been weaned off coal power in recent years, but the remaining plants are available on standby to accept eye-watering offers from National Grid ESO in times of need, such as during cold spikes or low wind conditions . The Ratcliffe-on-Soar coal plant near Nottingham is also in line to benefit from record power prices this week.

    The price of electricity on the UK’s main power auction rose above £400 per unit for the first time on Monday, while the price of gas surged to a record of 150p per therm.

    The increases follow market highs last week. Experts predict that UK wholesale energy prices will climb higher in the days ahead owing to forecasts of low wind speeds, which will limit the country’s renewable energy generation.

    The price of electricity during Tuesday evening’s peak power demand hours has reached a new record of £1,750 a MWh, more than 2,900% higher than the average price over the last decade, according to Bloomberg data.

    Prices have soared in recent months owing to a global gas market surge, which followed a cold winter in the northern hemisphere that left gas storage facilities depleted. The record gas price has made electricity more expensive in the UK, where almost half of all electricity is generated in gas plants.

    In addition, the UK has faced a “perfect storm” of power plant outages and low wind speeds that has forced energy prices higher despite demand “not being very high at the moment”, according to Rajiv Gogna, a partner at LCP Energy Analytics.”

    Ah yes, relying on something that’s inherently unreliable. That’s going well, then!

    Like

  26. “E.On boss: Remove green levies to cut energy bills”

    https://www.bbc.co.uk/news/business-58579829

    “The UK government should cut rising energy bills by getting rid of levies that subsidise renewable energy, the boss of E.On UK has said.”

    At last, someone has seen the light! Er, no, not exactly:

    “Speaking to the Financial Times, Michael Lewis said green subsidies should be funded through tax instead.”

    Still, at last somebody has joined the dots, that it’s “renewable” energy that’s making our bills so blasted expensive:

    “Regulators have warned that consumer energy bills will be hit by soaring prices of fossil fuels globally.

    Wholesale energy prices rose on Thursday after a key electricity cable between Britain and France shut down.

    Mr Lewis said: “This is going to be a very challenging winter for customers and for suppliers and there is a real short-term imperative to do what we can to help consumers.”

    Green levies account for around a quarter of energy bills, he said.”

    Like

  27. “Four more small energy firms could go bust next week”

    https://www.bbc.co.uk/news/business-58610561

    “At least four of the smaller UK energy companies are expected to go bust next week amid soaring wholesale gas prices.

    Industry sources have told the BBC that four firms have asked larger players to bid to take over the supply to one million customers.

    The price rise has left some companies unable to provide their customers with the energy they have paid for….

    …This week two energy firms announced they had ceased trading.

    Edinburgh-based People’s Energy supplied gas and electricity to about 350,000 homes and 1,000 businesses, while Dorset-based Utility Point had 220,000 domestic customers.

    At the beginning of 2021 there were 70 energy suppliers in the UK. Industry sources say there may be as few as 10 left by the end of the year….”

    One thing they don’t mention is that autumn is when energy companies have to account for the “green” levies they have to hand over every year. That is probably the real reason many will go bust later this year. I suspect it has little to do with rising prices (though inevitably they will cause problems for some).

    I also wonder, if these high prices are maintained for the duration, whether plans for the Green Gas Levy will still go ahead?

    https://www.ofgem.gov.uk/publications/consultation-ofgems-administration-green-gas-support-scheme-and-associated-green-gas-levy

    “In March 2021, the Government Response to the Future Support for Low Carbon Heat and the Green Gas Levy consultations named Ofgem as the intended administrator of the Green Gas Support Scheme (GGSS) and associated Green Gas Levy (GGL).

    The GGSS is intended to encourage the deployment of new anaerobic digestion (AD) biomethane plants, and consequently the proportion of green gas in the gas grid, by providing support to biomethane producers based on the volume of eligible biomethane they inject into the gas grid. The GGSS will be funded through the Green Gas Levy (GGL), which will be placed on all licenced gas suppliers in Great Britain, with the exception of those who supply at least 95% green gas. The GGSS is expected to launch in Autumn 2021, and the first levy payment will be collected during the first quarter of financial year 2022/23.”

    The closing date for responses was 13th August 2021. I suspect if they’d kept the closing date open for another 5 weeks, responses might well have been rather unfavourable.

