Renewable energy isn’t as cheap as advertised – so far
By Paul Homewood
h/t Ian Magness
Liam’s article begins with a summary of UK inflation, but then progresses onto the role that energy price inflation is having:
But the main reason UK inflation remains exceptionally high is our still elevated energy costs – a serious problem, which shows little sign of being resolved.
The UK’s domestic energy production has been 14pc below pre-pandemic levels over the last year, according to the latest Digest of UK Energy Statistics. Oil production was down nearly 30pc on 2019.
During 2022, high energy prices saw energy consumption – down 11pc on pre-Covid levels – fall further across all sectors, impacting broader economic growth. And energy prices have been slow to fall.
Wholesale gas prices in the US were 80pc below those across Europe during 2022 – and remain much lower now. That’s because the US has hugely expanded energy production, exploiting shale reserves.
Residential electricity prices in the UK, meanwhile, were €45.3 per kilowatt hour during June, compared to a European Union average of €45.3 according to the HEPI index. In the US, prices averaged €18.9.
Ongoing “green levies” on UK utility bills, used to subsidise renewable energy, have lately been suspended across many major European economies. In Britain, though, taxes and network charges still account for 56pc of household electricity bills, compared to 40pc across the EU – this share simply must be brought down.
Above all, our “marginal-cost pricing model” keeps UK energy bills comparatively high. It’s true that wind, solar and other renewables generated two-fifths of the UK’s electricity last year – out-stripping gas. But “cheap” renewables, far from cutting consumer energy bills, are pushing prices up.
Renewables still depend heavily not only on subsidies, but also a large fleet of gas power stations on standby – which must be fired up on days when the wind isn’t blowing and the sun doesn’t shine.
Such “intermittent” periods can last weeks, especially during winter, when energy demand is high. But having gas-fired stations on standby to facilitate more renewables is hugely expensive – as the sky-high fixed costs of being able to produce energy at short notice must be found from smaller revenues.
Even on days when it is sunny and windy, UK electricity prices are driven by the marginal cost of generation – that is, the spot price of gas. The shift to renewables inflates this marginal cost, pushing up household bills too – whatever we’re told about “low cost” renewable energy.
Renewable companies make serious money from the very intermittency problems they’re meant to be solving. The government takes a big slice – via a low-key but hefty renewable windfall tax.
Marginal cost energy pricing has seriously aggravated the UK’s cost-of-living crisis, explaining at least part of our inflation problem. Yet rather than reforming this pricing system, easing household bills, the government raids renewable profits – an ever-increasing household energy “stealth tax”.
Since the Tories won the Uxbridge by-election amidst widespread opposition to Sadiq Khan’s Ulez expansion, there’s been talk of watering-down “net zero” deadlines and other green targets. This builds on a sentiment that’s grown considerably over recent months.
The question of how we get to “net zero” – and who pays – is increasingly-debated, becoming more and more controversial. Reaching the 2050 target has enormous cost implications not only for households and firms, but also the government.
Between now and mid-century, subsidies and other “green investment” will add 21 percentage points to the UK’s national debt-to-GDP ratio, according to a recent Office for Budget Responsibility Report. In today’s money, that’s equivalent to £500 billion.
These are vast costs and, as long as “Net Zero 2050” remains in place, the process of spreading them around will become increasingly politically contentious. Any government wanting support for such targets to be maintained should start by finding a way to ensure renewables start delivering much cheaper energy bills.
https://www.telegraph.co.uk/business/2023/07/30/renewable-energy-net-zero-2050-cost-who-pays/
Comments are closed.
NOT A LOT OF PEOPLE KNOW THAT 
Mixed bag of an article ( polite comment). He is advocating disguising the real costs of the system , presumably putting the burden on the tax base rather than the utility bill so the real costs of renewables doesn’t provoke a customer backlash. However as real cost of net zero is at least twice the number he uses, the burden of taxes, already very high, would promote the same backlash.
