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Gummer Has Grossly Underestimated The Cost Of The Climate Change Act

August 16, 2016

By Paul Homewood

 

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https://documents.theccc.org.uk/wp-content/uploads/2015/11/Sectoral-scenarios-for-the-fifth-carbon-budget-Committee-on-Climate-Change.pdf

 

As part of their Fifth Carbon Budget, the Committee on Climate Change calculated how much their proposals would cost, which would then need funding by the Levy Control Framework. (The LCF in principle caps the costs that can be passed onto consumers as a result of government policies).

According to their calculations, costs would peak in 2028, at £9.4 billion. It is worth pointing out here that this number does not include any allowance for the cost of the Capacity Market Mechanism, estimated by the OBR at £2.7 billion for 2020/21. It merely covers the cost of electricity generation from renewables and other low carbon sources, over and above the normal market price.

However, there is a big con going on here. The wholesale price of electricity is already artificially inflated by the Carbon Price. Moreover, the plan, and therefore the above costs, also assume that this carbon price will be gradually raised in coming years.

Put simply, the cost of subsidising renewables in years to come is grossly understated, because they are being compared with an artificially inflated market price.

(For clarification, the CCC state that “we use the long-run marginal cost of a new-build gas plant as a proxy for the electricity price”).

 

To find out how much the cost of subsidy has been understated, I asked the CCC for their detailed calculations, and they have sent me their spreadsheet.

 

 

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Don’t worry too much about the actual numbers. The total cost is on the bottom line, and you can probably just about see the cost of £8021 million in 2030.

Of more interest though is the top line, Wholesale Prices, which rises from £51.98/MWh in 2016, to £84.37 in 2030.

 

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On the “Lists” tab, they show how much of this wholesale price is Carbon Price Uplift. By 2030, the “wholesale price” will include £27.52/MWh for the carbon price, up from £8.06 this year.

 

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It is this sleight of hand that enables the CCC to claim that the cost of decarbonisation will start to fall after 2028.

 

Using their generation figures, we can recalculate what the real cost of their policies will be:

 

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By 2030, the annual cost will be £15.6 billion, instead of the £8.0 billion claimed. Over the next fifteen years, the total cost will be £157 billion. Again, remember that this does not include the cost of providing standby capacity.

One more thing to note. All of the calculations are based around the central case for power prices. This gives a current price of £51.98/MWh, whereas the low case is £43.88. Although I would not argue with using the central case, it is worth pointing out that the current wholesale price is £43.80.

If prices remain low, the cost of subsidising renewables will be much greater than anticipated.

 

 

FOOTNOTE

The CCC spreadsheet also contains a lot of useful information about prices for various renewable technologies. I will be saving this for a future post!

22 Comments leave one →
  1. rwoollaston permalink
    August 16, 2016 3:54 pm

    Although you will probably cover this later, the premium for the nuclear strike price over the wholesale market price is not included either – assuming we want to include that as a ‘hidden’ green subsidy.

  2. 1saveenergy permalink
    August 16, 2016 4:07 pm

    Not underestimated,
    the costs have been known all along; it’s always been about hiding them.

    • rwoollaston permalink
      August 16, 2016 4:13 pm

      Yes, the point is who knows about them! Knowing politicians and their thirst for convenient truths, I’d be surprised if the members of the committee themselves fully understand…maybe the Audit Commission needs to get involved in order to expose the true costs.

      • Nordisch-geo-climber permalink
        August 16, 2016 7:31 pm

        As a former chairman of Governance committee for a stock-market listed company – if I was in their position I would expect to be lynched and put in prison. How do they sleep at night?

    • August 16, 2016 4:51 pm

      Dead right.

      I remember highlighting this discrepancy when the Budget came out last year. In the small print, it admits what they are up to.

      But none of the graphs or figures actually quantify it

  3. August 16, 2016 4:12 pm

    The devious ****s figures do not show the cost in terms of companies failing / leaving the UK because of high power bills. Steel has largely gone to EU countries, paper-making has almost all gone to EU countries….. Chemicals next if it were not for Ineos backing fracking.

    At least that will reduce the risk of rolling power cuts, or has current usage been included in the plans for grid management?

  4. markl permalink
    August 16, 2016 4:42 pm

    It’s not about informing the public. It’s about telling them only what you want them know. That’s normally referred to as propaganda.

  5. August 16, 2016 5:12 pm

    What about the cost of emergency payments when electricity supply runs short, as it must do when they keep closing power stations without replacing them like-for-like?

  6. Max Sawyer permalink
    August 16, 2016 5:23 pm

    Is there a realistic chance that the Government will repeal the Climate change Act and derogate from the EU Large Combustion Plant Directive? In combination, these have cost the UK its aluminium smelting and almost all of its steel producing industries by artificially raising energy prices. The UK produces around 1.5% of global CO2, so whether we halve or double that will make no appreciable difference to World levels, but then as an denier of anthropomorphic climate change I am happy to take this view – as presumably Germany is, given the rate at which it is building coal-fired power stations. The climate is of course changing – it always has and it always will – as a result of natural phenomena such as El Nino, La Nina and variation is the Sun’s activity, the Earth’s orbit and the tilt of the Earth’s axis, so it is pointless to try and fight it. Far more sensible to live with the consequences, as in Nigel Lawson’s book “An Appeal To Reason”. Energy generation in the UK should be predicated on cheapness and self-sufficiency/energy security – everyone would benefit. A mixed approach would be sensible, provided the costs stack up – coal, gas (including from fracking), modular nuclear (forget about (Hinckley Point), combined heat and power, incinerators, pumped storage hydro, solar, plus research into Thorium reactors, nuclear fusion and battery technology. And if they work in a free market, subsidies will be unnecessary.

