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John Constable: The Government’s Murky Wind Subsidies Revival Is A Costly Blunder

March 4, 2020

By Paul Homewood


The Telegraph have a comment piece from John Constable today:



In the world of renewable energy nothing is what it seems. “Environmentally friendly” turns out to be devastating to the natural world. “Cheap” is expensive. “Local support” is found to be at a distance.  “Sustainable” is, strange to say, short lived and unaffordable. A “contract” is non-binding. “Secure” is actually unreliable. Love is hate, black is white, and “Green” is a murky shade of brown.

So we should not be surprised when we are simultaneously told, as we were yesterday by government, that onshore wind is now so cost competitive it should be allowed to apply for subsidies again. It is quite usual for the wind industry, and their ministerial enablers, to be wreathed in smoke, surrounded by mirrors, and speaking in riddles.

But what is actually going on? Who is doing what to whom? A complicated game of bait and switch is what is going on, and the consumer is getting a poor deal. Here’s the background and how it works.

Since 2002 renewable electricity in the UK has received £38bn in subsidy from one scheme alone, the Renewables Obligation. The wind industry is the largest recipient, with onshore wind taking £10bn and offshore wind over £12 billion in subsidy since 2002. Big money.

The annual cost of all renewables subsidies now stands at £10bn a year, rising to £12 billion a year in the middle 2020s, when it will start to fall as existing subsidy entitlements expire.

The threat that this cumulative cost would spiral drove the Treasury in 2017 to argue for the closure of existing mechanisms to new entrants, and a moratorium on fresh schemes. They’d had enough.

But the industry hadn’t, and, in spite the rhetoric, the renewables sector is not keen to go subsidy free. Indeed, the physical thermodynamics of wind and sun mean, in my view, that it never will be competitive with fossil fuels or nuclear.

Wind and sunshine are very low-grade energy, close to random heat, and require vast and vastly expensive correction before the output is suitable to power a modern economy. This makes them intrinsically expensive.

That is why their capital costs haven’t fallen much, if at all, over time, and why it is so costly to balance an electricity grid in the presence of renewables, up from £367m a year in 2002, pre-renewables, to £1.5bn in 2019. Turning a sow’s ear into a silk purse is difficult.

But it’s the capital cost which is relevant to the economics of these schemes. Data from audited accounts shows that both onshore and offshore wind are still much more expensive than conventional generation. The capital cost of onshore wind has been stable since 2011 at about £1.5m a megawatt. A Combined Cycle Gas Turbine costs less than half that and is twice as productive. Offshore wind has seen some reduction, but still stands at about £3m a megawatt.

So renewables need subsidy, but government is currently unwilling. Fortunately for the industry, revenues from existing subsidies are so large that they can survive in the short term. The idea that their costs have fallen is the ‘bait’. Hence, the uneconomic bids for Contracts for Difference, and the implausibly low prices given for onshore wind in yesterday’s government announcement. In spite of their name, Contracts for Difference aren’t actually binding futures contracts, and the industry regards them as low cost “options”, giving them good PR and a favourable market position.

Now for the “switch”. When a greenwash thirsty government is heavily committed to a wind powered future, the industry will ask for new income support subsidies, or a carbon tax, or government pressure encouraging commercial consumers and government bodies into Power Purchase Agreements at high market rates for long periods.

That seems to be the wind industry’s plan, and a very good plan it is, for them. But why is this government playing along? The short-term Thunberg-appeasing gain is trivial compared to the threat. This is bad politics, as the public is generally not keen on onshore wind, and it’s bad economics, since high electricity costs rule out post-Brexit prosperity.


It is of course pretty simple – if onshore wind really is cost competitive it would not need to apply for subsidies under CfDs. Operators would be queuing up to build wind farms anyway.


John makes the point that the cost of balancing the grid is now £1.5bn, up from £367m in 2002 – an increase of maybe £1.0bn after allowing for inflation.

My view is that even this figure is an underestimate. Capacity market payments this year are estimated at £1.3bn alone, a cost which did not exist prior to the renewable power take off. These are the payments made to generators to provide standby capacity, and are only needed because of the intermittency of wind power.

There are also additional costs for short term balancing services, which run into hundreds of millions, and are more critical now than before the introduction of wind power.

On top of that are constraint payments, which cost £139m last year, and are already up to £72m this year, as well as uncosted grid enhancements and new transmission cables.

But using John’s numbers, and with wind power currently running around 60TWh a year, this equates to a hidden cost attributable to wind power of £25/MWh.

