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27 responses to “What the Papers Won’t Say”

    • Ted Marynicz

      Dale, there is a small flaw (and it is only small) in the calculations you’ve used.

      You take domestic electricity as 31% (from Dukes 5.1) which is based on GWh.

      You then multiply this by the £1.2 billion total cost of ROCs.

      This contains the wrong assumption that all electricity – domestic and commercial – has the same cost per kWh, which it doesn’t.

      You really need to use the % domestic/non-domestic split based on cost rather than GWh. And don’t forget to include VAT for domestic and ignore it for non-domestic either.

    • Ted Marynicz

      Just to clarify that – when I say ‘cost’ of course I mean cost to the consumer, not the cost of electricity to the supplier.

    • Tracy Chateau

      I too was interested to trace exactly how Ecotricity came up with the figures.

      Using the domestic/non-domestic split as suggested by Ted Marynicz above from DECC’s figures we get £30,170m total expenditure for all users (which only includes non-refundable VAT) and £14,155m for domestic (which includes VAT).

      So the split is now 46% domestic which means the Ecotricity’s figures are slightly too low.

      With this new split the cost to the consumer is comes out at £22.48 for all renewables and £6.95 for onshore wind. Still a fraction of the increased cost of gas, was £120.

    • Ted Marynicz

      Thanks for doing the leg-work on that Tracy.

      I did have 40-45% as a guesstimate figure in mind.

    • paul

      Hey Ted, Tracey,

      Thanks for your comments. I’m no statistician, but I’ve been discussing your comments with our researcher (he sits behind me!)….

      In short:

      Our estimate of how much the RO costs per household is in line with recent figures quoted by DECC (see Estimated Impacts of energy & climate change policies on energy prices and bills, November 2011).

      So, we’re trying to show the cost of renewable support against a backdrop of escellating fossil fuel prices. For a moment lets just assume that our figures (and those of DECC) were out by 100%, that’s a significant change compared to the effect of a 5% VAT charge or how much someone else is paying for a MWh on the open market.

      That would increase the RO for onshore wind to £10 per household, that’s still significantly less than any figure you’ll see quoted in the media and only around 7% of the price hike we’ve seen from gas in the past year. Big picture is that renewables cost very little and that we shouldn’t believe everything we read in the papers…

      Cheers
      Paul

    • alex scargall

      i totally agree 100% that the media wont print the facts. it all goes back to a court case in america between tesla and eddison. tesla was going to give the world unlimited energy for free but eddison wanted to charge per electrical unit. every electricity bill is charged ppkwh so this is the way it will be. solar and wind enable the consumer to generate electricity without being charged. end of story. just do the best you can with what you have. if you try and fail at least you tried which is more than most people.

    • Ted Marynicz

      Hi Paul,

      I understand the point you’re making.

      It’s just that I like to see points made using data that is as accurate as possible rather than slightly inaccurate.

      So ROCs for onshore wind cost the average domestic bill payer about £7 a year not £5.

      £7 versus £120 makes your point just as well – but is the more accurate figure to use, I think, in this case.

        • Dale Vince

          Hi Ted and Tracey, I actually think you are wrong in your approach to this.

          The price paid for electricity is not a factor that needs taking into account, likewise VAT.

          We have used the published price of ROCs as the basis for the calculation – assuming that domestic and business customers each pay the same for their ROCs, which of course they should.

          It follows that if domestic users are one third of the volume of the total market, then they pay one third of the total costs of the RO.

          It’s not more complex than that.

          Make sense?

          Cheers.

            • Ted Marynicz

              What I am saying is that I don’t believe that suppliers split the ROC cost equally per kWh between domestic and non-domestic whilst your calculation assumes that this is the case – so it depends how suppliers add the cost of ROCs to bills.

              If they charge a flat 0.2p per kWh to everyone equally to cover ROCs then using the GWh % split is the right way to do it as everyone will be contributing to ROC costs based purely on their consumption. But my understanding is that that is not how the pricing works. That seems to be what DECC say as well.

              If the ROC cost is added in as just another overhead that needs to be recovered via total billing then you need to split the domestic/non-domestic by cost as well.

              The fact that non-domestic tariffs are negotiable, for large consumers, suggests that this is the case too. Every £1 that a supplier fails to recover from a non-domestic customer adds an extra £1 to be recovered from the domestic sector.

                • Dale Vince

                  Hi Ted, it’s worth perhaps pointing out, though you may know this of course, that the RO is an obligation based on total energy supplied – it is not connected to price of energy in any way – as an obligation.

                  So for example this year the Obligation on suppliers is to hold ROCs to the tune of 12.4% of their total supply. So for every 12 units of electricity they supply they must hold 1 ROC.

                  It’s thus very simple for suppliers to ascribe the cost of the RO – it is a simple per unit cost.

                  If any suppliers are doing this any other way – then there’s actually no way to make this calculation – it would be sheer guess work as to how they ascribe RO costs.

                  And I see no real rationale not to simply apply ROC costs on a per unit basis – as they are incurred.

