There are several relevant developments recently. Prof Sir Dieter Helm has been forthright in pointing out that CP2030 is going to be very costly:
"It is hard to conclude other than that the Secretary of State is deluded when he champions the 2030 net zero target as a route to lower costs of energy through ever-cheaper renewables. Rather, it reflects a conclusion seeking a cost measure that confirms it.
The correct measure is system costs. The reality is that net zero by 2030 is expensive and that by dashing flat-out towards it, the result will be even higher costs. That points to an even more challenging reality: it is going to be expensive to decarbonise carbon consumption, and it is a delusion to think that having for so long not been paying the cost of the pollution our consumption is causing, by now paying for pollution, it is going to be all win–win. The price is not coming down, as heralded by the Secretary of State. It is going up, with a system requiring twice the generating capacity and much more transmission, lots of batteries and storage, and a great deal of back-up generation to keep the lights on, all to achieve the same amount of electricity. To think otherwise is to commit the broken windows fallacy – that by breaking windows, economic growth is increased. Replacing one set of windows with another is a net cost, and replacing the windows with more glass than was previously needed is a bigger cost still.
It is time to be honest about the costs of the net zero target."
The Greenvolt floating wind farm is now in difficulty as CNOOC have refused to purchase output from it for its nearby Buzzard platform. Wind projects are being cancelled around the world - in Australia, Japan, the US, as well as in Europe/UK.
Claire Coutinho (Conservative Shadow ESNZ minister) wrote to the new CCC Chair, Nigel Topping, demanding he update costs properly for the 7th Carbon Budget, as they are plainly unrealistic and misleading Parliament and the nation.
It could be said that NESO and OFGEM really need to do likewise: OFGEM have a consultation on their Soviet style prescriptive planning for the grids (including gas) which is designed to lock in CP2030 and Miliband as normal - options that are on the path to failure and replacement by the next government - but by then it will be an emergency if the present course is not halted rapidly now.
Note also that Kemi Badenoch is now formally renouncing Net Zero, and arguing for full development of the remaining North Sea potential.
The 49% load factor quoted in this for wind did not ring true so I researched it. The Clean Power 2030 Annex 1: Electricity demand and supply analysis states the following:
4.1.1.2 Great Britain in 2030: Offshore wind will become the dominant factor of a clean energy system. The share of generation provided by offshore wind must grow sharply to provide around half of the supply in an average weather year. This means an additional 28 - 35 GW of offshore wind with load factors of 43% for offshore wind generating 167 - 187 TWh of clean power.
4.1.2.2 Great Britain in 2030: The amount of generation provided by onshore wind power must grow by around 75%. This means an additional 14 GW of onshore wind. With load factors of 24% for onshore wind, this generates 58 TWh of clean power.
There's no way that there will be 14GW of additional onshore generation by 2030 AR4-7 awarded 3.4GW but several AR4 sites have already terminated contracts and several have yet to start works. Many AR5 sites still aren't fully consented and very few have started construction. Not had time yet to see what state AR6 is. No doubt they will throw the kitchen sink at AR7 and I wouldn't be surprised to see the lesser value AR5/6's being deferred/terminated where the developer has an AR7 site.
Then you have the other farce is whether they will actualise the CfDs anyway.
Yes, the load factor used by DESNZ for AR7 is unrealistically high. Nevertheless, that is what they used in the AR7 price calculation for fixed offshore wind:
Thank you David for providing the source. I have done a bit more digging and it’s necessary to read the AR6 documentation to understand how the figure of 49% was derived. I quote part of it I suggest that readers should view the whole caboodle in order to understand what and ARn Load factor is : -
“Gross load factors for the wind technologies are calculated using an internal departmental model, which combines a theoretical turbine power curve (power output as a function of wind speed, modelled using turbine technology parameters including rotor swept area and hub height) with historic site-specific Virtual Met Mast (VMM) hourly wind speed data sourced from the UK Met Office.”