    Like

  28. Well, this is going well:

    “Gas price rise: Government considering loans for energy firms”

    https://www.bbc.co.uk/news/business-58620167

    “The government is considering offering emergency state-backed loans to energy companies as firms battle to stay afloat amid surging gas prices.

    Business Secretary Kwasi Kwarteng is holding crisis talks on Monday morning.

    Smaller suppliers face ruin as price hikes have made their price promises to customers undeliverable.

    The process for dealing with failing firms is under pressure as adopting customers has become unattractive for surviving companies due to price rises.

    The loans are expected to be offered to encourage firms to take on customers.

    Wholesale gas prices have risen by 250% since January after a cold winter put pressure on Europe’s supplies, running down levels of stored gas.

    Increased competition for liquefied natural gas, particularly from countries in Asia which also experienced cold weather, has added to the pressure on prices.

    Boris Johnson, who is in New York for a UN General Assembly meeting, told reporters: “We’ve got to try and fix it as fast as we can, make sure that we have the supplies that we want, make sure that we don’t allow the companies we rely on to go under.

    “We’ll have to do everything we can, but this will get better as the market starts to sort itself out as the world economy gets back on its feet.”

    Mr Johnson said he was “very confident” in the UK’s supply chains.”

    Oh dear, if BoJo is very confident, I’m worried.

    Like

  29. “UK energy company seeks funds to stay afloat”

    https://www.bbc.co.uk/news/business-58619418

    “The UK’s sixth largest energy company, Bulb, is seeking a bailout to stay afloat amid surging wholesale gas prices.

    The company, with 1.7m customers, is working with the investment bank Lazard to try to shore up its balance sheet.

    It is the latest energy company battling to avoid going bust, with at least four smaller UK firms expected to go out of business next week.

    High global demand for gas has caused a recent surge in wholesale prices.

    A bailout for Bulb could come as part of a joint venture or merger with another company, with a further option being a cash injection from investors, according to the Financial Times, who first reported the story.

    In a statement, Bulb told the BBC: “From time to time we explore various opportunities to fund our business plans and further our mission to lower bills and lower CO2.

    “Like everyone in the industry, we’re monitoring wholesale prices and their impact on our business.”…”.

    Perhaps it was that “lower CO2” mission that caused the problem?

    Like

  30. “Our eco-obsessed government is sleepwalking into an energy crisis
    We could be facing a hard winter of higher energy bills and even blackouts.”

    https://www.spiked-online.com/2021/09/18/our-eco-obsessed-government-is-sleepwalking-into-an-energy-crisis/

    “…What is to be done? The government needs to stop grandstanding about climate change and pay more attention to old-fashioned priorities. We’ve been hasty in phasing out coal, another relatively cheap and reliable source of energy. Years-long delays to the building of new nuclear power plants have left us facing a gap between the closure of old plants and the opening of new ones. And we have turned our backs on ‘fracking’ for natural gas, despite having plentiful domestic resources.

    Setting targets for tackling climate change and decarbonising UK energy is easy. But the hard task of actually achieving those goals without screwing up the economy has been left on the back burner. Instead, governments have wasted money on subsidising renewables and crossing their collective fingers that new technologies – like an economical way of storing excess power to be used later when needed – would somehow magically appear.

    Some of the issues that have led to price rises and energy shortages will pass. But we could be facing a hard winter of higher energy bills and even blackouts. Ministers need to get serious about energy policy, rather than showing off ahead of the COP26 climate-change talks in November. Otherwise, we could be facing a miserable, underpowered and costly future.”

    Liked by 1 person

  31. Stop me if someone’s already mentioned this, but Bernard Matthews is threatening a shortage of turkeys this Christmas because of a lack of CO2 caused by 40% of Britain’s fertiliser production (of which CO2 is a by-product) being shut down because of high gas prices caused by a lack of the wind which we need to power the turbines which are the only way of limiting the danger of global heating caused by too much CO2. All those chickens which can’t be painlessly gassed to death are going to come home to roost, living on to become old boilers, which are also .. oh, never mind.

    Liked by 2 people

  32. You can stop me as well and for the same reason, but if there are different colours/flavours of hydrogen (green hydrogen, red hydrogen and last week I saw reference to the holy grail of golden hydrogen) surely we can identify different varieties of carbon dioxide? That used for “good” (meat preparation, vegetable storage, growing plants in greenhouses) would be green CO2, whereas that caused by industry would be irredeemably BLACK and nasty.

