UK Labour Caught in Own Net-Zero Trap

RON CLUTZ

Rupert Darwall explains how UK Labour ensnared itself in his Spectator article  Labour has walked into a net-zero trap of its own making. Excerpts in italics with my bolds and added images.

The government’s net-zero noose draws tighter. At energy questions in the House of Commons on Tuesday, the Conservative MP Charlie Dewhirst asked the Energy Security and Net Zero Secretary Ed Miliband if the recent report by the National Energy System Operator (Neso) projected higher or lower bills under his policies. Miliband replied that Neso forecast lower overall costs. ‘It is completely logical to say that that will lead to a reduction in bills,’ he said.

Logic and historic data point in the opposite direction. Between 2009 and 2020, the average price of electricity sold by the Big Six energy companies rose by 67 per cent from 10.71p per kilowatt hour (kWh) to 17.92p per kWh. This wasn’t caused by any increase in the cost of natural gas. In fact, the average price paid by major power generators fell by 15 per cent over the period. There was, however, a spectacular explosion in the amount of wind and solar on the grid which rose from 4.5 gigawatts (GW) in 2009 to 37.95 GW in 2020.

The upward pressure on prices will only increase as Miliband pushes for more offshore wind. Earlier this week, the Financial Times reported a senior energy investment banker commenting on the hubris of the offshore wind industry, which has been hit by higher interest rates and supply chain inflation. Renewable energy projects require enormous upfront investment costs. The pay-off, its advocates argue, is that renewables have no fuel input costs. But it would be a mistake to assume they have minimal ongoing costs.

The North Sea is a harsh environment for wind turbines; fixing a defective wind turbine in the middle of the ocean is no easy matter. A 2020 forensic analysis of wind company accounts by Edinburgh University’s Professor Gordon Hughes found that Year 1 operating costs for deepwater wind projects averaged £44 per megawatt hour (MWh), rising to £82 per MWh in Year 12. Moreover, the output efficiency of wind turbines degrades at a rate of around 4.5 per cent a year. When plotted against the market price obtained for wind output, Hughes concluded:

 ‘a significant portion of wind output is expensive to produce and of no value in terms of its contribution to national wellbeing’.

Renewable subsidies are awarded in allocation rounds. The fifth allocation round (AR5), conducted under the previous government, was a dud because of rising project costs caused by higher interest rates and supply chain inflation. Coming into office, Miliband was determined to make a big splash with AR6. He threw bill payers’ money at it with a record-breaking £1.555 billion subsidy pot. The government accepted bids totalling 9.6 GW, which includes 5.34 GW of offshore wind and 3.29 GW of solar, capacity which is useless when it’s likely to be most needed to meet peak electricity demand on winter evenings.

The government gives successful bidders guaranteed prices, irrespective of how much – or, more often, how little – the market values their output. Consumers are then forced to make up the difference between the market price and the set strike price they bid for. The average strike price for AR6 was very nearly £80 per MWh. Based on Professor Hughes’s analysis of load factor decay and rising maintenance costs, there is a high risk that offshore wind becomes lossmaking well before Year 12. Floating offshore wind, which Miliband says ‘is at the heart of the government’s mission to make Britain a clean energy superpower’, was awarded an eye-watering strike price of £176 per MWh

Larger subsidies and floating offshore wind are hardly conducive to cutting bills.

Until mid-October, the wholesale price of electricity in 2024 averaged £78.70 per MWh. The more wind and solar added at strike prices above wholesale prices mathematically drives up the amount of subsidy consumers must pay. But the cost of renewables doesn’t stop there. Because wind farms are mostly located hundreds of miles from where electricity is used, when grid connections get congested, wind farms are paid constraint payments not to generate electricity.

Decongesting all the wind power on the grid doesn’t come cheap either. Miliband’s Clean Power 2030 Action Plan, published earlier this month, envisages building twice as much new transmission infrastructure in the next five years as was built in the past decade. The faster the planned build-out, the higher the cost. It means that renewable strike prices are a floor on which constraint payments and higher network costs are added.

That’s not all. There’s a second net-zero factor driving up energy costs. Net-zero policies have been forcing conventional power stations off the grid. Britain’s dispatchable generating capacity (principally coal, gas and nuclear) peaked in 2010, by 2020 declining by 25.1 GW and shrinking dispatchable capacity by 28.5 per cent. This was mostly because 18.3 GW of coal-fired capacity was retired as Britain demonstrated its green virtue to the world by powering past coal. The problem comes when there’s insufficient wind to power the grid. That’s what happened this autumn. Unseasonably windless conditions saw wholesale electricity prices rise through October and November with a huge spike at the beginning of December.

The latest renewable lobbyist talking point is that gas sets the wholesale electricity price. The implication is that gas prices are driving up the cost of electricity. However, gas prices this year have been lower than they were in 2023. The culprit behind the surging electricity prices is not the price of gas, but politicians kicking coal off the grid and Britain not having sufficient gas-powered generating capacity to meet demand when there’s not enough wind. Vladimir Putin and Qatari gas sheikhs are not to blame for home-grown net zero policies that have left Britain with dangerously inadequate non-weather dependent generating capacity.

In this, Britain is not alone. As other countries are finding out, having more renewables on the grid destabilises the electricity market. Sweden has also had soaring electricity prices, says Ebba Busch, Sweden’s deputy prime minister and energy minister. Like Britain, Sweden has an extremely weather-dependant energy system which makes prices highly volatile, worsened by its German neighbour on the other side of Baltic. The need, Busch argues, is for ‘more dispatchable power production’.

This is politically impossible for the Starmer government. Labour is trapped by net zero and decarbonising the grid constitutes its overriding mission. So far, neither the Conservatives or Reform have stepped up. Tory leader Kemi Badenoch calls herself a net-zero sceptic and Reform’s Nigel Farage wants more nuclear. Whatever the merits of nuclear, there is no way in which new nuclear power stations can be built and commissioned fast enough to offset the retirement of Britain’s old ones, let alone substantially increasing the amount of nuclear power. They should be thinking and talking like Ebba Busch: Britain needs an emergency programme to build 20 GW of new gas-fired power stations. If that means suspending net zero, they should make the case that keeping the lights on and electricity bills down is a price worth paying.

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This article (UK Labour Caught in Own Net-Zero Trap) was created and published by Science Matters and is republished here under “Fair Use” with attribution to the author Ron Clutz

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