• Renewable Energy: The Most Expensive Policy Disaster in Modern UK History (EM)
In a new report ‘Central Planning with Market Features: How Renewable Subsidies Destroyed The UK Electricity Market’, published by the Centre for Policy Studies on Wednesday 18 March, Rupert Darwall shows that recent energy policy represents the biggest expansion of state power since the nationalisations of the 1940s and 1950s – and is on course to be the most expensive domestic policy disaster in modern British history.
Darwall shows that:
• The electricity sector is being transformed into a vast, ramshackle Public Private Partnership, an outcome that promises the worst of both worlds – state control of investment funded by high cost private sector capital, with energy companies being set up as the fall guys to take the rap for higher electricity bills.
• Post-privatisation gains in productivity are now being reversed as a result of plunging labour productivity. By 2013, three quarters of the productivity gains recorded between 1994 and 2004 had been lost.
• Competition between electricity suppliers is an expensive sideshow (which Ofgem estimated cost £730m in 2008) if it does not drive competition between generators and market investment in the most efficient generating technologies.
• Government policies aim to hide the full costs of intermittent renewables, which as a result are systematically understated. In addition to their higher plant-level costs, renewables require massive amounts of extra generating capacity to provide cover for intermittent generation when the wind doesn’t blow and the sun doesn’t shine.
• Highly subsidised wind and solar capacity flooding the market with near random amounts of zero marginal cost electricity wrecks the economics of conventional power stations. It is therefore impossible to integrate large amounts of intermittent renewables into a private sector system and still expect it to function as such.
• As a result, the State has stepped in with a patchwork of interventions to support prices. Because revenues are dependent on continued government interventions, private investors end up having to price and manage political risk, imparting a further upwards twist to electricity bills.
• Without renewables, the UK market would require 22GW of new capacity to replace old coal and nuclear. With renewables, 50GW is required, i.e. 28GW more to deal with the intermittency problem. Then there are extra grid costs to connect both remote onshore wind farms (£8 billion) and even more costly offshore capacity (£15 billion) – a near trebling of grid costs.
Read more …
In a new report ‘Central Planning with Market Features: How Renewable Subsidies Destroyed The UK Electricity Market’, published by the Centre for Policy Studies on Wednesday 18 March, Rupert Darwall shows that recent energy policy represents the biggest expansion of state power since the nationalisations of the 1940s and 1950s – and is on course to be the most expensive domestic policy disaster in modern British history.
Darwall shows that:
• The electricity sector is being transformed into a vast, ramshackle Public Private Partnership, an outcome that promises the worst of both worlds – state control of investment funded by high cost private sector capital, with energy companies being set up as the fall guys to take the rap for higher electricity bills.
• Post-privatisation gains in productivity are now being reversed as a result of plunging labour productivity. By 2013, three quarters of the productivity gains recorded between 1994 and 2004 had been lost.
• Competition between electricity suppliers is an expensive sideshow (which Ofgem estimated cost £730m in 2008) if it does not drive competition between generators and market investment in the most efficient generating technologies.
• Government policies aim to hide the full costs of intermittent renewables, which as a result are systematically understated. In addition to their higher plant-level costs, renewables require massive amounts of extra generating capacity to provide cover for intermittent generation when the wind doesn’t blow and the sun doesn’t shine.
• Highly subsidised wind and solar capacity flooding the market with near random amounts of zero marginal cost electricity wrecks the economics of conventional power stations. It is therefore impossible to integrate large amounts of intermittent renewables into a private sector system and still expect it to function as such.
• As a result, the State has stepped in with a patchwork of interventions to support prices. Because revenues are dependent on continued government interventions, private investors end up having to price and manage political risk, imparting a further upwards twist to electricity bills.
• Without renewables, the UK market would require 22GW of new capacity to replace old coal and nuclear. With renewables, 50GW is required, i.e. 28GW more to deal with the intermittency problem. Then there are extra grid costs to connect both remote onshore wind farms (£8 billion) and even more costly offshore capacity (£15 billion) – a near trebling of grid costs.
Read more …