If wind farm operators were forced to pay this cost, it would totally alter the economics of wind power.

It is true that as extra wind capacity is added, this cost per unit may fall because the cost of capacity market payments would be spread over greater output.

On the other hand though, capacity market payments are likely to rise in years to come, as coal fired plants and older gas and nuclear plants close. For these existing generators, standby payments are just a bit of money on top of their normal earnings. In future, the capacity auction will need to attract new build CCGT and other generators. And for them, the economics will demand a much higher payment.

Also constraint payments will rocket, as increasingly there will be surplus wind generation on the market.

    • MrGrimNasty permalink
      March 4, 2020 10:04 pm


    • Gerry, England permalink
      March 5, 2020 2:02 pm

      He is a serial liar of course….

    • Jane Taylor permalink
      March 6, 2020 3:35 pm

      Well remembered Brenda – how enlightening – and how concerning for our energy futures!

  1. iananthonyharris permalink
    March 4, 2020 7:17 pm

    How much C02 is expended in erecting and connecting one of these monsters, compared to the C02 it will theoretically save over its lifetime of 15/20 years? Personally, I think electric cars are a non-starter, especially with the heater or air-con going, owing to limited range, and length of time charging, and how are people living in built-up areas and flats going to charge their vehicles? But assuming we are bullied or bribed, how much extra electricity will be needed? Who is going to pay for millions of on-street charging points? Who is going to intervene when fights break out over availability when needed? And then we are to heat our houses electrically.
    The only technology that is practicable will be the small nuclear reactors that are presently used in submarines, which are tried and tested. If they can be produced for installation in such small spaces, they can surely be produced in numbers for general electric generation. As far as I can see, it’s the only way enough electricity can be produced effectively and within the time scale required. Unlike wind, waves or solar, it’s constant and consistent.

    • cajwbroomhill permalink
      March 6, 2020 9:03 am

      Absolutely so, and RRoyce are said to be planning for that.

  2. Alaskan Sea permalink
    March 4, 2020 7:34 pm

    Current wind output 1.4 GW

    • Adam Gallon permalink
      March 4, 2020 9:36 pm

      Now 1.25, coal 2.47!

  3. mwhite permalink
    March 4, 2020 7:35 pm

    Problem – No choice at the ballet box.

  4. tom0mason permalink
    March 4, 2020 7:44 pm

    I wonder how much cheaper and more reliable the electricity grid would be if we were to abandon the ‘green’/brown options and just return to coal and nuclear for the base load supply and gas for the peak load top-up, and if needed (for political and trading requirements) pay ‘carbon credits’ to cover it all? With a robust and stable electricity supply Britain could become a manufacturing country again.

    • Phoenix44 permalink
      March 5, 2020 8:03 am

      Why would we want to do that? Theres nothing intrinsically “better” about making a widget than providing the capital markets, insurance, FX, pension plan and engineering consultancy required to build and operate a widget factory.

      • tom0mason permalink
        March 5, 2020 3:43 pm

        Nobody makes ‘widgets’ they make products that others pay for, thus making making profits for the manufacturers and the employees.
        Trying to maintain an economy with “capital markets, insurance, FX, pension plan”, etc may be OK for a while. However as this corona virus outbreak shows when the manufacturing is reduced and the nation imports nearly all their required products, then the importing countries are beholden to the exporting countries and their difficulties. Currently there is (and will be for quite a while) significant shortfalls in availability of products.
        India and China are currently restricting the exports of chemicals that make drugs, the drugs themselves, and many other types medical equipment. Shipments are not happening because China has so much of it’s industrial base closed because of this virus. Vehicle and electronic parts are also seeing shortfalls in supply, so the assembly plants that we still have, along with industrial maintenance and repair facilities are starting to be affected.

        IMO the UK needs a better balance between “capital markets, insurance, FX, pension plan” etc, and manufacturing. Britain needs to manufacture more for two main reasons —
        1. It can make the country more self-sufficient and therefore more robust and better insulated from international trade variations.
        2. Employing people makes society stronger. Most people feel that they are useful when they perceive that they have worthwhile and productive occupations.

        But as Mr. Dyson found out nobody in power in Britain wanted a manufacturing plant here, certainly not one that employed people to make product to sell to the world and make a profit for Britain. All they want is ~20 million people doing nothing productive, and the once green and pleasant land littered with imported industrial windfarms, and useless and toxic solar cell.

    • Malcolm Bell permalink
      March 5, 2020 8:23 am

      Yes, you are right. Plus, we must become manufacturers again.

      The last thing the green Arts and Crafts romantics want is manufacturing.