Creative accountancy isn’t going to save their bacon ( heads?)
Agreed, the government needs to admit that the true cost of Netzero is far higher than they are admitting to.
Maybe. But they will continue to virtue-signal until some reputable scientist explains to them in words of one syllable why net-zero is unachievable and if it were achievable irrelevant, extremely expensive and almost certainly counter-productive as the next climate downturn hits and we are caught looking the other way.
My consolation is that I probably won’t be around to see it but I worry for my grand-daughter and the next generation after that.
Mike J. says “until some reputable scientist explains ”
I’ve argued this won’t occur because reputable people have tried to explain and gotten shouted at by activists and ignored by politicians and elites of the ClimateCult™.
Global warming via CO2 has been accepted as an axiom and needs to be dislodged from that Euclidean notion. An apparition floating belt-high above the ground in flowing robes and having an Ice Sabre spewing frozen shards of CO2 might have and effect.
Or we could just enter a prolonged cold period where the River Thames, the Seine, and Potomac freeze through an entire summer. Let’s add Petit Lac at Geneva to get the attention of the U. N. folks.
The article concludes with
Ha! THAT is the problem. No one knows HOW to ensure renewables can deliver cheaper energy bills! There’s natural gas which isn’t renewable and relatively cheap. And nuclear which is nearly free once plants are commissioned and running. But the UN (including US, UK et al) don’t want to hear that, let alone oil or gas…
Government announce today a new plan to secure Energy Security above other considerations. https://www.gov.uk/government/news/energy-security-push-to-boost-economic-growth?utm_medium=email&utm_campaign=govuk-notifications-topic&utm_source=4c0533a2-5757-4546-917e-634e4950ff57&utm_content=daily
Haha. More empty promises. I’ll believe they’re serious when they scrap the Net zero target and recind the evil climate change Act. Only then will be believe the liars in parliament.
They’ll get forced to do this in the 2030s when the pepetual rolling blackouts force a citizens revolution. Shame we have to wait until this lunacy causes a crisis and deaths from the cold.
Unfortunately the government still doesn’t see the real cost of unreliables and is still intent on investing billions of pounds in unreliable energy – leading to the UK having the world’s four largest operational wind farms off its shores.
The problem, IMHO, Phillip, is that too many people have been suckered by the idea the sun and wind is free.
I think they see those costs full well, they just daren’t retreat from their policy.
The Greens, EU and UN would all have the mother of hissy fits and they’d lose all credibility with the public.
I would hardly describe pissing money away as ‘investment’. Apparently the now departed lying oaf is responsible – probably at the behest of his then girlfriend Princess Nutjob – for adding the Net Zero crap to the Tory manifesto as he believed it was an investment. But then nobody has ever accused him of being well informed and competent – a liar, yes.
A liar, with his brains in his genitals which is why his squeeze got him to get carried away (pun not intended) with all the green hysteria
I understood UK was still buying Russian gas and oil. Just getting it delivered by a roundabout route through third parties and I doubt paying heavily for it.
I don’t think we are importing Russian gas, even by roundabout routes. There is no pipeline route for doing so (especially since our pipelines other than from Norway are being used for export). I monitor the LNG vessel movements into European ports and the movements of the Russian and Chinese icebreaker LNG carriers. I see plenty of discharges in Spain, Belgium, France, the Netherlands and Portugal from Russia, and at this time of year Asia is a big market, with demand from China, Japan, Korea and Taiwan among recent discharges. The Russians are not short of other customers for LNG.
Russian gas is still being delivered through Ukraine and Turkstream to Europe.
https://www.bruegel.org/dataset/european-natural-gas-imports
Thank you
Oil products are coming from India after they have processed the Russian oil and added on their profit.
Inflation is devaluation of the currency.
‘But the main reason UK inflation remains exceptionally high is our still elevated energy costs – a serious problem’
Which has what to do with devaluation of the currency?
