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CCC Analysis Reveals The Frightening Cost Of Decarbonisation

March 3, 2020

By Paul Homewood

 

h/t Joe Public

 

 image

https://www.theccc.org.uk/publication/analysis-on-abating-direct-emissions-from-hard-to-decarbonise-homes-element-energy-ucl/

 

Last August, shortly after the publication of their Net Zero plan, the CCC released the above analysis which they had commissioned.

Although it was intended to study “hard to decarbonise” homes, such as heritage houses and older properties with limited space, the study included a dataset of assumptions made by the CCC in their Net Zero and other work, but never released in public (as far as I am aware).

These include the projected costs of energy:

image

https://www.theccc.org.uk/wp-content/uploads/2019/08/Analysis-on-abating-direct-emissions-from-%E2%80%98hard-to-decarbonise%E2%80%99-homes-Element-Energy-UCL.xlsx

 

These costs are fixed at 2018 prices, in other words there is no general inflation element.

Between 2018 and 2030, natural gas costs are projected to increase by 47%, with oil going up by 32%. These seem to be highly dubious assumptions, given that in a world theoretically quitting fossil fuels there would be a glut of gas and oil.

The higher the cost assumed for fossil fuels, of course, the lower the projected cost of decarbonisation appears, so there is a built in incentive for the CCC to overestimate the former. It is certainly the case that government projections have consistently overestimated gas prices in recent years.

Leaving this aside, however, what is really significant is the dramatic increase in real electricity prices – 22% for both peak and off peak. These increases are the direct result of the ever increasing subsidies for low carbon electricity.

In terms of household bills, this would equate to an additional annual cost of about £160. However this does not reflect the full cost, as domestic use only accounts for a third of total electricity consumption. The total cost for the country of these increases would be around £9bn, and comes on top of the current subsidies of £12bn.

And, of course, it does not end there. According to the projections, electricity costs will be 6 times as high as natural gas by 2030. With an average annual gas bill of, say, £600, households will be facing an increase of up to £3000, even if they go for off peak storage solutions.

Heat pumps, of course, are more efficient, but even with these gas bills are likely to at least double. On top of that, householders will be faced with installation bills of well over £10,000. In total cost terms, assuming everybody goes down the heat pump route, heating bills would rise by £15bn a year nationally, while the cost of fitting heat pumps would amount to at least £260bn.

Costs to industry and the public sector will add considerably to that figure.

 

The hydrogen option looks no better, with a projected cost of double that of natural gas. That estimate is almost certainly too low, as the CCC point out that it does not include the cost of “seasonal storage of hydrogen”, for instance in salt caverns, which would be essential if hydrogen heating was widely rolled out.

It also does not cover the one off cost of retro-fitting homes and appliances.

District heating schemes (DH) are often presented as a green alternative, but unfortunately these work out at four times the cost of gas, on top of capital expenditure of £6000 per house to cover heat exchangers and piping.

With figures like these, it is not difficult to see how national costs could rise to £50bn a year very quickly.

40 Comments
  1. March 3, 2020 12:11 pm

    Don’t do the hard to decarbonise stuff. Just do the easy to decarbonise stuff and offset the hard to decarbinise stuff. It’s a NET zero plan after all not an absolute zero plan.

  2. March 3, 2020 12:26 pm

    The “hard to decarbonise stuff” is all of it. The “easy” stuff can only be offset if some someone somewhere is doing “hard” stuff – you just cannot plant enough trees to compensate particularly when large scale wind and solar leads to clearing of forests. In any case, green energy companies will be charging real price increases whether it leads to a real decrease in CO2 emissions or not. There is no free lunch where decarbonsation is concerned.

  3. March 3, 2020 12:32 pm

    Reblogged this on Wolsten.

  4. Jackington permalink
    March 3, 2020 12:32 pm

    The DT reports today that almost I in 5 children in the UK are having bad dreams about climate change. I know how they feel

    • JohnM permalink
      March 3, 2020 2:33 pm

      My experience confirms this. I had four children and none of them dreamed – ever. We did think of having another, but my wife refused when she learned that every fifth child born was Chinese. :o)

  5. It doesn't add up... permalink
    March 3, 2020 12:46 pm

    Last night I read through the BEIS “consultation” document on proposed changes to the CFD system for future allocation rounds. In reality, it sets out how they are minded to proceed with future development of the electricity system. We have a request for how best to con the locals that a wind farm near them is good for them.