                  I think our approach is robust.

                  Cheers.

    • Paul Verbinnen

      As an absolute lightweight in the discussion so far, I have struggled to grasp the significance of your points. I assume that you are all in broad agreement although haggling over the finer detail?

      What occurs to me, however, is that if less legal costs were incurred – endless public consultations for onshore wind – then a company could reduce their prices accordingly. Maybe the cost to the consumer would be negative instead of the debated £5 to £7 ?

      Just my thoughts, I’m not a businessman.

        • Dale Vince

          You’re quite right Paul – this is a distraction. The story is that the media have been exaggerating the cost of green policies and their impact on energy bills, considerably. And when faced with the evidence of that – are not willing/interested to print it.

          It’s self censorship to adhere to an editorial line.

          I’m confident that RO costs are accounted for by energy companies on a per unit basis, and that our £5 figure is robust. But £5 or £7 – that’s not the story as you say.

          On your second point – one very interesting feature of the RO is that energy companies incur the same costs (under the RO) whatever their costs of trying to meet the Obligation are. I’m all for shorter planning processes – and getting windmills built faster and at less cost. But it couldn’t affect the costs suppliers ‘incur’ under the RO. There’s no mechanism within the RO to reflect efficiency or lack of it.

          Indeed the same is true of newly built capacity (which the RO is intended to procure) – the cost of the RO each year is actually the same whether we (the industry) meet the targets or we don’t.

          Cheers.

    • Jonny Holt

      Hello everybody,

      It all has to be seen in the context of the true costs of rival power generation technologies. On the one hand we pay so much for wind and on the other so much for nuclear, gas, coal et al.

      Here is an interesting perspective, one which should (if there is any sanity in the world) show how much of a comparative bargain we get when we harvest the wind, and how commercially bonkers and bankrupting is nuclear power – at least until we have overcome some specific and huge technological hurdles. It comes from an unlikely source – the Mail on Sunday, no less.

      http://www.dailymail.co.uk/news/article-2113327/The-toxic-pond-Europe-Sellafield-cost-10bn-make-safe–Harold-Wilson-wont-pay-it.html

      The playing field is by no means level even now, given that nuclear power has received many many times the level of financial support from the state (even on a per Kilowatt generated basis) than wind power has ever had. A completely unrecognised – effectively “off-balance sheet” – liability is a source of serious instability in our electricity generating industry and the market it supplies.

      Best regards,

      Jonny.

    • Koen van Seijen

      Dear everybody,

      It’s an interesting discussion so far, but like Paul said it’s about pennies and maybe distracts from the really big questions!

      For example: where is the industry going to find the money needed to invest in the smart grids, new grid connections, renewable energy in the next decades?

      It seems like we need billions the coming decade but the major players (the big six) aren’t really working on it.

      Do they make enough money to invest or is their business model broken and we need other players with enough money (pension funds, VCs???) to step in?

      I’m interested in your thoughts on this.

      Best,
      Koen

        • alex scargall

          the big 6 are working on smart meters bit developing the service takes time. trials are currently under way by the big 6 but no standard service has been agreed yet. for example the smart meters fitted by ecotricity for example are not compatable with the other companies therefore ecotricity customers cannot change providers in the future should they wish to. everyone in the industry needs to agree on service requirements ie software, metres, national grid updates etc. and once the trials are complete the providers can resolve these issues. smart metering will happen and each provider has allocated hundreds of millions of pounds for the roll out if service. all we are waiting for is the agreements on how the service will work and what needs to be done in terms of current supply networks to meet these changes. if you visit the websites of the big 6 details are available in terms if who has and is doing what projects.

        • alex scargall

          got some updates on smart meters today. industry complient smart meters and installing them will begin end of 2012. so people will start getting the letters to say the domestic meters will be changed later this year. due to the millions of meters that need to be changed this will take several years but you will begin to see the roll out of smart meters withina few months. depending on who your local provider is determins how quick this will hapen and this in turn is affected by available resources. if you contact your current provider most will add you to a waiting list for priority if you are wanting one as soon as they arr available in your area.

    • paul

      A little ‘Budget 2012′ update to this story:

      These quotes from George yesterday stand out:

      “renewable energy will play a crucial part in Britain’s energy mix but I will always be alert to the costs we’re asking families, business to bear.”

      “Gas is cheap, has much less carbon than coal and will be the largest single source of our electricity in the coming years.”

      Considering the rising price of gas in international energy markets added an average of £120 to energy bills last year, and ALL renewables support cost £15.15 (onshore wind £4.68) you might be forgiven for wondering whether George can add up properly…

        • Paul Verbinnen

          That’s a bit like worrying about the cost of an inner tube for your bicycle (which you can fit), whilst not batting an eyelid over the price of a punctured car tyre (which has to be replaced by a garage)! :)

          People have to remember that the Tory agenda is focused on benefits for shareholders, especially rich ones. And especially rich ones who contribute to party funds.

          I agree Paul, truth doesn’t come into the equation.