‘One reason is our tight labour market – with over a million vacancies still outstanding. This pushes up wages, 7.3pc higher during the three months to May’
No devaluation of the currency here.
‘Spiralling grocery bills are also important, with food price inflation still an astonishing 17.9pc in June.’
The effect of inflation. Not the cause.
‘Then there’s the Bank of England’s quantitative easing programme – which churned out £470bn of new money in 2020 and 2021’
Ahhh . . . now we have it, the devaluation of the currency.
‘But the main reason UK inflation remains exceptionally high is our still elevated energy costs.’
“Liam Halligan is an award-winning economist, journalist, broadcaster and author. He is currently the Economics and Business Editor of GB News and co-hosts the Telegraph’s Planet Normal podcast.”
An award-winning economist, no less. Wow.
Gamecock, you are focusing on inflation (as is this purported award-winning economist <>.) Let’s call that an increase in the rate of change of prices. Yes, that is spurred by devaluation of the currency. Let’s drop back from the derivative of price with respect to time, and merely consider the simple change in prices, rather than the rate of change in prices.
Addressing each of your points in order:
“elevated energy costs – a serious problem….” Yes, they are. Energy costs drive the costs of many things, both commercial/industrial and consumer/retail. One can make a case that the two are one and the same. Increase costs associated with generating electricity and buying gas and oil fuels (for heating, autos, etc.) and most other costs will increase. One of the few things spared is the price of existing housing stock (ownership not rental). That is already sky high, so ignore that.
Next is the “tight labour market – with over a million vacancies still outstanding. This pushes up wages, 7.3% higher….” As a now unemployed banker, sacrificed on the altar of diversity, equity & inclusion (despite being a middle-aged Jewess but too white and truthful about compliance violations) and an American, I know that the COVID19 stimulus by the US central bank was so generous that many received higher weekly cash benefits while not working than they ever did while fully employed. This caused a huge build-up in retail bank deposits. Instead of returning to work and keeping excess savings deposits in the bank, most people just lived off these funds, despite the availability of jobs and diminishing “threat”. This was partly due to (the foolish by widespread tendency toward) short time preferences and partly due to the Federal Reserve’s quantitative easing. In other words, real interest rates (including those on retail bank deposits) remained near zero for too long
Finally, there are the “spiraling grocery bills…with food price inflation still an astonishing 17.9% in June.”
Renewable companies make serious money from the very intermittency problems they’re meant to be solving. The government takes a big slice – via a low-key but hefty renewable windfall tax.
Marginal cost energy pricing has seriously aggravated the UK’s cost-of-living crisis, explaining at least part of our inflation problem. Yet rather than reforming this pricing system, easing household bills, the government raids renewable profits – an ever-increasing household energy “stealth tax”.
The maneco64 videos on YouTube have been showing the effects of QE on inflation and the economy for years.
https://www.youtube.com/@maneco64
Exactly – I’ve just posted similar comments having not read the Comments first. We have higher and rising energy prices because of changes in supply and demand and because renewables are more expensive than fossil fuels. So many words and so much energy is expended attempting to show otherwise but these are undeniable simple facts. Renewables are more expensive and the more renewablrs you have, the more expensive new renewables will be. This is the cycle of wealth destruction that is the opposite of wealth creation you get when you substitute less productive technologies for more productive technologies. It is as inevitable as death and taxes.
Gamecock,
Sorry, I hit enter prematurely. Please ignore everything in my reply to you following “Finally, there are the “spiraling grocery bills…”
Lord Hammond freely admits that government lies on the true cost of Net Zero, such lies are blatantly obvious:
Even on a good windy day all the i/c’s flat out on import and ESO have constrained off 21GWh of wind already. This is the hidden cost of renewables that just isn’t being adequately exposed.
Twitter peeps obviously feel I should see/read the heir to Attenborough’s every word.
I assume that one now had to be a Twatter to read the comments?
or buy a copy of the Observer…
not like you’re missing much really – a load of mutual pleasuring from the usual suspects.