    Liked by 1 person

  33. “No 10 is warned energy crisis and cuts could plunge households into hardship
    Senior Tories say thousands face ‘very, very difficult’ winter due to rising living costs and cut to universal credit”

    https://www.theguardian.com/politics/2021/sep/20/no-10-warned-energy-crisis-and-cuts-could-plunge-households-into-hardship

    “Hundreds of thousands of Britons face a “very, very difficult” winter thanks to rising household costs, No 10 has been warned, as firms said the energy price shock could trigger a three-day week for factories and further gaps on supermarket shelves….

    ..Damian Green, a former cabinet minister who was deputy to Theresa May, warned of the prospect of “very, very difficult times ahead for hundreds of thousands of people in this country”, while Robert Halfon, a Tory former business minister, called for the government to consider scrapping or reducing the 5% VAT on energy bills.

    Labour said many households would be crippled by the “triple whammy” of energy price rises, the NI rise and universal credit cut….

    …Energy bills are due to rise by an average of £139 in October, although the price cap restricts further increases over the winter. The spike in global gas prices – which has already triggered the collapse of several suppliers and threatened many more – means there is a risk of a further rise at the next review point in the spring….”

    Meanwhile, with an extraordinary lack of self-awareness, the architect of the UK’s Climate Change Act, “Ed Miliband said he feared the government was “much too complacent on the price and economic impact of the current situation” with energy.”

    Like

  34. And just to prove that somewhere along the way, we have entered an Alice Through the Looking Glass world:

    “Government should have moved earlier to low-carbon, say industry experts
    Energy crisis could have been lessened if more had been done to shift UK market towards renewables”

    https://www.theguardian.com/business/2021/sep/21/government-should-have-moved-earlier-to-low-carbon-say-industry-experts

    “Switching to renewables reduces the impact of fossil fuel price fluctuation, but the UK is still “particularly exposed to international gas prices”, said Rob Gross of UCL. “Gas power stations set prices [in the UK], particularly when demand is high and renewables output is low. Countries with a lower share of gas in their power mix experience less volatile prices and we should expect that here too.”

    Dan McGrail, chief executive of RenewableUK, which represents wind energy companies, said the government should learn the lesson for future years. “The first priority for government and the sector is, of course, protecting consumers in response to this price surge. The only way to do that in the long term is to have an energy system powered by cheap renewables, with flexible storage, hydrogen and other low-carbon technologies to meet demand at lowest cost.”

    He pointed out that it was already cheaper, even before the gas price began soaring, to generate electricity by building a new windfarm than running an existing gas power plant. The growth of renewables has cut the proportion of power the UK gets from fossil fuels from 60% to under 40% in the last few years.”

    There is so much wrong with this article that it’s difficult to know where to begin. Until very recently, electricity in the UK has been around 5 x more expensive than gas. Even now, it’s still significantly more expensive than gas. The surge in demand for fossil fuels, especially gas, has been in part at least because of the failure of renewables. Putting more renewables into the mix can only make that worse, not better. And of course, if we’d been allowed to frack for gas, given that we have plentiful gas resources in the UK, we wouldn’t be in this mess now. And the story also conflates electricity with power. Renewable electricity contributes maybe 10% of UK’s power, at best.

    Like

  35. “Families forced to choose between heating and eating as up to a quarter live in ‘extreme’ fuel poverty”

    https://www.pressandjournal.co.uk/fp/news/politics/scottish-politics/3483296/families-forced-to-choose-between-heating-and-eating-as-up-to-a-third-live-in-extreme-fuel-poverty/

    “Families will be forced to choose between heating and eating this winter, a leading charity has warned, with up to a quarter in some council areas facing “extreme” fuel poverty.

    It comes as the energy industry faces a crisis in wholesale prices which could force charges even higher.

    Frazer Scott, chief executive of Energy Action Scotland, said “skyrocketing” bills coupled with the end of pandemic support schemes and the continuation of home working will leave people facing harrowing choices during an “unpredictable” winter.

    Our analysis of data from Ofgem, the government energy regulator, reveals more than a third of households in some local authority areas in Scotland are already living in fuel poverty, while nearly a quarter in others are in extreme fuel poverty.”

    Given that a significant part of Ofgem’s remit is to look after the interests of consumers, there seems to be a strong argument that it has failed. Of course, it’s not entirely its fault. Ignorant politicians require it to do this at the same time as achieving net zero. It’s a circle that can’t be squared.

    Like

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