My interpretation is that the ARn load factors as only there to calculate a price and for no other reason. These load factors appear to me quite a bit higher that real world value both past and estimated future.
Many of us are critical of DESNZ from time to time but we need to give them credit for publishing so much detailed information for us to assess.
If you dig back into supporting documentation for earlier CFD rounds, when the capacity factor assumptions were even higher, the excuse given was that it was a mechanism to ensure that the CFD budget would not be overspent! Of course the actual cost is unaltered by the assumption, since it depends on actual rather than assumed production, inflated strike prices, and hourly day ahead market prices. The effect is to skew the results across technologies in the same pot. As the whole farrago is conducted in funny money the underlying reality is clear: the motivation was to claim a exaggerated number of homes would get supplied by the winners.
Doubtless the professors advising on the auction design might have a fuller explanation, mainly about obfuscation I suspect. One factor that is obviously lacking given that the aim is to procure electricity is that bidders should be making site specific estimates known so that the best sites will tend to be the winners, and so a better estimate of likely production can be made. There might need to be some audit of that, or at least the use of a standard geographic dataset on insolation and wind speeds. The counter argument is that more productive sites can afford to bid more competitively, but the realities of auction games don't work like that. Bidders make their own private estimates about the competition, and also about how government would react when things go wrong one way or another. Everyone is open to being wrong.
Your cartoon of the Trolley Problem reminds me of the huge amount of money (our money at the end of the day) that is being spent by Haventus to develop Ardersier Port on the inner Moray Firth as an Energy Transition Facility for deploying and servicing offshore windfarms. They are obviously planning to transport very heavy plant in and out as they dredged the channel for months with very expensive barges which dumped the sand spoil 10 miles away out at sea.
If we ever want to get back to cheap energy, we need to stop building redundant wind and solar farms and start decommissioning the redundant existing fleet. It’s as simple as that and I wrote that in my recent post “The charade of Net Zero” now hosted by my pal Ed Hoskins: https://edmhdotme.wpcomstaging.com/the-charade-of-net-zero-2/.
Thanks David. A stark analysis of the real and exponentially growing costs of 'clean' electricity.
In stark contrast to the Stark raving bonkers assumptions at Clean Power Mission Control and the hallucinogenic inspired estimations of Pinchbeck's CCC.
You overlooked the Energy Mission Board oh and not forgetting the Offshore Wind Energy Taskforce!!! both chaired by Miliband to "deliver clean power by 2030 and accelerating towards net zero boosting energy independence, protecting consumers, and supporting jobs across the country"
Like Starkies Mission Control they never reveal what they are doing so I can only hope all held in Scotland so they can spew out enough hot air to make the turbines move a bit faster.
I would be intersted in a further analysis of how much "NESO calculated the cost of the CP2030 plan at somewhere between £44bn and £48bn per year " would be necessary in any case ?
If we wanted to stop NetZero as Reform claim they will (whether it legally could be stopped is of course another question), what would we still need to pay to maintain the Grid (but without further expansion for new capacity). And what would we need to spend to build new/refurbished capacity but based on gas or nuclear ?
For Reform to reverse any signed contract would blow up the foundations of our economy. What they could and should do is properly enforce the terms of the contracts and not allow any extensions on CfDs not delivered on time.
On the grid expansion again some projects are already in construction and costly though DC Eastern Green Links are they will sterilise much of the constraint costs from todays renewable generation so worth doing. The rest of the projects should be stopped but Miliband is going to go all out to maximise the achievement of his goal so by the time of the next GE it could become quite costly to stop any of it.
On generation we need to get back to 15GW of nuclear and build out new CCGTs at all the locations where the coal fired power stations were so there are minimal grid works. Oh and get back to getting the rest of the gas out of the N.Sea.
I agree about Reform and contract law, but their intervention was to add uncertainty into the process and therefore probably reduce the number of people who will bid for AR7. Therefore upsetting Ed the Shred's plans.....