    • Gerry, England permalink
      August 17, 2016 12:50 pm

      You could put cement production, glass manufacture, oil refining (energy costs were part of the Grangemouth dispute) on the danger list. If the madness continues you can’t help wonder how long before car production starts to move out.

      It is ‘anthropogenic’ by the way.

      • Max Sawyer permalink
        August 17, 2016 1:12 pm

        Quite right – appalling typo, no excuse!
        Likening animals to people would hardly be relevant here.

      • 1saveenergy permalink
        August 17, 2016 2:14 pm

        Well, Gummer & his mates have had their noses in the trough for years, but you’re right, we shouldn’t drag animals down to our level.

  7. AlecM permalink
    August 16, 2016 5:52 pm

    They have also failed to put in the cost of Police Protection for CCC members when the lights go out!**

    **Winter 2016/2017 which to judge from the present North Atlantic ocean temperature data will be like that of 1962/1963, when most homes had a coal fire and kerosene burners as basic heating and cooking.

    This time around the excess death toll could be in the 100s of 1000s because there is no backup option for most people.

    • August 16, 2016 6:11 pm

      Domestic consumers will have some protection from power cuts as industries will take the hit first – mostly voluntarily in return for hefty payments. That’s supposed to be the plan at least.

      • Gerry, England permalink
        August 17, 2016 12:48 pm

        Hefty payments of taxpayers’ cash of course.

  8. Oliver K. Manuel permalink
    August 16, 2016 6:23 pm

    Deception about costs to society from ignoring the report in the last paragraph of Aston’s 1922 Nobel Lecture are staggering:

    Human kind will now have command over “Powers beyond the dreams of scientific fiction” – NEUTRON REPULSION, as reported today in yet another peer-reviewed publication that avoided tyrannical government censorship

  9. tom0mason permalink
    August 16, 2016 6:24 pm

    Surely Paul, all you’ve done is just over-estimated the future price of diesel.
    🙂

  10. Broadlands permalink
    August 16, 2016 7:43 pm

    According to that Carbon Budget Committee’s report, they say that after CO2 capture, “storage is unlikely to be a limiting factor”. Where is all this captured carbon to be stored?

    After all, just one ppm of CO2 is ~213 petagrams, and getting us back to a “safe” 350 ppm means 50 times that much has to be captured from the atmosphere and be put somewhere safely…where it cannot leak back out. That seems virtually impossible.

    Or have I misunderstood and miscalculated?

  11. 1saveenergy permalink
    August 16, 2016 9:46 pm

    Or have I misunderstood and miscalculated?”
    No & No.

    “Where is all this captured carbon to be stored?”
    I’d like to stuff some up Gummer

    • ray permalink
      August 17, 2016 7:50 am

      “…carbon to be stored…”

      Mesopelagic fish transport downwards in the water column of the Ocean* a large amount of carbon. It turns out that the mass of these fish has been grossly underestimated** – instead of a billion tons of them there is more like 10 billion tons. The consequent underestimation of the active transport downwards provides a clue to the “missing carbon” conundrum. The Ocean may well drain CO2 from the air quicker than previously estimated.

      * They tend to feed at night on plankton near the surface, and poop in the deep during the day.

      **Their motion sensors enable them to evade nets. Recently, sonar techniques have been used to locate and measure them.

      • Broadlands permalink
        August 17, 2016 1:21 pm

        Ray… You are confusing standing crop secondary productivity with long-term carbon storage.

        On its way down almost all of the primary productivity, the photosynthetic phytoplankton carbon is rapidly recycled back to CO2 by food chain oxidative respiration…”fish food”. Sediment trap studies reveal that just 10% reaches 200 meters and only ~1% gets below 4000 m. (Suess, 1980). Annual marine burial rates have been estimated at 0.03% for the open ocean (Berger et al., 1989). Thus, using a 10 gigaton per year estimate, this works out to a miniscule 0.0003 Gt for the open ocean. Not much help for any climatically meaningful sequestration of CO2. The CO2 tied up in organic carbon must be buried, and “stored” below the sediment-water interface of further anaerobic recycling, to make an impact… long term. That’s what “fossil fuel” carbon is… and we are trying to stuff it back??

  12. Max Sawyer permalink
    August 18, 2016 5:08 pm

    Good article by Ambrose Evans-Pritchard in today’s (18 Aug) Daily Telegraph, although I do share his caveats in the fourth last paragraph.

    http://www.telegraph.co.uk/business/2016/08/17/britain-should-leap-frog-hinkley-and-lead-21st-century-nuclear-r/

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