    • Ohad

      I am interested to see that the discussion in england is about the cost of wind power – here in israel we have tried wind and there are a few turbine on the golan but the sector just hasn’t worked.

      Although there is some talk of getting wind turbines to power the coastal highway the subsidy is not big enough yet.

      How much subsidy does a wind turbine get in the UK? Trying to work out from your figures is hard as although you say £5 per customer how much does that mean as subsidy for each turbine?

      Also, how do you cope with the problems of noise and the ugly turbine? Up in the Golan it does not matter but much of israel is beautiful and we see strong resistance to these high turbines.

      How do you get permission to build or do you just build and ignore those who are unlucky to live near by?

      thanks

      Ohad

        • Koen

          Hi Ohad,

          I think local ownership has to be a key aspect. As soon as people are (part) owner of the wind turbines and actually make money with ‘their view’ and wind which passes over their land. A lot of resistance disappears. People feel (and to be honest I think this is true) it’s unfair that only the land owners where the turbines rest on, are profiting from them, and not the people who ‘suffer’ because their view changed.

          And who likes to live next to a coal mine/plant anyway?

            • Trev

              When someone tries to make money by developing their land and inflicting something bad on a neighbour such as an open cast coal mine, multiple massive wind turbines or a hug factory, then the neighbour is going to resist. But of course, with all these things it not just the view that is ruined by these industrial blights on the landscape.

              They also produce noise as well and some money doesn’t actually make up for the nuisance. Maybe there should be a minimum distance from houses for all these things – a mile sounds sensible as a starting point. Failing that, anyone living within a mile should have to agree to be subject to the nuisance, or the building of the factory, wind turbine or whatever, and without that agreement, the building shouldn’t start.

              What we need in the UK is more consideration for the effects of these types of blights on the countryside. Sadly, it looks like the desire of a few big companies will always ride roughshod over people.

              That’s an interesting point you raise about the ownership issue – maybe if there was more done to involve people or these massive turbines were a community scheme owned by the people affected things might be different. If rather than being imposed by faceless companies and faceless planning inspectors, locals were involved then these great big noisy things might be sited a bit better and put where they are wanted and not where some landowner wants to rake in the cash.

              Funny how most of these developers choose to develop these massive noisy ugly things well away from their own homes…

                • Dale Vince

                  Interesting discussion. It’s worth considering perhaps that nobody, well virtually nobody, would agree to have a power station, a major road, an airport, even a supermarket – in their own back yard.

                  Yet these are things which we all enjoy the benefits of.

                  It’s human nature, it’s actually selfish – but it’s how the world rolls.

                  There is no reason why wind energy should be treated any differently to any other form of development – there’s national interest/benefit in a secure energy system, as there is in a good transport system, airports, schools, supermarkets – even pylons have a role to play.

                  But who, given the power, would allow them in their own backyard (and therefore how sensible is that suggestion to give this power to ‘locals’) – and why of all these things, are community schemes only talked about in respect of windmills…..?

                  Interesting.

    • GrumpyCabbie

      Would I be right in assuming the Government are not able to tax green electricity to any degree, especially once it is up and running, whereas imported gas or even North Sea and fracked gas will deliver vast amounts of tax revenue to the Government?

      Is this the reason for their lack of interest in renewable electricity? Or am I on the wrong tracks here?

    • Alex Scargall

      RWE have today announced they are pulling out of the UK nuclear strategy, which it a big surprise to most people but given the state of nuclear energy in Germany it seems that RWE are going to focus strongly on low carbon and green energy going into the future. This would be a massive support for green energy campaigners and a big blow to the UK governments plans. While the 2 nuclear site are now up for sale and no announcements have been made as to who the purchasers are I really think this sends a strong message that the big 6 are focused on providing low carbon technologies as the main option for our future generations. Hopefully people who read this blog will understand that RWE has spent over £1.2 Billion pounds in the last 3 years on developing green energy in the UK alone (much more spent all over Europe).

    • Paul D

      Some points:

      Interesting that the Daily Mail was used as a mock up. It should be noted that the Daily Mail is apparently the most popular global newspaper. eg. There are quite a few Americans now that read it and that will probably have an impact on it’s world view. If you look through the comments on many UK newspaper sites, quite a high proportion are Americans. Indeed it is common knowledge that if you make a ‘green’ comment on the Daily Mail site, your comment will receive numerous thumbs down votes probably within minutes. It’s a badge of honour to post a comment on the Daily Mail and get voted down.

      Since this blog article was posted, nuclear energy has had a major set back with the withdrawal of Eon and Npower from the UK scene.

    • Tall

      Good to see some sense from the government today by reducing the subsidy to on-shore wind – although only a 10% cut is not enough.

      Hopefully the full review next year will cut it by much more so that if wind is as cheap as the suppliers claim then it can stand on it’s own just like any other industrial development in the countryside.

      Perhaps the uncertainty over how much these schemes will receive from hard pressed families will keep some of these schemes from being built at all – if they only work due to subsidy then they don’t deserve to be built.