I don't suggest any signed contracts should be ignored, but as you say, they should be executed according to the exact terms and any opportunities taken to legally reduce the length of the contracts and that actual amounts paid should be taken.
You make a good point that some of the grid investment would reduce constraint paments, but what are the sums involved ?
Agreed totally on using our own gas (and oil) and where we build new CCGT and on nuclear too and we should be looking at SMRs more seriously too.
I had solar panels installed in 2019 so benefit from some FIT payments - not sure what is in the contract, but could the inflation increase be halted for example ?
Similarly, could some loopholes be found to reduce the remaining constraint payments and also to change the ROC scheme so they effectively become worthless ?
Existing grid maintenance costs are already built into our bills. Although the cost of extra build out is coming soon, I believe.
According to DESNZ (a weak source I know), modern CCGTs costs about £600m/GW, so 30GW would cost about £18bn. This is chicken feed compared to the £80bn of grid expansion, and would actually be useful.
OFGEM are forecasting bills will increase by 100/yr/household by the end of the next RIIO3 period in 2031 although other commentators say that will be partly offset by lower constraint costs. There is a modicum of truth in that but the flaw is we will have spent 80B to get at it and another 15B on constraint costs before then let alone whatever the rate they set for AR8/9 et al. Thus the payback looks poor and it will need same again if they go all in on the Scotwind sites.
Isn’t it the case that there are no economies of scale in the capex of building wind turbines? I thought the entire idea of subsidies was to get access to these economies.
Actually there's reverse economies of scale. The square-cube law tells us that the power rating of a turbine rises with the square of the blade diameter, but the material consumption rises with the cube of the diameter, so get more expensive the bigger the turbine.
It was put together over 20 years ago, so doesn't reflect all the modern innovations. However, many engineering and economic principles remain much the same. It repays study to gain many insights about the wind business.
Is it not somewhat disingenuous to estimate savings in gas generation costs simply from the cost of the gas used? The gas generators have to charge enough for their electricity to cover a year's worth of overheads from only a few day's worth of operation.
Capex recovery won't be saved in either a CP2030 or Business As Usual scenario, so it balances out. It's Miliband claiming that his plan will save us from the rollercoaster of international gas prices, not me.
Brilliant again David! I picture a sitcom ("The Numpties"), where Rachel (from accounts) is dismantling the sofa in the hope of finding the odd tenner, while Ed is on tour with the (nation's) credit card.
David, I may have missed it in your dense but highly informative article, but do you have data on the cost of capital for AR7 offshore wind? I’d like to compare it to those quotes by Centrica in the RAB funding of Sizewell C and UK 5- and 10-year gilts. Thanks.
Thanks. I was looking at Sizewell C, Centrica’s stock market announcement was that the regulated rate of return was 10.8% and it’s WAAC (iirc) 6.5%. 10 year gilts are around 4.75%. I’m only a lowly lawyer, but it strikes me that it would much cheaper for the government to fund construction using 10-year rates, run them for the balance of the period, then sell the assets to recoup repay the capital plus coupon. Or am I completely off the rails?
You're probably right. Sizewell C, the 20 year index-linked contracts for AR7 and the deals from Ofgem for grid expansion are this Government's equivalent of Brown's PFI deals.
You probably have seen the 'Energy Bad Boys' analysis of the US savings by following the Trump plan rather than the Biden plan. Even taking into account dubious 'costs' of emissions it comes in at well over $300bn. They have given it to the government to hopefully replace their rather tame effort at identifying savings of $19bn in order to fend off the inevitable legal challenges over there.
You obviously have all the same numbers for the UK available and it might be useful to present the same style of analysis so both can be presented side by side to our recalcitrant politicians and media.
The assumptions on which current policy rests are so egregiously wrong it begs the question are NESO just incompetent and not up to the task or simply a convenient front (ostensibly “independent” no less) source of propaganda for DESNZ and our Secretary of State?
