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Peers Report On Energy Fails To Address The Real Problem

February 25, 2017

By Paul Homewood

 

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https://www.thesun.co.uk/news/2940408/furious-peers-urge-ministers-to-come-clean-about-the-true-cost-of-green-levies-pushing-up-household-energy-bills/

 

A new report by the House of Lords Economic Affairs Committee on energy policy attracted some headlines yesterday.

However, on further analysis, it seems to totally miss the point.

These are the key findings:

 

 

The Committee examined the impact of the policies of successive governments on the electricity market. In its report, "The Price of Power: Reforming the Electricity Market", published today, the cross-party Economic Affairs Committee identifies two key failures in the current market: the narrow amount of spare capacity, particularly in winter, and the rising cost of electricity to consumers and businesses.

In order to address the failures in the energy market the Committee recommends the Government should:

  • Ensure that security of supply is always the first and most important consideration in energy policy. Affordability and decarbonisation must not be prioritised ahead of security.
  • Ensure that decarbonisation is achieved at the lowest cost to consumers. Decarbonisation policies accounted for around 10% of the average domestic bill in 2013.  This may mean waiting for the development of new technologies which can reduce emissions. The Government should make sure that the pace of reductions is flexible and not a rigid path to be achieved at all costs.
  • Reduce and remove Government interventions in the market. The best way to do this would be to ensure that electricity generating capacity is secured through a single, technology-neutral, competitive auction for electricity supply. This auction would ensure that consumers are paying the lowest prices for low-carbon electricity.
  • Establish an Energy Commission to provide greater scrutiny of energy policy decisions. This independent advisory body would report to the Secretary of State and advise on the best way for all the objectives of energy policy to be delivered.
  • Create a world-class National Energy Research Centre which would search for new methods of producing cheap, clean energy and translate them into commercial applications.
  • Outline its ‘Plan B’ in the event Hinkley Point C is delayed or cannot produce the anticipated power.

http://www.parliament.uk/business/committees/committees-a-z/lords-select/economic-affairs-committee/news-parliament-2015/uk-energy-policy-report/

 

Although the Committee makes some valid points, it fails to show any understanding that both the problems outlined – security of supply and cost – are the direct consequence of decarbonisation policies, enforced by the Climate Change Act.

Instead, the blame seems to be being put on government process. The Committee Chairman, Lord Hollick, makes this clear in his comments:

 

Poorly-designed government interventions, in pursuit of the decarbonisation, have put unnecessary pressure on the electricity supply and left consumers and industry paying too high a price.

Hinkley Point C is a good example of the way policy has become unbalanced and affordability neglected. It does not provide good value for money for consumers and there are substantial risks associated with the project.

We would like to see the Government step back from the market and allow all generating technologies to compete against each other. It should establish an Energy Commission to ensure competitive auctions have independent oversight and are scrutinised carefully.

 

Hollick seems to be blissfully unaware that his own Labour party not only introduced the Climate Change Act, but has repeatedly called for even faster decarbonisation since.

 

First though, let’s look at some of the sensible points they make:

 

1) The UK currently has a slim capacity margin. The emergency tools available to the Grid to manage the margin have been effective in the short term. The Government has struggled to procure sufficient numbers of new power stations through the mechanism to ensure longer-term security of supply

2) The increased amount of electricity generated from intermittent sources presents new challenges for security of supply. As the proportion of electricity from these sources is projected to increase, tools to ensure cost effective back-up must be available and the cost of appropriate back-up incorporated into estimates of the cost of renewable generation.

3) It estimated that the proportion of electricity bills relating to climate change policies would increase to 24 per cent in 2020 and 26 per cent by 2030.

4) Industrial electricity prices in Britain are amongst the highest in Europe.

 

It never ceases to amaze me that anybody, least of all Parliamentarians, should be surprised at any of these issues.

The implications for electricity bills have been well publicised each year by the OBR in its annual Fiscal Outlook Report. And as I, not to mention the Energy Select Committee, have repeatedly pointed out, the true cost to the public, in terms of prices for goods and services, taxes etc, is triple what the Committee have said.

Equally, it has long been obvious that a deliberate policy of shutting down reliable coal power plants would leave capacity margins extremely tight.

It has also been just as evident that intermittent renewable energy cannot offer any security of supply.

 

The Committee takes particular issue with Hinkley Point. As readers will know, I have been every bit as critical.

However, the Committee fails to recognise that the need for new nuclear is a direct result of decarbonisation policies, as only nuclear can provide reliable baseload once coal and gas plants have been phased out.

