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The Real Cost Of Miliband’s Decarbonisation Agenda

May 5, 2015

By Paul Homewood

 

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http://www.telegraph.co.uk/finance/newsbysector/energy/11582173/The-200bn-economic-bombshell-lurking-in-the-Labour-Partys-manifesto.html

 

The Telegraph has attempted to put a cost on Ed Miliband’s manifesto promise to decarbonise Britain’s electricity supply by 2030. Unfortunately they have muddied the water by adding the subsidies paid out to renewables together with the capital costs of building new nuclear.

So, let’s see if we can come up with the proper numbers, using the Telegraph’s assumptions, which are these:-

 

  • A market wholesale price for electricity of £55/MWh. (All prices are at 2012 levels). As the Telegraph points out, this is on the high side, as the current price is around £40/MWh. With oil likely to start flowing soon from Iran, and a glut of cheap natural gas ready to come onto the market, electricity prices are likely to remain low for some time.
  • An average strike price paid to renewables of £110/MWh, based on an even split of onshore, offshore wind and solar. Again, this is generous, as solar is unlikely to provide any significant contribution because of its essential worthlessness in winter, while there is limited room for expansion for onshore wind. As offshore wind, with a strike price of £140/MWh, will have to provide most of the extra renewable energy needed, the average price is more likely to be in excess of £120/MWh.
  • A 50/50 split in electricity generation between renewables and nuclear.
  • Total generation of 335TWh pa.

 

 

1) By 2030, renewables will be supplying 167.5 TWh pa, at a subsidy of £55/MWh. This equals £9.2bn.

2) The strike price for Hinkley Point (assuming more than one reactor) is £89.50/MWh, so for 167.5 TWh, the annual subsidy would be £5.8bn, giving a total annual subsidy, including renewables, of £15.0bn by 2030.

3) Existing subsidies for renewables and other climate policies already add about £3bn to electricity bills, so we can expect, on average, this bill to increase by £800 million each year between now and 2030. This would give a total cost over the next fifteen years of £135bn, though this would obviously depend on how quickly all this was phased in.

 

This is not quite as scary as the Telegraph’s numbers, but, as they point out, this does not include all of the costs involved, such as :-

 

  • The cost of providing standby capacity for intermittent renewables. Under the govt’s own projections, this will add £4/MWh to electricity prices even by 2020. Much more capacity will be needed by 2030, as more and more wind capacity is added. The potential cost could easily exceed £2bn a year.
  • The cost of connecting remote wind farms to the grid.
  • The large increase in electricity demand, which will result from govt policies to decarbonise transport and domestic heating. An increase of 50% is not unrealistic.

Given these extra costs, the annual bill by 2030 could easily be in excess of £24bn.

 

Of course, much of this is pie in the sky, since Miliband’s dream of total decarbonisation by 2030 is the stuff of illiterate fantasy.

The chance of getting the equivalent of seven Hinkley Points built by 2030 is zero. It is already apparent that, with the Austrian challenge to the UK’s proposed nuclear subsidies, Hinkley Point itself will not be built on time by 2023. According to World Nuclear News, back in 2013 when the deal was originally announced, the plan allowed for one year to get EU approval, followed by construction time of eight years.

The Austrian challenge could stall the project starting by between five and eight years, even if the challenge fails. Given the long planning processes for nuclear projects, it seems unlikely that construction could start on any other new reactors before the middle of the next decade.

Furthermore, even with nuclear supplying half of the UK’s demand, we will still need gas fired capacity to provide power when the wind is not blowing, so total decarbonisation is no more than a ridiculous pipedream.

 

 

The most worrying thing about all of this is the reaction of the Labour party to the Telegraph’s analysis:

“These figures are completely made up and similar attempts in the past have been comprehensively discredited.

“Investing in clean energy will lead to lower bills than the alternative high-carbon scenario and all the evidence shows that the benefits of strong and early action far outweigh the costs of not acting on climate change.”

What planet are they living on? Do they deny the much higher prices already being paid to renewable generators. Do they deny their own Climate Change Act, which put the annual cost of it at £18.3bn?

As for the benefits or otherwise of “acting on climate change”, we know that whatever action the UK takes will make not the slightest difference to global temperatures.

Worse still, the Labour spokesman goes on:

“This bogus analysis completely ignores the potential for carbon capture and storage and the fact that the costs of renewable technologies, such as solar power, are continuing to fall.”

As one energy expert commented, “You certainly can’t go about basing a major economy’s future on the hoped-for possibility of a technological breakthrough.” And even if some way is found to make it work, we know that any electricity produced from CCS will be much more expensive than conventional generation.

As for solar power, do they not know that solar is virtually worthless in winter months, when the extra power is actually needed. In Q1 last year, solar only produced at 4% of its capacity, and doubtlessly much less still in January when demand is at its peak. While it will produce more in summer, it will not actually be needed, because nuclear and whatever other baseload capacity we have will be merrily spinning away.

 

By 2030, the last person to leave the country won’t need to turn the lights out, they’ll already have gone out!

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11 Comments
  1. Gray permalink
    May 5, 2015 8:51 pm

    Their manifesto proves they’re all completely mad because as well as decarbonisation of the UK electricity industry by 2030 they also plan for zero global emissions by the middle of this century.

  2. avro607 permalink
    May 5, 2015 9:18 pm

    Do not forget that Milliband,Cameron and Clegg have signed a pledge to push for agreement at the coming Paris UN conference to destroy Capitalism.
    No mention of this before the election you will note.

  3. FrankSW permalink
    May 5, 2015 9:46 pm

    I find all this talk of billions here another 100 there is unreal noddy money. From a previous Telegraph article £1billion equates to about £42.43 per household.

    So to put this on a personal level £135b +£24b converts to around £6746 per household over 15 years. As Mr Average bill, that’s what I will be paying in between power cuts.

  4. Kevin permalink
    May 5, 2015 10:08 pm

    And of course while we are decarbonising we will all be driving electric cars and using electricity for heating and cooking. Where will all that come from?

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