NESO is too influenced by what was good for National Grid Plc so quite happy to go along with Net Zero as it will make them a lot of money. Ultimately though they are directed by DENZ about what outcomes are wanted and that is heavily influenced by the CCC. So until you either change the remit of the CCC, unlikely, or until Starmer or Reeves grow a pair and wake up to the economic impact of this policy nothing is going to change. Milibrain will continue to lay irreversible traps with more CfDs and long term contracts for grid upgrades. AR7 will be the straw that breaks the back here given the pricing and relaxing of qualification parameters we could see high participation. That outcome wont be known until Jan/Feb 26. There should be 3 or 4 opportunities to challenge in the commons under normal DENZ questions but as weve seen over 12mths Milibrain and his cohort never answer or engage anyhow. Then we may get select committee report into "Cost of Energy" although I doubt that will be that influential to our cause.
So im pretty pessimistic about stopping this or even getting a pause and see only the economic impact as the last chance here.
I'm not sure how much participation we will see in offshore wind. It's an industry in acute difficulties internationally, with project cancellations and failed auctions around the globe and governments facing the reality that if they really think they want wind they are going to have to pay a lot more for it. The Offshore pot results should be out in December, and Miliband will have peeked at the bid stack as soon as bidding is over. If there is a failure to procure capacity AR7 there will be pressure for an accelerated timetable for AR8, doubtless at even higher prices. If I were a wind farm developer I would hold off and look for the best opportunities around the world next year. Miliband is painting himself into a corner. Professors of game theory will be busy advising on (no) bidding strategy.
Note that there are separate pots for Scottish offshore wind where the connection and curtailment risks are higher.
A small request if I may, can we stop referring to these energy production sites/installations as farms. Farms are for food, which is far more important than net zero.
Clare Coutinho is an MP. Does anyone on here know why she is writing to a discredited Quango rather than using Parliament to question what she believes might be punishable malfeasance by the Civil Service and Ministers ?
Shes proven to be pretty inept when it comes to questions in HoC but Milibrain and coterie are masters at evading answering the questions and just recycling the same mantra about energy security et al whilst teh Speaker does nothing to call any of them to account to answer the questions.
Look...I understand that we have to keep playing the climate emergency idiots game by running these numbers even if they are all based on wacky logic.
But when are we going to face down the big one and cut the head off the snake and face that renewables and all of the other NetZero solutions are by a long stretch unnecessary, technologically unattainable, economically unviable and extremely foolish.
Why would we want to buy energy technology as an import when we could build using our own resources (Nuclear, Drilling and Fracking) and be forced to use up space we need for other things, and still not enjoy energy that is reliable lowest cost and abundant. How much lack of prosperity will result when no industry or economic performance remains due to hi energy costs..
The climate evangelists have spent decades brainwashing the population and its going to take a lot to dissuade the majority that they've been had. I can tell you from my own experience how friends and family wont be persuaded that there isn't a climate emergency and until you swing that pendulum I just can't see pressure coming to bare from that quarter. Economically its causing serious dislocation of industry in the UK much of which isn't probably isn't reversible even if we change tack now. Im staggered how impotent the unions are in this country over what is happening and they need to collectively break ranks and call it out before its too late which is a lot closer than people think.
The reversal cannot be done by only directly disagreeing against the noble notion of saving the planet… you need to say that attacking CO2 is not needed but you will always lose as who wants to be un-noble… But focus on attacking the economic impact of NetZero and the hit on prosperity….. It will take strong political leadership to say.. well we can save the planet but not this way… your family prosperity comes first and the planet a bit down the list.. and most people will buy that…. But keep it simple like Trump did..… no cost benefit analysis ..just how much we will hurt without affordable reliable and local abundent energy … comparing the cost of energy in the US with the UK will sort it out very quickly.
Use these presentation that shows the cost gap between technologies....