      I spent my career in manufacturing and factories and know it to socially and economically superior to the keyboard sweat offices of today.

      I am thrilled that the Guardian of all people should publish such a challenging and welcome article. Are they beginning to see the light at last?

      • Malcolm Bell permalink
        March 5, 2020 8:39 am

        Why did I think this was in the Guardian? Clearly this would be impossible! I am getting old, sorry.

  5. March 4, 2020 7:53 pm

    This is my only gripe with this government. They are a strong decisive administration, but they need to ditch their populist green policies. The general public aren’t stupid and many realise AGW is a scam, once they see their energy prices rocketing, with inevitable power cuts, government support will plummet and even worse, the honesty of the Right will become questionable.

    • Adam Gallon permalink
      March 4, 2020 9:34 pm

      Strong & decisive?

      • MrGrimNasty permalink
        March 4, 2020 10:06 pm

        More like easily led by a small bunch of fruitcakes.

    • Rowland P permalink
      March 5, 2020 7:22 am

      Not while Boris has Carrie sleeping in his bed!

  6. Barbara permalink
    March 4, 2020 8:14 pm

    Reporters Helena Horton and Emma Gatten DT 2 March tell us
    ‘David Cameron’s government fulfilled an election promise to end subsidies for “unsightly” wind farms in 2016. Polling since then has shown 78% of the British public support onshore wind’. Why are they feeding us these figures and where have they found them? Is it the Telegraph’s role to point out that we have asked for a roll out of on-shore wind farms so that’s all right then.
    I have tried to discover where polling took place and can only come up with a ComRes poll, Oct 2016 conducted for 10:10 Climate Action (new name Possible), found that 73% of the British public supported onshore windfarms. Also, published by Renewables UK – YouGov July 2018 – 66% say they would support a change in Government policy so that onshore wind farms can be built.
    One can only wonder how valid these polls are given the results that those involved with them wished to produce and I am yet to find where the poll took place and who commissioned it to produce the 78% in favour.

    • March 4, 2020 8:46 pm

      It wouldn’t be surprising if people did support onshore wind, given the propaganda surrounding it. Folk answering the poll probably believed that onshore wind was cheaper than the alternatives, reliable – always available, carbon dioxide free energy, with no effect on birds, bats, or landscape, with no light flicker, no infrasound, with recyclable components, no added costs in the form of lengthy connections to the existing grid, no effect on grid stability because they are non-synchronous generators, oh and that they are not paid to turn off when it’s too windy.

      Having been told the actual facts, I reckon the % in favour would be about 7.8%, not 78%.

      • March 4, 2020 9:00 pm

        Don’t forget 78% live in cities, never see a wind turbine but get all the propaganda.

    • Phoenix44 permalink
      March 5, 2020 8:07 am

      It depends on the question asked.

      Would you like a large wind farm built near you on a local beauty spot and which made your eye tricity 10% more expensive?

      That I reckon would get 0% support in a poll.

      Do you think we should have more renewable energy to tackle the Climate Crisis if it is cheaper than current energy?

      That might get 78% support.

  7. Adam Gallon permalink
    March 4, 2020 9:33 pm

    At time of writing (9.30pm), coal is producing twice as much electricity, as wind is!

    • March 4, 2020 9:51 pm

      At about 6.30pm demand must have come very close to exceeding supply. Pumped storage was high and prices peaked at about £2,300/MWh compared to a normal of about £45/MWh.

      • Alaskan Sea permalink
        March 4, 2020 10:10 pm

        Blimey £2300, Phillip where do you get the data for the prices?

      • It doesn't add up... permalink
        March 4, 2020 10:23 pm

        Prices here:

        They have been amazingly volatile. Just an hour and a half after they peaked, they fell to zero, presumably because National Grid had panicked and bought too much reserve which had to be sold back out again.

        It’s also worth comparing against the day ahead settlement prices that are used for calculating CFD payments.

        They show some tightness was expected, with prices settling as high as £211/MWh.

      • Stuart Brown permalink
        March 4, 2020 10:30 pm

        Alaskan Sea – here, I imagine…

      • March 5, 2020 12:02 pm

        Technical question, in case anyone knows the answer:

        Bmreports have demand and generation, the latter not including solar because it is not metered. Is it valid to subtract generation from demand to deduce the contribution of solar?

        I can’t quite work it out, because the “model” says solar ought to have peaked out at 3GW yesterday, but I don’t see that much of a gap between demand and the known generation.

