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Revealed: the great wind farm tax ‘con’

February 14, 2016

By Paul Homewood 

  

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http://www.telegraph.co.uk/news/earth/energy/12156171/Revealed-the-great-wind-farm-tax-con.html

 

 

The Telegrpah reports:

 

Ministers have been accused of planning a U-turn that would see consumers fund new onshore wind farms through green levies.

The Government confirmed it was “looking carefully” at a wind industry proposal to continue public financial support for new turbines, despite a manifesto pledge to halt expansion.

Critics described the proposal as a con, and said the Conservatives’ policy had been “crystal clear” that the subsidies would stop.

Under the plan, households would still be forced to pay millions of pounds on their energy bills to fund new wind farms – but the payments would no longer be defined as subsidies.

 

 

 

The wind industry’s plan hinges on the fact that no new power plants are commercially viable to build at the moment without extra financial support from bill-payers.

If wind farms can be built at lower cost to consumers than alternatives, such as new gas plants, then payments to fund them should no longer be classed as “subsidy”, the industry argues.

“Hard-working energy consumers will not be conned by a change in name. The Conservative manifesto was crystal clear that public subsidies for onshore wind will stop"

Owen Paterson, Tory MP and former environment secretary

Andrea Leadsom, the energy minister, admitted that the proposal for so-called “subsidy-free” contracts would not in fact be “cost free” for bill-payers, but said the Government was “listening carefully to industry on how it can be delivered”.

Opponents called the plan “outrageous” and said that the proposals under consideration would still constitute subsidies.

Owen Paterson, the Tory MP and former environment secretary, said: “Hard-working energy consumers will not be conned by a change in name. The Conservative manifesto was crystal clear that public subsidies for onshore wind will stop.

 

Owen Paterson   Photo: GEOFF PUGH

“There is absolutely no place for subsidising wind – a failed medieval technology which during the coldest day of the year so far produced only 0.75 per cent of the electricity load.”

The Conservatives pledged in their 2015 manifesto to “halt the spread of onshore wind farms” and vowed to “end any new public subsidy” for the turbines.

More than 5,000 wind turbines have so far been built onshore in the UK under efforts to hit renewable energy and climate change targets.

Consumers are already estimated to pay in excess of £800 million a year in subsidies for the turbines, adding about £10 to an annual household energy bill.

David Cameron has said that Britain does not “need to have more of these subsidised onshore”.

But the proposal being considered by the Department of Energy and Climate Change (DECC) would see onshore wind farms continue to qualify for an existing subsidy scheme that guarantees developers a fixed price for electricity generated.

 

The most recent onshore wind farm contracts awarded under the scheme, early last year, were at prices of about £80 per megawatt hour (MWh) – more than double current market prices of about £35/MWh. Consumers will fund the difference through green levies on their energy bills.

Under the proposals being looked at by DECC, prices of between £60/MWh and £80/MWh would be regarded as “subsidy-free” by 2020.

 

John Constable, of the Renewable Energy Foundation, a group critical of renewable energy costs, said it would be “outrageous” to regard the proposal DECC was considering as “subsidy free”. “It is just spin doctor stuff, it’s playing with words,” he said.

Glyn Davies, the Tory MP, a member of the energy select committee, said: “I don’t think we should be introducing mechanisms that continue with subsidy – just to say there’s no subsidy when there actually is.”

He said he would be “very concerned” if ministers continued payouts to new onshore wind farms.

 

Fellow Tory Peter Lilley said the wind industry’s proposal “wouldn’t be subsidy-free” and that wind farms should not receive the same support as gas plants, because the power they produced was not reliable and was therefore worth less.

Mr Paterson added: “If we must support energy, we should help develop combined heat and power which increases efficiency from 50 per cent to 80 per cent or we should develop new technologies which actually work.”

A DECC source insisted energy secretary Amber Rudd was “crystal clear that the manifesto commitment to end new public subsidies for onshore wind and give local people the final say is delivered to the letter”.

“Any idea that doesn’t do this is simply not going to get the green light,” the source said.

The influential think-tank Policy Exchange has said that “subsidy-free” contracts should be offered to support the construction of new onshore wind farms in Scotland and Wales, as well as replacing old turbines with new, far bigger ones.

 

 

There are a number of problems with the analysis that £80/MWh can be regarded as subsidy free.