An Inconvenient Truth: Our climate policies cant save the environment. So what will? | Bjorn Lomborg
It's also worth mentioning the absolutely awful (genuine) environment impact of the mining and refining of the raw materials involved in making solar panels, lithium batteries and wind turbines.
The high-powered analysis of the costs of different technologies is meaningless to people in the street and it not necessary to explain that a grid loaded with wind and solar can never be cheaper than the conventional grid.
Let’s invite the voters to join the energy debate and demand that the politicians abandon net zero policies that have wasted trillions worldwide to get more expensive and less reliable power with catastrophic damage to forests and farmlands.
Anyone who is interested should be able to understand the ABC of intermittent energy. That’s not an acronym, just three things that people need to know.
A. Supply must meet the demand continuously.
B. The continuity of supply from wind and solar is broken on nights with little or no wind. Nocturnal wind droughts are an existential threat to the supply of power, and hence civilisation as we know it.
C. There is no grid-scale storage to bridge the gaps at present or in the foreseeable future.
That means the RE-loaded grid is not fit for purpose, so it will never replace conventional power and we could be stuck with a hybrid power supply that can never get cheaper.
Of course RE enthusiasts think that the technology can be improved by innovations and spending more money but they missed the point that the technology is inherently not fit for purpose.
Think of the steam engine, no doubt they can be made more powerful and more efficient, but they will never be fit for the purpose of space travel.
As for storage, RE enthusiasts often say “we store water don’t we!” But they don’t realise that the overwhelming amount of stored water is in the soil, in the root zone of the forests and fields of the world. Man-made storage is an invisible percentage of the total!
Plants need a continuous supply of water in the same way that the grid needs a continuous supply of power. Imagine if the plants did not have water stored in the soil and they had live on continuous precipitation! They would die in a few minutes on a sunny day if the rain stopped!
The same applies to the wind-dependent grid when there is a wind drought. In Australia, severe droughts can last three days and nights, in Europe the dunkelflautes can persist for weeks on some occasions.
ONE MORE KILLER BLOW TO THE HOPE OF STORAGE
Many people have calculated the astronomical cost of storage required to back up wind and solar power. But according to McBratney’s Law, that will not help. The storage will never be charged beyond a tiny fraction of its capacity because the wind and solar grid will never generate enough surplus power.
There are several relevant developments recently. Prof Sir Dieter Helm has been forthright in pointing out that CP2030 is going to be very costly:
"It is hard to conclude other than that the Secretary of State is deluded when he champions the 2030 net zero target as a route to lower costs of energy through ever-cheaper renewables. Rather, it reflects a conclusion seeking a cost measure that confirms it.
The correct measure is system costs. The reality is that net zero by 2030 is expensive and that by dashing flat-out towards it, the result will be even higher costs. That points to an even more challenging reality: it is going to be expensive to decarbonise carbon consumption, and it is a delusion to think that having for so long not been paying the cost of the pollution our consumption is causing, by now paying for pollution, it is going to be all win–win. The price is not coming down, as heralded by the Secretary of State. It is going up, with a system requiring twice the generating capacity and much more transmission, lots of batteries and storage, and a great deal of back-up generation to keep the lights on, all to achieve the same amount of electricity. To think otherwise is to commit the broken windows fallacy – that by breaking windows, economic growth is increased. Replacing one set of windows with another is a net cost, and replacing the windows with more glass than was previously needed is a bigger cost still.
It is time to be honest about the costs of the net zero target."
The Greenvolt floating wind farm is now in difficulty as CNOOC have refused to purchase output from it for its nearby Buzzard platform. Wind projects are being cancelled around the world - in Australia, Japan, the US, as well as in Europe/UK.
Claire Coutinho (Conservative Shadow ESNZ minister) wrote to the new CCC Chair, Nigel Topping, demanding he update costs properly for the 7th Carbon Budget, as they are plainly unrealistic and misleading Parliament and the nation.