    But the real meat is their clear expectation that offshore wind will be the mainstay, including floating turbines in deeper waters. They plan to allocate a special pot to enrich Norwegians (Equinor runs a demo floating turbine project currently, and dominates the technology cross over from deep water oil and gas platforms). This will of course be extra expensive as it it is still considered under development, and there is no real competition because it is economically unattractive, so you have to con someone to invest in it. BEIS are their own patsy. Evidently they have learned nothing from the experience of locking in prices that are four times the most recent cleared bid on offshore wind.

    Speaking of which, they are evidently getting nervous about delivery, with a whole section devoted to possible ways to toughen up sanctions for non delivery of a project, including a bid bond at £10,000/MW, and lengthening the period for which a failed bidder would be wallied (easily circumvented by establishing a new investment vehicle – it isn’t Oersted that invested in Hornsea, but Hornsea Power Ltd.).

    There is also a whole section on negative pricing. Currently, CFD payments are capped at the level of the CFD, but if there is a continuos period of 6 hours or more of negative day ahead prices, then the CFD pays nothing at all. The signs are that they have greatly underestimated the risks of wind and solar surpluses, and have failed to take on board that interconnection will likely make the problem worse. So they are proposing to pay zero on any negative settlement price with no running six hour qualification.

    The idea is that this provides the full value of the CFD as an incentive to building storage. Current rules require storage to be separately metered, which adds cost and transparency. They are considering allowing co-located storage to be behind the same meter, provided ot isn’t used to store imported energy from elsewhere on the grid. The whole concept is of course bonkers. If they expect storage to make a return out of CFD prices below £40/MWh or for it to be co-located at deep sea floating platforms and not be allowed to be used other than for the attached wind farm they are indeed complete idiots – never mind the scale of storage that would be required. Of course, what we are seeing is careful manipulation of the market to ensure that bids remain just above zero for maximum CFD payment and maximum damage to unsubsidised competitors.

    The one small bright feature is the plan to stop paying subsidies to coal to biomass conversions from 2027. The bad news is that CCS remains as another highly expensive option in similar vein to floating wind, although they don’t talk about it much.

    They seem to think that the capacity market will sort out the various lacunae in their schemes, without offering any insight as to the likely consequences. Of course what they are doing is picking winners with absolutely no regard for the system wide costs of their choices. Contrast the recent work by Capell and Gubson for GWPF, which started from the point of view of trying to minimise whole system costs. Their whole basis is the legal requirement for net zero, whatever it costs.

    https://www.gov.uk/government/consultations/contracts-for-difference-cfd-proposed-amendments-to-the-scheme-2020

    • It doesn't add up... permalink
      March 3, 2020 12:54 pm

      P.S. there is absolutely no mention of curtailment, despite its rapidly rising cost and contribution to wind farm economics.

    • NeilC permalink
      March 3, 2020 2:03 pm

      The real stupidity, of increasing more and more wind turbines is the wind in the UK, it can only produce electricity on average of 32.2% days, no matter if you completely cover the country with them it will still be an average of 32.2% days. Absolute lunacy.

      https://www.weather-research.com/articles/the-facts-behind-wind-and-solar-energy-in-the-uk

      • March 3, 2020 4:07 pm

        The only reality in this foolish folly is that we are ruled by “crazies” and there is no escape. It matters not whether the wind blows or not the socialist inspired enrichment plans continue what ever the circumstances. If the wind blows too little or it blows too much money flows unrestricted by thoughts of prudence or care. Last time I looked, former PM David Cameron’s father in law with eight wind turbines earned over £1000.00 PER DAY. That stretches the realms of belief, but “hey”, it fits the fantasy.

    • Joe Public permalink
      March 3, 2020 3:16 pm

      “We have a request for how best to con the locals that a wind farm near them is good for them.”

      Some Green Scots have yet to be convinced.

  6. Athelstan. permalink
    March 3, 2020 12:52 pm

    “de carbonize”

    which f**kwit coined that idiot phrase?

    As with all green hogwash, another impossiblity, what is it about this rot that people and not least politicians so easily fall for, and only money is the answer, great big backhanders and promises of more to come.

    Nota bene, the root of the problem, investment banking and the corporate blob and oh China laughing it’s cotton socks off.

    • Broadlands permalink
      March 3, 2020 3:17 pm

      The opposite must be ‘carbonize’. That’s what the CCS industry is wasting its time (and our subsidies) trying to do. Capture the oxidized carbon and find someplace to safely store it… somewhere geologically?