The Committee whittles on about the relative costs of renewable alternatives, such as wind power, but fails to explain how they can provide security of supply.

Interestingly, they make no comments about potential alternative suppliers of nuclear plants.

 

None of their recommendations address the real issue, the Climate Change Act itself.

Instead they propose fiddling around at the edges.

For instance, they talk of a single, technology-neutral, competitive auction for electricity supply. Yet we already have this with auctions for CfDs. Of course, if all technologies (incl coal and gas) were allowed to compete, we really would get some answers to our problems.

They also suggest a new Energy Commission, but it is not apparent what that would do that OFGEM currently does not.

While we must be grateful to them for bringing these issues to public attention, none of their suggestions will make any material difference to solving them.

Only tearing up the Climate Change Act will do that.

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27 Comments
  1. Harry Passfield permalink
    February 25, 2017 1:24 pm

    Point #2 is spot on:

    […] the cost of appropriate back-up [should be] incorporated into estimates of the cost of renewable generation.

    Nothing pains me more than to watch another solar farm being built near me, taking up prime farm-land and suckling on the government’s taxpayers’ subsidy tit. No other venture would tolerate such a ludicrous business process: build a ‘power station’ that cannot work at all for two-thirds of the 24-hour day; make no guarantee for any output from it but be assured of being paid top dollar for whatever is ‘generated’; and increase the price consumers pay for what would be a cheaper alternative; and destabilise the existing reliable power generators. [memo to self: stop ranting…]

    • CheshireRed permalink
      February 25, 2017 2:58 pm

      I’ve said that for ages.
      Renewables don’t work without back-up, so the cost of back-up IS an integral component of the total cost of renewables.
      The true cost of renewables is therefore cost of renewables PLUS cost of back-up systems.
      End of discussion.

      • John Palmer permalink
        February 25, 2017 3:32 pm

        +100!

  2. February 25, 2017 1:37 pm

    I read the whole report yesterday (or was it on Thursday?). The report makes some good points, but it also contains some serious errors. I agree with your findings Paul and we know it won’t result in any significant change to Government Policy. Reports from the HoL tend to be filed in the round green filing cabinet.

    The main problem we have is the Climate Change Act 2008, because that sets a legally binding decarbonisation target for 2050. That target takes precedence over all other considerations, since they do not have the backing of the law. There is nothing else in law that says we must have a secure supply of electricity or that electricity must be affordable and yet these two factors are far more important than decarbonisation.

    The only solution is repeal of the Climate Change Act 2008 or a change to the targets in the Act (which the SoS can do if he thinks the science has changed – which it clearly has) and the elimination of the so-called “independent” Committee on Climate Change.

  3. Bitter&twisted permalink
    February 25, 2017 1:38 pm

    Why is this report not a surprise?
    What will be a surprise is if any sensible action is taken as a result.

  4. HotScot permalink
    February 25, 2017 1:40 pm

    Criminal enterprise disguised as government policy; tax everyone more, to fund rising energy prices so opportunistic spivs can jump on the Co2 scam bandwagon.

    Nightly prayer whilst kneeling by my bedside in my teddy PJ’s: Dear Lord, please bless Mummy, Daddy and Mr. Trump; and please help Mr. Trump expose the green shysters for what they are, and please make him ban the BBC and the Guardian from Presidential conferences.

    One out of two ain’t bad so far.

  5. HotScot permalink
    February 25, 2017 1:43 pm

    P.S.

    Please help Mr. Corbyn hang onto his job. He’s the best thing that’s ever happened to the Conservative party.

    • Gerry, England permalink
      February 25, 2017 8:45 pm

      With May and the Tories leading us to a Brexit disaster, Corbyn just has to hang in there until 2020 and Downing Street will be handed to him on plate. But then Labour MPs can’t see what will unfold any more than the Tories.

      • Tim Hammond permalink
        February 26, 2017 11:35 am

        You have to have no understanding of trade to believe that, and no understanding of how and why people buy things, and no understanding of what the UK makes and provides and why.

        So you are utterly ignorant. Well done.