It could be said that NESO and OFGEM really need to do likewise: OFGEM have a consultation on their Soviet style prescriptive planning for the grids (including gas) which is designed to lock in CP2030 and Miliband as normal - options that are on the path to failure and replacement by the next government - but by then it will be an emergency if the present course is not halted rapidly now.
Note also that Kemi Badenoch is now formally renouncing Net Zero, and arguing for full development of the remaining North Sea potential.
The 49% load factor quoted in this for wind did not ring true so I researched it. The Clean Power 2030 Annex 1: Electricity demand and supply analysis states the following:
4.1.1.2 Great Britain in 2030: Offshore wind will become the dominant factor of a clean energy system. The share of generation provided by offshore wind must grow sharply to provide around half of the supply in an average weather year. This means an additional 28 - 35 GW of offshore wind with load factors of 43% for offshore wind generating 167 - 187 TWh of clean power.
4.1.2.2 Great Britain in 2030: The amount of generation provided by onshore wind power must grow by around 75%. This means an additional 14 GW of onshore wind. With load factors of 24% for onshore wind, this generates 58 TWh of clean power.
Source: [https://www.neso.energy/document/346791/download]
These are in the same ballpark as the historical figure quoted in Dukes Table 6.3 [https://www.gov.uk/government/statistics/renewable-sources-of-energy-chapter-6-digest-of-united-kingdom-energy-statistics-dukes]
There's no way that there will be 14GW of additional onshore generation by 2030 AR4-7 awarded 3.4GW but several AR4 sites have already terminated contracts and several have yet to start works. Many AR5 sites still aren't fully consented and very few have started construction. Not had time yet to see what state AR6 is. No doubt they will throw the kitchen sink at AR7 and I wouldn't be surprised to see the lesser value AR5/6's being deferred/terminated where the developer has an AR7 site.
Then you have the other farce is whether they will actualise the CfDs anyway.
Yes, the load factor used by DESNZ for AR7 is unrealistically high. Nevertheless, that is what they used in the AR7 price calculation for fixed offshore wind:
https://assets.publishing.service.gov.uk/media/6880d6f8f47abf78ca1d3550/cfd-ar7-administrative-strike-prices-methodology-note.pdf (p13)
So, to replicate their model, I used that value.
The CfD Funded offshore fleet actually achieved 38.8% in 2024 (probably some curtailment impact)
Thank you David for providing the source. I have done a bit more digging and it’s necessary to read the AR6 documentation to understand how the figure of 49% was derived. I quote part of it I suggest that readers should view the whole caboodle in order to understand what and ARn Load factor is : -
“Gross load factors for the wind technologies are calculated using an internal departmental model, which combines a theoretical turbine power curve (power output as a function of wind speed, modelled using turbine technology parameters including rotor swept area and hub height) with historic site-specific Virtual Met Mast (VMM) hourly wind speed data sourced from the UK Met Office.”
https://assets.publishing.service.gov.uk/media/6555dca8d03a8d000d07fa12/cfd-ar6-administrative-strike-price-methodology.pdf
My interpretation is that the ARn load factors as only there to calculate a price and for no other reason. These load factors appear to me quite a bit higher that real world value both past and estimated future.
Many of us are critical of DESNZ from time to time but we need to give them credit for publishing so much detailed information for us to assess.
If you dig back into supporting documentation for earlier CFD rounds, when the capacity factor assumptions were even higher, the excuse given was that it was a mechanism to ensure that the CFD budget would not be overspent! Of course the actual cost is unaltered by the assumption, since it depends on actual rather than assumed production, inflated strike prices, and hourly day ahead market prices. The effect is to skew the results across technologies in the same pot. As the whole farrago is conducted in funny money the underlying reality is clear: the motivation was to claim a exaggerated number of homes would get supplied by the winners.