      The cost? One ppm of CO2 is almost 8,000 million metric tons. Do the math on the many billions of tons needed to make a difference to the climate…per-ton transported and stored.

      ‘Green’ hogwash?

  7. Harry Passfield permalink
    March 3, 2020 12:59 pm

    There’s another knock-on cost. What happens to the likes of Worcester Boilers (Bosch)? Will they get into building heat pumps etc? Will they continue making gas boilers for the export market? Will they just close up shop and move abroad?
    Those born this decade should consider training to be a plumber when they come of age.

  8. sid permalink
    March 3, 2020 1:16 pm

    There must be a point at which petrol stations will cllose and one will have to drive miles for fuel.
    Point being that rather than there being a glut of fuel the economies of scale will go and it will become very expensive

    • March 3, 2020 1:37 pm

      It’s more the international market that I was thinking of.

      Can you imagine, for instance, Qatar simply shutting down their wells?

    • Phoenix44 permalink
      March 3, 2020 3:23 pm

      At least they won’t be like the promised charging stations within 30 miles of people, where in winter and with a middling battery, by the time you drive there and bsck you have to do it again!

  9. GeoffB permalink
    March 3, 2020 1:34 pm

    CCC future…..A place where majestic castles, make-believe lands and beauty breathes life into the world around us. It is a place where peace, joy and wonder fill our hearts. Magic doors and fantastic kingdoms await all of us who are willing to embark.

    • Bertie permalink
      March 3, 2020 8:21 pm

      And unicorns, dragons and griffons roam the land.

  10. Gerry, England permalink
    March 3, 2020 1:47 pm

    The GWPF has a post that Bumbling Boris’s government is going to increase the subsidies to wind and solar – the so-called cheapest energy so the liars say.

    Regarding the increase in electricity, in the latest inflation figures, electricity increased by 8.6% so at this rate we will be at 22% in a few years. I find the term ‘electricity for heat’ strange – is this a special kind of electricity? Or are we to have multiple meters in our homes and separate circuits for heating?

  11. March 3, 2020 1:53 pm

    I had my gas boiler serviced last week. I mentioned all this stuff to the guy doing the work and he’d said he’d heard of it but laughed and said the general consensus among people working in the industry is that it’s all nonsense and will never happen. He gave me an example: Western Power is currently upgrading/replacing its entire gas pipe network in parts of Shropshire. They wouldn’t be bothering if they knew they were going to be put out of business. Also, given the short timescale for the phasing out of internal combustion engines, Shropshire council is approving new petrol stations like they’re going out of fashion (which they presumably are). Allowing for the limitless stupidity and incompetence of local councils (especially in Shrosphire), they too must have assumed it’s a load of tosh, won’t happen, and are proceeding accordingly.

    • Steve permalink
      March 4, 2020 7:02 am

      National Grid are replacing gas mains all over the SE and the roads are becoming a nightmare where I live. They are putting in a large diameter medium pressure plastic main, according to the contractor. I suspect that this is because the government has quietly given the order to make the grid ‘hydrogen ready’. They last dug up the whole country about ten years ago and that all went on the bill. Does anyone in the know have any information?

  12. Gerry, England permalink
    March 3, 2020 1:53 pm

    There seems to be lots of crap spewing out at the moment. A survey reckons climate change is top of our concerns – my concern would be Climate Outreach being involved in the survey. WMO claiming places will be warmer – yawn! And 8.8m people have died prematurely from pollution is another claim. Is this all leading up to COP?

    • Adrian, East Anglia permalink
      March 3, 2020 2:46 pm

      Probably (assuming that corona don’t get us first)!!!
      Now there’s a thought – might they have to cancel the Glasgow jamboree, or will it be deemed ‘too important’?!?!

      • Keith permalink
        March 3, 2020 3:18 pm

        That would make the Coronavirus a benefit!!!

    • It doesn't add up... permalink
      March 3, 2020 9:46 pm

      Trying to prevent zero carbon policy is pretty much at the top of my concerns at the moment. But I don’t think that is what the survey is supposed to mean.

      • Gerry, England permalink
        March 4, 2020 2:11 pm

        I have not seen the questions but with a bunch called Climate Outreach involved my BS detector says biased questions are quite likely.

  13. March 3, 2020 2:38 pm

    Perhaps when the lights go out in 2025 the government will rethink the whole thing, or com up with some gran excuse?
    https://adriankerton.wordpress.com/005c-will-the-lights-go-off-in-january/

    • Keith Holland permalink
      March 3, 2020 6:48 pm

      No the excuse will be ‘wrong type of wind’ just as they say it is the ‘wrong type of rain’ in the summer!!!