      • It doesn't add up... permalink
        March 5, 2020 2:07 pm


        The answer is no: grid demand is as seen at the high voltage grid, so solar is netted off at the low voltage distribution level. The best you can do is either look at the Sheffield University estimates of solar ( as reported on Gridwatch) or the data here:

        Note the info note about wind. Click on the info button at the page to read.

      • AllanM permalink
        March 5, 2020 2:17 pm

        I wonder how much profit is made by unnamed persons and institutions on the rise and fall of these prices? I hope there isn’t any money laundering.

      • March 5, 2020 9:22 pm

        @ Idau, ta – I finally worked it out myself shortly after posting the question. (Well, I say worked it out – actually I just read what was written on the solar page at Sheffield Uni, which explained it in the same terms as you did.)

  8. It doesn't add up... permalink
    March 4, 2020 9:59 pm

    Snuck in under the radar at the beginning of the week was the new composition of the BEIS Select Committee whose job it will be to scrutinise these policies.

    It will be interesting to discover whether any of them are capable of doing the job.

  9. Gamecock permalink
    March 5, 2020 1:51 am

    “But it’s the capital cost which is relevant to the economics of these schemes.”

    A big part, but not the killer. Wind gets backup for free. At higher penetration in the market, they’ll have to pay for their backup. Crushing their business model.

    Wind can never be more than supplemental.

    • tom0mason permalink
      March 5, 2020 4:03 pm

      Also remember that wind and solar must be put on the grid (if there is enough demand), in preference to fuel burning generation, or penalties must be paid to the so called ‘renewables’ providers.
      Effectively this means that fuel burning generation is not seeing a level playing field as all so called ‘renewables’ can jump the line to get on the grid.
      This effectively increases the price of fuel burning generation as they are throttled back to allow ‘renewables’ on the grid, and are therefore not operating at their best power generating efficiency and incur higher maintenance costs (than was originally budgeted).

  10. StephenP permalink
    March 5, 2020 7:05 am

    Well, we know where to build these new on-shore windmills.
    They are clean and green, so could with advantage be built in the areas where there was opposition to fracking.
    Also if it provides the cheapest form of generation there will be no need for subsidies, so it should be a win win all round, green electricity at a cheap price.
    As for constraint payments, conventional generators have to throttle back when supply exceeds demand, so should the wind generators.
    When the wind doesn’t blow, they should make a contribution to the costs of the backup generators.
    Now wait for the wailing and gnashing of teeth.

  11. March 5, 2020 8:50 am

    It’s an ill wind!

  12. March 5, 2020 9:10 am

    Sherelle Jacobs on the warpath again at the Telegraph today…

    The political storm over green targets will be even bigger than Brexit
    [paywall after first few paras.]

    • March 5, 2020 9:32 am

      Here is the full text:

      Our PM’s eco-strategy is at disastrous odds with ‘levelling up’

      Just when we thought the war was over, it is starting to dawn on some London hacks that it has only just begun. Beyond the Red Wall are rumblings of a new revolt, utterly unanticipated by No 10 and overlooked by a liberal media still shell-shocked by the election. With its drive to “green” the economy at any cost, the Tory party has seemingly decided to celebrate its populist landslide by bogging down the country in zero-carbon paternalism. And so we career towards another People vs Establishment conflict that could be more explosive even than that sparked by the referendum.

      A savvy politician like Boris Johnson can still reverse No 10’s green strategy, which moved on this week from banning petrol and diesel cars to the revival of onshore wind farms. He must – all the ingredients for another seismic uprising are already simmering.

      First is the drift towards disaster at the Treasury. With the Chancellor, Rishi Sunak, reportedly poised to end the freeze on fuel duty for all motorists, voters are referring to zero carbon as “the new austerity”.

      Indeed, the message to voters is sonorously clear – elites have learnt precisely nothing from the past 10 years. In 2008, people paid the price for dysfunction in the banking industry; today they must foot the bill for shortcomings in the energy industry, which is further away from a carbon-free breakthrough than it should be. Still, why tackle the source of problems when you can administer “tough medicine” to the masses?

      Second is the rising sense that the UK is still being sabotaged by the zealotry of unaccountable elites. Just as the EU establishment derives its legitimacy from the teleological assumption that the future is borderless universalism, the green establishment poised to take its place sees the planet rather than the people as the highest authority. As a result, the country is heading in a direction at odds with the ambitions of ordinary people.