Not convinced here that Twitter algorithms have changed that much – seeing familiar antics when Musk heads off to do rockets in Texas…
Mazda pulls latest MX-30 EV model after selling only 66 this year
(It was primarily sold in California)
Sweden rejects Vattenfall offshore wind project citing environmental concerns and national interests.
https://www.wind-watch.org/news/2023/07/28/sweden-nixes-vattenfalls-offshore-wind-project/
Weren’t Vattvillfail the ones who abandoned a Green Hydrogen project last week?
And pulled out of Boreas wind farm
Mazda are pushing the MX30 like mad.
Interest free finance.
All one has to do is look at the cost of electricity rising in direct proportion to the addition of renewable energy to figure this one out.
I looked at this last month – and found that the G20 countries with the highest wind penetration on their grids also have the highest domestic electricity costs. https://cliscep.com/2023/06/10/electricity-prices-vs-wind-penetration/
Someone please tell Ed Milliband.
Chris Stark, the CE of the Climate Change Committee, told the HoL Industry & Regulators Committee on 12/10/2021 on the subject “Ofgem & Net Zero” that Net Zero will cost no more than 1% of GDP and could even be at zero cost
I am expecting to see Chris Stark one day in either Moscow or Beijing.
Stark is a deluded fantasist. He has no understanding of actual Economics and thinks the mindless “analysis” done by vacuous renewables advocates is actual reality.
I hope it is not Moscow as I have nothing against our Russian allies in the fight against the World Empire of Fascism.
https://www.telegraph.co.uk/politics/2023/07/29/tory-pms-systematically-dishonest-1-trillion-cost-net-zero/
Tory PMs ‘systematically dishonest’ about £1 trillion cost of net zero, says Lord Hammond
Former chancellor says there’s a ‘cross-party disease’ of politicians not being straight with voters about significant true cost of project
“But the main reason UK inflation remains exceptionally high is our still elevated energy costs…”
This is complete nonsense in every way. Inflation is measured against previous prices, thus if prices stop increasing, annual inflation falls to zero after 12 months. Stable but higher prices is not inflation. Energy prices are not increasing but previous increases may continue to work their way through prices of other goods and services if they have not already. More importantly, rising energy prices were not “inflation” but simply higher prices caused by changes in supply and demand. Between 2000 and 2008 the oil price increased from $25 to $130 yet inflation barely moved. Why? Because inflation is a devaluation of money caused by the creation of more money. That increase in money continues to move around the economy amd continues to create inflation.
Phoenix,
surely as the cost of energy impacts manufacturing costs (Including farming and hence food prices) and impacts ditribution costs it has to make goods more expensive to buy, isn’t that inflation? Had we had twenty or more years of sensible enrgy policy instead off what we have endured, and a consequent much lower energy price wouldn’t that make our goods cheaper, both for home and markets abroad and benefit our competitiveness?
Higher prices add to wage demands, surely that is inflation as goods cost even more, the never ending roundabout.
A lot of companies have swallowed increased costs but have reached the limit on that so will have to raise prices from now on. In the perfect world prices would stay stable but we don’t have a stable world so there is always inflation. It is interesting to see how economics editors moan about a lack of production in the UK but fail to see how our sky high electricity costs – note the article refers to residential costs being average – are pricing UK manufactured goods off the market. And I don’t see anything that will address that in the next few years. Germany is haemorrhaging industrial production due to their costs and taking qualified people with them. Habeck was interviewed out in India pleading for people to emigrate to Germany to plug the gaps in the workforce.
Most of what Andrew Neil writes in the Mail is ignorant dross but his last piece on the growing reduction in the wealth of EU nations was interesting. It was based around why would anyone think that it would be to the UK’s advantage to rejoin the EU as for example Sir Tony the Liar wants, when the EU nations are growing poorer. There was always going to be an outcome to wasting trillions on Net Zero lunacy and it is starting to take effect.