  14. Phoenix44 permalink
    March 3, 2020 3:21 pm

    The price of a commodity is set by the marginal cost of production of the last bit needed. Thus if we need x barrels of oil a day, the price is the cost of that xth barrel. If we use less oil, the price will fall accordingly. The fall depends on the shape of the cost curve.

    It’s difficult to see how a significant reduction in fossil fuel usage results in a significant increase in real prices. It’s difficult to believe it’s not just a fudge necessary to make the numbers look better.

  15. Vincent Booth permalink
    March 3, 2020 3:51 pm

    Green New Deal

    The Green New Deal offered and pledges by the Government are misleading and will not be achievable for the following reasons:

    Cost, Timescale and Resources.

    To achieve the GND energy bills will increase significantly. To convert the UK to an all- electric or part hydrogen economy will raise the cost of electricity for heating, by 3 or 4 times the cost of gas today. A household today that pays £500 per year for gas, in 2030/2050 will pay £1500 or more when using electricity or hydrogen. One in ten households today is fuel poor. The drive to be carbon neutral will be paid for by the poorest people.

    The building of more wind and solar is not a sound policy. In 2018 wind and solar provided the UK with 70 terawatt-hours of energy. 7.9% of the total 880 TWh of the UK energy supplied by gas. Wind and solar are very variable and have to be backed up by gas-fuelled generation.
    Note that Germany has next to the highest electricity price in the EU, at 25.59p per kWhr, compared to 14p per kWh in the UK. This is due to a policy of developing a large renewable sector (wind and solar).

    In order to replace the energy supplied by gas today for industry, domestic heating and electricity generation, (880 TWhr in 2018), and also in the future to supply electric cars.

    The UK will need to build and commission the following:
    10 off Hinkley Point C power stations, 8 off tidal barrier schemes,11,000 10 MW wind turbines,
    70 of 880 MW gas turbines to provide back-up when the wind fails to blow.
    Upgrade most of the distribution network, homes and buildings to total electricity use.
    Provide at least 200,000 public charging stations for electric cars.
    All this at an approx cost £600 billion and a 70 to 100 year planning & build time.

    Resources
    A letter on June 5th, 2019 to the Committee on Climate Change, by the Natural History Head of Earth Sciences, Prof Richard Herrington and fellow expert members of SOS Minerals

    The letter explains that to meet UK electric car targets for 2050 we would need to produce just under two times the current total annual world cobalt production, three quarters the world’s lithium production and at least half of the world’s copper production.

    Ofgem envisages the number of electric vehicles will surge from 230,000 today to 10 million by 2030 and 39 million by 2050. Who can supply these in the timescale, and what replaces the current fuel annual duty (approx, £30 billion per year) on petrol and diesel?

    The UK’s current high standard of living is based on the use of fossil fuels.
    Coal and coke are required to produce steel for buildings, machines and cars, gas is used for heating and many industrial processes, gas is used to manufacture fertilizer and hence our food. Gas, coal or oil heating is used to make cement, the manufacture of pharmaceuticals depends on fossil fuels.
    Oil provides transport and delivers most of the goods we use on a daily basis.
    Oil provides many of the plastics we use.

    The UK should not cripple these industries with high fuel prices and carbon taxes.

    These industries provide our wealth and the taxes that pay for the staff and buildings of hospitals, schools, fire and police, all the public services we enjoy.

    Note that the Committee on Climate Change forecast that in 2050, we will still use 70% of the gas we use now and convert this to hydrogen to use for heating.

    As gas provides our main source of energy and our standard of living, the government should revisit the proposed ban on fracking. The UK should control our natural gas industry and not export the release of CO2 by importing gas from abroad.

    The drive to a low carbon economy is not a 10 or 30-year project, it will develop naturally and take a hundred or so years as technology develops to meet the challenge of climate change.

  16. Mad Mike permalink
    March 3, 2020 6:21 pm

    A bit off topic but we were talking about the third runway at Heathrow appeal decision leading to multiple other actions being taken against other infrastructure projects using the same argument. Well, here’s the first fronted by our friend Mr Packham. I’m no fan of HS2 but this could get serious.

    https://www.bbc.co.uk/news/business-51722251

  17. sonofametman permalink
    March 3, 2020 7:51 pm

    I have made an attempt to model the costs of switching to electric heating for my late victorian terraced house in our windy Scottish city.
    Loft insulation in place, and all double-glazed.
    Annual gas consumption = 28,000 kWh
    Current prices I pay: Gas 2.66p/kWh, Elec 15.07 p/kWh
    So how will it work out if I switch to electricity for heating ?