      • Gerry, England permalink
        February 27, 2017 12:02 am

        I think the one who is utterly ignorant is you, Mr Hammond. You must be one of those who believes that the US, China, Australia etc trade with the EU without any trade agreements and rely on the WTO rules. But since you are ignorant you would not know that the US has over 20 trade agreements with the EU – if you possess any intelligence you can search the internet to find out. Sir Ivan Rogers in his appearance before the commons committee on Brexit said this. You are probably dim enough to think that trade is all about tariffs. But tariffs are a tiny almost insignificant matter compared to the non-tariff barriers that will stop our exports of cars, animals, food, chemicals, timber and wood products, lift components, etc because our ability to do this is because we are members of the Single Market. May is taking us out of the Single Market and placing her misplaced trust in replicating EU into UK law. Except that it won’t work because many of the supervisory mechanisms are carried out by the EU. But then you wouldn’t know that would you, Mr Hammond. You probably know nothing of the carnet system we used to use for taking equipment to another country to carry out work. Every little item has to be listed and god forbid you forgot something after the carnet was sent off. And then at every border you need the carnet stamped so you have to hope that if you are running late they haven’t gone home for the day. Fail to get it checked and enjoy spending hours with customs officers. And you have no idea what a ‘third country’ is which is where we will be since there is not time to complete anything but the most basic of agreements in just 18 months, after all, there is air travel to sort out. No flying in or out, or over if we leave with no deal rather than a bad deal as May has said, or just get timed out.

  6. Broadlands permalink
    February 25, 2017 2:08 pm

    And the real big point is not addressed at all? The cost of doing the impossible? Lowering the current atmospheric level by negative emission technology…capturing and storing billions of metric tons of compressed oxidized carbon. Simply take just ONE ppm of CO2 (two billion Mtons) and multiply it by any currency value. Hand that to your favorite politician (or celebrity). Maybe that might wake them up? But, don’t hold your breath.

  7. Bloke down the pub permalink
    February 25, 2017 2:09 pm

    Many of the problems associated with reducing carbon emissions from energy production could be avoided if the onus to provide back-up generation was placed on the primary supplier.The cost and CO&#8322: would then be imposed on the supplier and would thus favour producers who used the cheapest and most reliable source of energy.

    • AlecM permalink
      February 25, 2017 3:37 pm

      But that cannot be done because the purpose of the subsidies is to enrich insiders by allowing them via their oligopoly to tax the poor. The clue is smart meters, the purpose of which is to allow price to be set by shortages.

      The only real solution is to provide sufficient micro-generated CHP (say 15 GW) to reduce Grid price at night, very profitable standby in the day, to displace Diesel STOR, and reduce domestic and SME methane consumption by over 40%.

      • Gerry, England permalink
        February 25, 2017 8:38 pm

        That is just an unintended consequence of the subsidies. Government does everything by mistake as they are not intelligent enough to understand what their policies will do. Smart meters are intended to reduce demand by driving us towards greater efficiency – this is a key part of their pie in the sky plan. It is a bonus that is can be used via variable tariffs to spread the demand across the day to cover for a reduced supply.

        The only real solution is to admit that CO2 reduction is a waste of time and money because acting alone we will make no difference and in any event there is no proof that our CO2 does cause warming. Then we can just get back to coal and gas.

  8. A C Osborn permalink
    February 25, 2017 7:07 pm

    Paul, the Government Policies, this time German, are beginning to do what we all expected them to do.
    RWE won’t be able to carry on very long with this rate of loss.
    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/579200/Emissions_airpollutants_statisticalrelease_2016_final.pdf

    5.7Billion Euros in one year.

  9. catweazle666 permalink
    February 25, 2017 7:57 pm

    It never ceases to amaze me that anybody, least of all Parliamentarians, should be surprised at any of these issues.

    “least of all Parliamentarians”

    Why?

    These days, the vast majority of parliamentarians are politicians first and foremost, and have been ever since they entered higher education to study for their PPE’s.

    I doubt as many as one in ten has ever had a proper job, with real-world accountability and scrutiny, and the vast majority have an inbuilt distrust of any professionals who have, especially those nasty negative engineers who only ever tell them why their pie-in-the-sky rainbows-and-unicorns fantasies can never work in the real world, thus ensuring they prefer the opinions of nice agreeable ‘ologists instead.

    And as for their ethics, just look at Huhne, Gummer, Yeo and Davey…

    • Gerry, England permalink
      February 25, 2017 8:40 pm

      Our MPs are some of the dimmest people on the planet so it should be no surprise they can completely miss the whole cause of their actions. Shame on us for electing them in the first place.

      • roger permalink
        February 25, 2017 11:21 pm

        Absolutely right.
        However they do have the legitimate excuse of following orders first and last from their masters in the EUSSR.