Doubtless the professors advising on the auction design might have a fuller explanation, mainly about obfuscation I suspect. One factor that is obviously lacking given that the aim is to procure electricity is that bidders should be making site specific estimates known so that the best sites will tend to be the winners, and so a better estimate of likely production can be made. There might need to be some audit of that, or at least the use of a standard geographic dataset on insolation and wind speeds. The counter argument is that more productive sites can afford to bid more competitively, but the realities of auction games don't work like that. Bidders make their own private estimates about the competition, and also about how government would react when things go wrong one way or another. Everyone is open to being wrong.
Your cartoon of the Trolley Problem reminds me of the huge amount of money (our money at the end of the day) that is being spent by Haventus to develop Ardersier Port on the inner Moray Firth as an Energy Transition Facility for deploying and servicing offshore windfarms. They are obviously planning to transport very heavy plant in and out as they dredged the channel for months with very expensive barges which dumped the sand spoil 10 miles away out at sea.
If we ever want to get back to cheap energy, we need to stop building redundant wind and solar farms and start decommissioning the redundant existing fleet. It’s as simple as that and I wrote that in my recent post “The charade of Net Zero” now hosted by my pal Ed Hoskins: https://edmhdotme.wpcomstaging.com/the-charade-of-net-zero-2/.
Andrew Montford has also said the same thing, deep within (~23 minutes) a Tom Nelson podcast. It’s a pity NZW/GWPF don’t repeat this line more prominently. Maybe it’s because they don’t want to get involved in politics: https://rumble.com/v6whges-andrew-montford-tom-nelson-pod-321.html?e9s=src_v1_eh_cs&utm_source=newsletter&utm_medium=email&utm_campaign=Climate%20realism.
My pal Ed Hoskins has also appeared on the Tom Nelson podcast showcasing his hobby website: https://rumble.com/v6y47cu-ed-hoskins-noble-cause-corruption-tom-nelson-pod-331.html?e9s=src_v1_eh_cs&utm_source=newsletter&utm_medium=email&utm_campaign=Climate%20realism.
Yes, there's going to be tens or even hundreds of billions of pounds of write offs coming.
Thanks David. A stark analysis of the real and exponentially growing costs of 'clean' electricity.
In stark contrast to the Stark raving bonkers assumptions at Clean Power Mission Control and the hallucinogenic inspired estimations of Pinchbeck's CCC.
You overlooked the Energy Mission Board oh and not forgetting the Offshore Wind Energy Taskforce!!! both chaired by Miliband to "deliver clean power by 2030 and accelerating towards net zero boosting energy independence, protecting consumers, and supporting jobs across the country"
Like Starkies Mission Control they never reveal what they are doing so I can only hope all held in Scotland so they can spew out enough hot air to make the turbines move a bit faster.
Another great article David.
I would be intersted in a further analysis of how much "NESO calculated the cost of the CP2030 plan at somewhere between £44bn and £48bn per year " would be necessary in any case ?
If we wanted to stop NetZero as Reform claim they will (whether it legally could be stopped is of course another question), what would we still need to pay to maintain the Grid (but without further expansion for new capacity). And what would we need to spend to build new/refurbished capacity but based on gas or nuclear ?
For Reform to reverse any signed contract would blow up the foundations of our economy. What they could and should do is properly enforce the terms of the contracts and not allow any extensions on CfDs not delivered on time.
On the grid expansion again some projects are already in construction and costly though DC Eastern Green Links are they will sterilise much of the constraint costs from todays renewable generation so worth doing. The rest of the projects should be stopped but Miliband is going to go all out to maximise the achievement of his goal so by the time of the next GE it could become quite costly to stop any of it.
On generation we need to get back to 15GW of nuclear and build out new CCGTs at all the locations where the coal fired power stations were so there are minimal grid works. Oh and get back to getting the rest of the gas out of the N.Sea.
I agree about Reform and contract law, but their intervention was to add uncertainty into the process and therefore probably reduce the number of people who will bid for AR7. Therefore upsetting Ed the Shred's plans.....
I don't suggest any signed contracts should be ignored, but as you say, they should be executed according to the exact terms and any opportunities taken to legally reduce the length of the contracts and that actual amounts paid should be taken.