    I discounted resistive electric heating as a non-starter, and since our garden is tiny, and the house is built on rock, I ruled out GSHP, leaving ASHP as the only realistic option for heating. Using government stats for the distribution of the heat requirements throughout the year, and guessing a COP for the ASHP varying between 2.5 in winter and 3.0 in summer (this is quite generous), I come up with an increase in cost from £745 to £1,600. That’s £855 a year extra, minimum.

    Then there are the installation ‘issues’. My house has wooden hung floors throughout and radiators. ASHP doesn’t really work with that, so what am I supposed to do?
    I could hack out the downstairs floors and have a concrete slab and underfloor heating put in ,but what do I do for upstairs?
    Whatever I do the costs will be huge. £10k? Think again.

    I’m due to retire in a few years and need to plan carefully to avoid penury (no juicy public sector pension).Will the government pay me to re-work all the heating so it’s affordable? Somehow I doubt it. These policies will rob people like me of tens of thousands of pounds.
    For nothing.

    Ignorance, and the insulation of comfortable wealth must must be nice for our lords and masters who dream up these insane ideas.
    Perhaps we need not a climate strike but a climate policy strike.

    • Gordon Hughes permalink
      March 3, 2020 8:52 pm

      You should think yourself lucky that your plot isn’t suitable for a GSHP. For a larger but very well-insulated and only 30 year old house in the South of Scotland the numbers look even worse and the capital cost is over £25K for a GSHP. I lived for a time in a flat in Washington, DC that relied on an ASHP. It was almost completely ineffective as a heating source and was here because of the need for air conditioning in summer.

      The CCC writes as though “hard to decarbonise” houses are a small part of the housing stock. In reality, they are probably 60-70% of the stock even in 2030. So what will happen is that enthusiasts and those with a low heating demand or easy conversion will go first. Then any policy will run into the sand as you move up the cost curve, at which point it will become extremely expensive to mandate conversions and the money will run out.

      For a different example, look at many networks including water, sewers & gas. It is quite cheap to connect 75-80% of the population, more expensive to get to 85% and prohibitively costly go above 90%. The steeply rising part of the cost curve will hit at an earlier stage for household heating. Hydrogen won’t work for more distant and expensive properties.

      At that point the whole policy becomes political dynamite. When it becomes clear that the choice is between spending a capital sum equal to the whole NHS budget – plus much higher running costs – on decarbonising the “diifficult” portion of the housing stock, then the issue may look very different.

  18. Steve permalink
    March 4, 2020 7:50 am

    Just a question for Paul. In the CCC technical report they don’t seem to have equalised the carbon tax on gas in their estimated costs for 2030 and 2050. Is this right?

    • March 4, 2020 11:00 am

      I presume they don’t include any carbon tax for gas, although they don’t make clear either way.

      The latest govt fossil fuel projections also forecast rising gas prices through to 2030, and these are based purely on wholesale prices, so no carbon tax:

      https://www.gov.uk/government/publications/fossil-fuel-price-assumptions-2019

      • Steve permalink
        March 4, 2020 6:32 pm

        Omission of the carbon tax means that the comparison of the renewable cost against gas is false as the present gas wholesale price includes it.

      • March 4, 2020 8:47 pm

        No, because carbon pricing currently only applies via the ETS scheme (Emissions trading System). This only applies to:

        the following sectors and gases, focusing on emissions that can be measured, reported and verified with a high level of accuracy:

        carbon dioxide (CO2)from
        power and heat generation
        energy-intensive industry sectors including oil refineries, steel works and production of iron, aluminium, metals, cement, lime, glass, ceramics, pulp, paper, cardboard, acids and bulk organic chemicals
        commercial aviation.

        https://ec.europa.eu/clima/policies/ets_en

        So gas power stations have to cop the whack, but homes burning gas don’t. I suspect there would be a mutiny if they did!

  19. Ken permalink
    March 6, 2020 3:43 am

    Decarbonize means reverting to life prior to fossil fuels. End stop.

    Fossil fuels has meant doubling life span, lifting billions out of grinding poverty, ending malnutrition and famine. Reverting to life as it was prior to fossil fuels means losing all that human prosperity.

    You would probably die within the month. There ain’t no such thing as a free lunch.

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