A bit of Perspective

One of the oft repeated complaints of the anti wind, anti climate change brigade is that green energy gets a lot of subsidies.

It’s a theme taken up recently by sections of the media – like the Daily Mail – claiming that green subsidies are responsible for high energy bills – and silly stuff like that.

But is it true…?

A few weeks ago a customer of ecotricity asked us just how much of his bill money was taken up by other support for green energy, other than that which ecotricity did itself – meaning through the Renewables Obligation (RO). It caused us to take a look at the cost of that per typical household. This is what we found:

The most recent published figures we could find were for the year ended April 2010.

Using data from OFGEM and assuming there are 26.7 million homes in Britain – we came to the figure of £13.84 per household per year to support renewable energy through the RO. Of this, £4.15 was for onshore wind.

Hardly princely sums. Especially if looked at in perspective;

For example – we also calculated the annual cost per household of the nuclear ‘clean up’ – the cost of containing nuclear waste – it’s a rather more significant £34.47 per year, per household.

And then we went looking for the support given to the fossil fuel industry and we found the annual cost per household is an incredible £1,000. That figure comes from the government itself – albeit when they were in opposition.

So we spend £13.84 per household (per year) on clean new sources of energy, nearly three times as much more to clean up the mess the nuclear industry has already made and a comparative small fortune to subsidise fossil fuels. The past and the present (in energy source terms) receive vastly more public support than our energy future.

That’s a perspective the Daily Mail won’t share with it’s readers.

There’s one more piece of perspective worth sharing – In the last twelve months energy bills in Britain have risen by roughly £200 per household (per year) – simply due to fluctuations on global energy markets (fossil fuel markets).

Fossil fuels didn’t suddenly become more expensive to extract or process – this is all about ‘free markets’ and commodity speculators.

That’s £200 we’re all spending on ‘Free Market’ price movements – £35 cleaning up nuclear waste and £1,000 subsidising fossil fuels….. oh and £14 supporting Green Energy.

That’s a perspective I thought worth sharing.

To me the current spending priorities are perverse – let spend that £1,000 year on Renewables – it’s a far better investment for all of us.

Cheers.

——————

Sources

RO data from Ofgem: Renewables Obligation Annual Report 2009-2010

Nuclear decommissioning Authority Budget 2009/10

Household Energy Bill Price Rises Dec 2010 = £1,150
Nov 2011 = £1345

£1000 fossil fuel subsidies – p.390

It’s not un-common to hear people say ‘We need Feed in Tariffs in the UK, like they have in Germany – they’ve got umpteen Gigawatts of renewables from it’. And fair enough they do. It’s important not to confuse large scale FITs with micro though.

The problem for onshore wind (large scale) in the UK is planning not financial and therefore FITs just can’t help. We need German planning laws to emulate German success, in large scale wind.

But what about micro generation; Are feed in tariffs the answer to better deliver this?

Planning used to be a barrier to micro generation but no longer. The problem is just that the numbers don’t stack up. It’s a financial problem, the territory of FITs.

German FITs pay well for micro generation – more than 30p per unit. No wonder much more gets built there than here with our 10p or so. That’s how it works. It’s nothing to do with it being an easy system to use or anything else, just much more money.

But multiple ROCs would do the same job here. They recently doubled and it would be easy enough to have them quadruple (to emulate the value of German FITs) – much easier than to set up a new scheme. And here’s why.

Export from home generation cannot be economically metered, so the ‘system’ cannot attribute it to individual suppliers, it just reduces grid losses. FITs require an electricity distribution company to pay for the power, one who operates the grid – and who then passes on the cost to electricity suppliers working in that region. That’s how it works in Germany. It would be complex to set up and run – compared to multiple ROCs. And it would require new legislation, no small issue.

And would FITs for micro generation give us shed loads of renewables, like Germany? Well yes and no – it would be a boost, but let’s not overestimate how much they have in Germany – from micro gen. Germany’s incredible 12% renewables contribution is often described as coming from ‘wind and solar’ – giving the impression that solar (micro generation) plays a large part. It doesn’t.

Solar actually makes up 0.3% of Germany’s electricity – wind and other large scale renewables produce 11.7%. Put another way micro generation makes up just 4% of the electricity supported under FITs in Germany. It’s good but not as good as it’s cracked up to be.

FITs are good at stimulating micro generation simply because they pay well. Money is really what stimulates micro generation. FITs are a mechanism that works in Germany to provide that money, they could be made to work here but not easily. Whereas multiple ROCs could readily do the same job. The system and the legislation is in place and it works in a UK market context. There’s nothing clever about FITs, they just pay well. That’s easy to emulate. You’d think.

Our German friends do have something we lack – commitment to renewables. That’s what we need. German style commitment to Planning for large wind that works and Finance for micro generation that works.

(Feed in Tariffs – FITs – are a system of fixed prices for renewable energy paid to the generator by the ‘grid company’. The fixed price is above the ‘market’ price and hence provides financial support to enable more renewable capacity to be built.)

So what’s wrong with Feed in Tariffs?

Well, actually nothing. It’s a good way to financially support renewable technologies and so encourage their wider use. It’s worked brilliantly in Germany.

But do they have anything to offer the UK? That’s a different question altogether and my answer to that is a definite no. The reasons are simple enough -

Feed in Tariffs are the right answer to the wrong question.

The UK RO (Renewables Obligation) scheme does the same job. It provides support above that which the ‘market’ alone would give.

FITs work well, so does the RO. The RO is not the problem, so swapping it for FITs won’t achieve anything.

The dominant renewable technology in the UK is on shore wind – it’s technically mature, in mass production and it’s economic. We have enough of it to power the whole country several times over (we have 40% of Europe’s wind resource), and it’s expected to deliver the lion’s share of our renewable targets.

Does it need additional financial support? No, it does not. The government only recently resisted the temptation to reduce the support that wind currently gets through the RO – the trend here is reduced support not increased, because wind clearly has what it needs.

The one thing preventing the UK from having a massive contribution to energy needs from our wind resource is the planning system. And FITs won’t and can’t fix that. Feed in Tariffs are about financial support and that is not the problem. It’s really that simple.

There are technologies other than wind of course, like wave power for example, and they need more support (money) to work than wind does, but they are getting this through the existing RO mechanism – which is now giving multiple ROCs (Renewable Obligation Certificates) to certain technologies, like wave and tidal power. It’s as effective as feed in tariffs at this job.

Feed in Tariffs were a great idea 15 years ago and would have helped the UK then, but we finally got our act together with the RO some years ago (it’s our Feed in Tariff by another name) – and our problems today are not money, they are planning – only planning. Let’s discuss instead adopting German planning laws – now there’s an idea David….

You can now see part two in this series on Feed-in Tariffs here.