      • Derek Buxton permalink
        February 26, 2017 10:41 am

        Therein lies the problem, M Ps are dim these days, probably the education system, ie brainwashing, is the cause. We are short of actual conservatives due to the cultural marxism in the people selected by CCO. Although dim, they still seem to think that they know all.

      • Gerry, England permalink
        February 27, 2017 12:11 am

        When we used to have a Conservative party rather than the current Blue Labour party, the majority of the MPs had held a proper job and so were blessed with a much greater level of common sense than other parties. Now they are just the same with their PPE degrees and having been party underlings with no life experience. And 40 odd years of creeping EU cancer where Directives are enacted into our legislation by Statutory Instrument that is not debated in Parliament has left them having little to no idea how this country actually operates. Not a good thing as we set about leaving the EU.

  10. February 25, 2017 8:11 pm

    The Telegraph had what appeared to be a slightly more realistic take thought still omitting mention of the CCA.

    For what it is worth I posted the following comment:

    “And if you want clean energy then look for any one of half-a-dozen tried and tested nukes in use around the world all of them cheaper and almost certainly (on current evidence) more reliable than Hinkley can ever be. EDF are in trouble and relying on them and the Chinese to supply 7% (maybe) of UK electricity sometime next decade (maybe) at £92.50/MWh (plus inflation which the article fails to mention) is madness bordering on criminal negligence.

    The purpose of government is not to “send messages” about climate or anything else to anybody. Nor is to engage in virtue signalling or “setting an example” to which no-one (least of all China and India) are paying a blind bit of notice. Its fundamental task is to cater for the well being of its own citizens, a function which it is notoriously failing to perform when it comes to energy supply.

    As for the views of “green groups”, since de-industrialisation is their objective and mendacity is their stock-in-trade it is hardly surprising that they take exception to this report. Renewables are not becoming cheaper unless you omit to take into account their full costs and leave the subsidies (paid for by the consumer) out of the equation and even if it were true it is irrelevant since wind and solar can never, ever, by their nature provide base load electricity. And the eco-fascists know that only too well. They just don’t care.”

    Incidentally the by-line is Jillian Ambrose. Dear little Emily appears to have migrated to The Times where she is continuing her excellent work in proessing press releases into news stories without the need for any sort of journalistic input. At least the DT had an attributed quote from Hollick though they couldn’t decide whether he needed one ‘l’ or two!

  11. February 26, 2017 10:54 am

    ‘This may mean waiting for the development of new technologies which can reduce emissions.’

    The praying-for-a-miracle approach. While we’re waiting, how about some reliable power generation for a change?

    • Gerry, England permalink
      February 27, 2017 12:18 am

      Sounds like the miracle car battery we are waiting for that can be charged in the time it takes to fill your tank with petrol or diesel.

  12. johnmarshall permalink
    February 26, 2017 10:59 am

    It would be great if these loones understood why their science was so wrong. Perhaps the new rules by Nature for results to be reproducable in papers might weed out the crap.

    • February 26, 2017 11:46 am

      Being able to reproduce the results of a climate computer model might not be a huge advance for science, even if it was possible.

      • Gerry, England permalink
        February 27, 2017 12:17 am

        The models require validation with reality not reproduction. In the welding industry for example models can be very useful in determining stresses in large components that can’t easily be tested. The model is created by using empirical data so that the output is validated. The growing divergence of the model output with the satellite records is something they choose to ignore.

        It is a giant step for Nature though given all the rubbish that they have accepted in the past.

  13. February 27, 2017 12:27 pm

    “…Hinkley Point C is a good example of the way policy has become unbalanced and affordability neglected. It does not provide good value for money for consumers and there are substantial risks associated with the project….”

    On the premiss that onshore wind will contribute little to future electricity generation, nuclear goes head-to-head with offshore wind for low-carbon electricity.

    Hinkley, even at £92.50/MWh [linked to inflation] represents much better value to consumers than offshore wind at £140.00/MWh [linked to inflation].

    The Government was caught between a rock and a hard place because HPC has to go ahead and start delivering or it’s Plan-B and kiss the mandatory carbon targets goodbye. So De Rivaz screwed them and turned HPC into a milch cow for EdF and the Chinese Government.

    If £18 billion [cost of HPC] were invested in offshore wind, it would only receive one-fifth of the income HPC will earn. Yet, through the Green Investment Bank our Government has sunk a over billion into offshore wind and not a penny into nuclear power – even though it meets all 5 points of their ‘Green Purposes’

    http://idiocyofrenewables.blogspot.co.uk/2017/02/nuclear-power-hinkley-point-c-nuclear.html

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