For a start, the offer of a guaranteed price to onshore wind and other renewables is itself a form of subsidy, which is not available to gas power plants. This is because it is offering something over and above what the market is. In normal circumstances, if a buyer offers a such a guarantee, he would expect a reduction in the usual market price in return.

Moreover, the way the Contracts for Difference scheme works gives renewables preferential access to the market, in effect a guarantee that all of its output will be purchased. This is because renewable power can be sold as cheaply as is necessary to undercut other suppliers, safe in the knowledge that the government will top up that price to the full guarantee. If necessary, there is nothing to stop an onshore wind farm selling its output at 1 penny per MWh. Again, in normal market conditions, such a guarantee to buy all that can be supplied would only be given in return for a discount.

 

But there is one fundamental point which the Telegraph article has not addressed. Their link to £80/MWh would be regarded as “subsidy-free”, takes us through to the Committee on Climate Change’s Power sector scenarios for the fifth carbon budget, published last October.

This is the key section:

 

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https://www.theccc.org.uk/publication/power-sector-scenarios-for-the-fifth-carbon-budget/

   

 

They even have this pretty graph. Where there is no carbon price, the cost of gas generation is just slightly over £50/MWh. 

In other words, wind power can only become competitive by loading gas generators with a huge carbon tax.

 

image

 

But it gets worse!

 

As the CCC notes:

 

 

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image

 

So even if the cost of wind power comes down to £60/MWh eventually, the true cost, including that of providing standby capacity, would still be £70/MWh.

 

 

There is of course a very simple answer to all of this – let onshore wind and other renewables compete on a level playing field with gas generation, with no guaranteed prices or preferential access to the market. If they can eventually get costs down as promised, they should then be able to stand on their own two feet.

In any event, the last thing we should be doing is locking in higher costs for the next fifteen years now, if the darned things are going to be so much cheaper in a few years time. 

10 Comments leave one →
  1. manicbeancounter permalink
    February 14, 2016 2:37 pm

    So subsidies for onshore wind will continue under another name. Meanwhile tax breaks to the oil industry are counted as subsidies. Even worse a failure to impose a carbon tax at a level to cover externalities at a fantasy rate that is only justified by costs unrelated to the real world is also a subsidy (see Monbiot’s article).
    Then there is the subsidies for burning wood, with the carbon emissions not counted in the statistics.

  2. David Richardson permalink
    February 14, 2016 2:53 pm

    All part of the fantasy world politicians seem to live in. Given that only a handful of MPs have a qualification in science or engineering, the whole thing is governed by green implants in DECC. They would claim that they are simply fighting to adhere to EU diktats on renewable energy and our overblown desire to lead the World.

    Of course the whole edifice is driven by Agenda 21 and the IPCC has its brief to paint a veneer of science on “Climate” to give the appearance of respectability.

    • manicbeancounter permalink
      February 14, 2016 3:05 pm

      You do not need a qualification in science or engineering to understand why this is wrong, just a dictionary.

      • BLACK PEARL permalink
        February 14, 2016 4:09 pm

        X 2

  3. February 14, 2016 4:51 pm

    One thing is certain; this Government is not to be trusted and the energy policy being pursued by Amber Rudd (or DECC who are pulling her strings) is a fiasco.

  4. It doesn't add up... permalink
    February 15, 2016 1:13 am

    The current gas price is under 29 p/therm or under 1 p/kWh

    https://www.quandl.com/collections/futures/ice-uk-natural-gas-futures

    which gives a marginal cost of power from CCGT of about 20 £/MWhe at 50% efficiency

    Meanwhile coal is under 45 $/tonne for ~7 MWh/tonne GCV (6,000kcal/kg)

    https://www.quandl.com/collections/futures/ice-rotterdam-coal-futures

    which is about £4.30/MWh GCV, or around £12.90/MWhe assuming efficiency of 33.3%.

    Modern plant is more efficient in both cases – around 60% for CCGT and close to 50% for coal without CHP or CCS.

    For completeness – HFO is under 140 $/tonne, or 12 $/MWh GCV, which is slightly more expensive than CCGT at 40% efficiency.

    Conclusion: At current (sic) prices, unreliables need even more subsidy.