      In particular, it is becoming disturbingly apparent that the Government prizes green targets over “unleashing” Britain’s potential. The cast-iron case for a road-building revolution, for example, clangs a little too harshly against the hollowness of eco-politan sensibilities. Whitehall is genuinely convinced that Red Wall utopia is cycling to work from a rabbit hutch on the outskirts of Birmingham. They find the idea that people might actually aspire to drive to their downtown office from their semi-detached in Dudley, and at the weekends cruise, sunroof down, to the Bullring for shopping, completely ghastly.

      The gulf in understanding was ever thus. As innovation professor James Woudhuysen alludes to in his writings, after decades of post-war policymaking hostile to the very concept of cars, what with them disrupting the working classes’ “community cohesion” and causing urban sprawl, in the Blair era there was the glimmer of intellectual breakthrough. Politicians finally recognised, at least in principle, that post-industrial towns can only be revived if they are an attractive commute from thriving cities.

      But there was a catch: elites could not bear to prioritise hard logic over their whimsical blueprints for car-free city centres and visceral disdain for the selfish individualism of the open road. Mr Johnson’s green-era promises to be equally irrational. There will be no relief for congested roads. A Cummings-style plan to connect the rustbelt tech hubs of tomorrow with superhighways is for the birds.

      The green agenda is also botching public transport. The epitome is HS2, a serpent-shaped monstrosity which slithered from the depths of a conniving political mind to appease the environmental lobby. True, it’s not exactly common knowledge that, in 2009, Andrew Adonis persuaded the then transport secretary, Geoff Hoon, to announce a high-speed railway to placate eco-activists spitting venom over a third Heathrow runway. But with former Brexit Party campaigners organising once again, it won’t take long for people to realise that green tape is suffocating our potential on a scale that rivals red tape from Brussels.

      All the more so given how quickly the project to “level up” the country has descended into fatuous virtue signalling. There is a joke going around the North that you can predict the metropolitan mayors’ latest gimmick about solar panels and cycling routes based on whatever nonsense Sadiq Khan has tweeted three weeks before in London. Architecture firms hungry for contracts are churning out plans for triple-glazed “affordable” homes too expensive to build on a mass scale, and offices with bike basements. One source told me that, all the while, “disenchanted employees squint at each other in meetings waiting to see if anyone dares to speak out”.

      Naturally, a new managerial language to mask the tiresome insanity of all this is delightfully burgeoning. Reports flatulate about “spatially just transitions to zero carbon” and “harnessing environmental assets”. Meanwhile, policy decisions that punish the poor are wrapped in doublespeak worthy of Ursula von der Leyen. The idea that onshore wind is now so competitive it should be able to apply for subsidies again being a most glorious example.

      People did not vote to take back control only to surrender to an even more imperious and destructive strain of metropolitan ideology. If Mr Johnson wishes to win again, he has no option but to U-turn.

      • ianprsy permalink
        March 5, 2020 10:11 am

        “People did not vote to take back control only to surrender to an even more imperious and destructive strain of metropolitan ideology.” – Nigel Farage’s next challenge?

      • March 5, 2020 11:06 am

        Good stuff, but who in power wants to listen? They opposed Brexit to the end and greenwash won’t be any different, unless or until there is some sort of ‘end’.

  13. Pancho Plail permalink
    March 5, 2020 9:52 am

    Off this topic but of interest. Climate change boosted Australia bushfire risk by at least 30% (
    The take home comment for me is “Prof van Oldenborgh is among those attempting to find out if the current climate computer models really are underestimating the influence of global warming – and if they are, working out how to correct them.” The models probably aren’t correct so are we are working on them to make them even more scary.

    • Adrian, East Anglia permalink
      March 5, 2020 4:47 pm

      And according to the same Beeb report, one of the team (Prof Otto, Univ of Oxford) apparently said “we need to continue to test our models in the real world”. Now that WOULD be first!!!!

  14. Vernon E permalink
    March 5, 2020 11:24 am

    Re previous post about SMRs. Current Private Eye under “Keeping the Lights On” has good article about how Rolls Royce is positioning itself to get an exclusive (i.e. non-competitive )position for massive subsidies to develop medium sized (400 MW) SMRs. Already grabbed £18 m and now seeking £500 m. Watch this space!

    • It doesn't add up... permalink
      March 5, 2020 8:44 pm

      Small beer. Drax have their eyes on £13bn p.a. for CCS.

  15. It doesn't add up... permalink
    March 6, 2020 1:50 pm

    I just checked up on the subsidy paid to the Hywind floating offshore project. It’s 3.5 ROCs per MWh, or over £175/MWh on top of market price. That is what the government wants us to rely on for the future. It will have its own protected pool of CFDs.

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