  5. February 15, 2016 1:28 am

    Medieval technology is indeed correct. Absolutely worthless and delusional. Cost shifting to china, then skim off the top for the scammer developer. Move the capital goods to a shell operation and the developer walks away. Shell operates for seven years, the depreciation schedule, takes the subsidies and pays off the “investors’ all the while, then declares bankruptcy leaving a rusting hulk turning in the wind, producing nothing, but giving the impression that it is working. That is wind power in a nutshell.

  6. Malcolm permalink
    February 15, 2016 10:18 am

    For a Conservative government to think in such terms is unconscionable. To think that the only bastion of free enterprise should propose such a thing. This is the legacy of socialism. Even though that creed is out of power the measures that it too often adopts to govern have a legacy that lives on no matter what flavour of government follows. We are in hock to bizarre social sentiments of caring, we have been saddled with legislation that would do for a team of Philadelphian lawyers. They have made intrusions into public wealth, ingenuity and consciousness that have become a norm while being totally destructive to the course of our society and the sanctity of the public purse.

    Our supposed debt to the world is a notional thing which hitherto would not have stood examination. A state that demands houses be built while having not a clue how to nurse sufficient business into existence, a state that is quite happy to dumb-down wages and prospects to be part of some European institutionalism. All it took was a British Obama to take the reins and that is exactly what has happened. What we needed was the employment of one of the labours of Hercules, cleaning the ‘Augean Stables’ and what we got was a Prime Minster who is quite happy for the mess to persist.

    Put as a cross party failure we have the inability to man-up (woman-up too) on the subject of a power resource that is certain and available on demand. To foist such a reliance onto wind power is the sure sign of that sort of romantic gesturing that would accompany the university study of ‘Greats’, and though an accomplished marketeer with the silver tongue and self-assurance to sell anything, David Cameron seems totally anti-science and has adopted the doom sayers view of the outcome. To suggest that the time to act, especially with the current frisson surrounding fusion, is mad, bad and dangerous. It takes a totally unscientific mind to be so sceptical about what the the unbridled scientific community is doing and only reasserting the role of the lap-dog funding chasers who are quite willing to sell their own children into slavery to maintain their social and university places.

    This is the legacy of the last socialist regime and Edward Miliband being followed without demur. The portrayal is one of the blindness of the undercurrents of political ebbs and flows where even dogma can live on unopposed when temerity, populism and fine words prevail. Considering that the British industrial revolution was conducted between capital and a largely education free community of engineers and now matters of scientific development are premised on errant sentimentality. The Industrial Revolution proposed earth shaking ideas and conjured vast wealth. The need to be ahead of your competitor demanded constant revision and a flow of ideas. Today, with the literary in control, everything is reduced to emollient words and fantastical prognostication. We are in thrall to emotion and contrive our denouement when the actual certainty of mankind is governed by its revisionism.

    What had the politicians been doing while Trevethick and Watt and Brindley were clamouring through the original, untravelled recesses of men’s minds? Only when the great thing was done did they attach to the wealth and generally leached, harvested, the wonderful minds of others. In the issue to hand, we see a situation where the romantic mind is set on its course while, equally, any expression of alternative and promise, any suggestion of the cooling of misdirection and the capabilities of the febrile mind, are lost and quiet conjecture spurned. We are a literary society that has more capability to disseminate its passions than any time hitherto. It is science’s burden that it is too complex and cannot convey its convolutions in a manner that the lay person can understand while the literary can construct monsters in the proportion of Mary Shelley. Science has been turned into servant rather than a leader, in complete refutation of the scientific revolution. The PM has showed himself more than ready to intervene in the workings of markets but, as in the great housing debacle, it is the failure of government policy which has instituted a cover-up and even more interference from that failed clan of legislators. Have we ever been in more peril?

    • February 15, 2016 5:50 pm

      Despite being a middle-class socialist, I generally agree with your points once the politics are stripped out. Surely you must agree that Cameron-the-chameleon makes Obama look active and Nixon honest…. maybe not?

  7. February 15, 2016 9:43 pm

    Both onshore and offshore wind farms have some effects over the climate that haven’t been investigated enough and which, on long term, may influence the climate in a bad way. I’m a supporter of green energy, but I think that it’s better to do some research first, and then use these alternatives. I do remember this post – https://notalotofpeopleknowthat.wordpress.com/2016/01/21/arnd-bernaerts-ocean-warming/ where was explained the role of offshore wind parks related to regional warming.

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