You make a good point that some of the grid investment would reduce constraint paments, but what are the sums involved ?
Agreed totally on using our own gas (and oil) and where we build new CCGT and on nuclear too and we should be looking at SMRs more seriously too.
I had solar panels installed in 2019 so benefit from some FIT payments - not sure what is in the contract, but could the inflation increase be halted for example ?
Similarly, could some loopholes be found to reduce the remaining constraint payments and also to change the ROC scheme so they effectively become worthless ?
The ROCs are starting to run off now so at least that element is now in run down mode to its 2037 expiry!!
Existing grid maintenance costs are already built into our bills. Although the cost of extra build out is coming soon, I believe.
According to DESNZ (a weak source I know), modern CCGTs costs about £600m/GW, so 30GW would cost about £18bn. This is chicken feed compared to the £80bn of grid expansion, and would actually be useful.
OFGEM are forecasting bills will increase by 100/yr/household by the end of the next RIIO3 period in 2031 although other commentators say that will be partly offset by lower constraint costs. There is a modicum of truth in that but the flaw is we will have spent 80B to get at it and another 15B on constraint costs before then let alone whatever the rate they set for AR8/9 et al. Thus the payback looks poor and it will need same again if they go all in on the Scotwind sites.
Isn’t it the case that there are no economies of scale in the capex of building wind turbines? I thought the entire idea of subsidies was to get access to these economies.
Actually there's reverse economies of scale. The square-cube law tells us that the power rating of a turbine rises with the square of the blade diameter, but the material consumption rises with the cube of the diameter, so get more expensive the bigger the turbine.
The reality is much more complex. There used to be a good introductory guide from the Danish Wind Energy Association which has been archived here
http://ele.aut.ac.ir/~wind/en/tour/index.htm
It was put together over 20 years ago, so doesn't reflect all the modern innovations. However, many engineering and economic principles remain much the same. It repays study to gain many insights about the wind business.
Is it not somewhat disingenuous to estimate savings in gas generation costs simply from the cost of the gas used? The gas generators have to charge enough for their electricity to cover a year's worth of overheads from only a few day's worth of operation.
Capex recovery won't be saved in either a CP2030 or Business As Usual scenario, so it balances out. It's Miliband claiming that his plan will save us from the rollercoaster of international gas prices, not me.
Yes, it was Miliband, NESO, the CCC et al I was accusing of disingenuity, not you David. :-)
Brilliant again David! I picture a sitcom ("The Numpties"), where Rachel (from accounts) is dismantling the sofa in the hope of finding the odd tenner, while Ed is on tour with the (nation's) credit card.
David, I may have missed it in your dense but highly informative article, but do you have data on the cost of capital for AR7 offshore wind? I’d like to compare it to those quotes by Centrica in the RAB funding of Sizewell C and UK 5- and 10-year gilts. Thanks.
In the AR7 calculations, DESNZ assume 8.5% for fixed bottom and 10.9% for floating offshore wind.
https://assets.publishing.service.gov.uk/media/6880d6f8f47abf78ca1d3550/cfd-ar7-administrative-strike-prices-methodology-note.pdf p11.
Thanks. I was looking at Sizewell C, Centrica’s stock market announcement was that the regulated rate of return was 10.8% and it’s WAAC (iirc) 6.5%. 10 year gilts are around 4.75%. I’m only a lowly lawyer, but it strikes me that it would much cheaper for the government to fund construction using 10-year rates, run them for the balance of the period, then sell the assets to recoup repay the capital plus coupon. Or am I completely off the rails?
You're probably right. Sizewell C, the 20 year index-linked contracts for AR7 and the deals from Ofgem for grid expansion are this Government's equivalent of Brown's PFI deals.
Great article as always.
You probably have seen the 'Energy Bad Boys' analysis of the US savings by following the Trump plan rather than the Biden plan. Even taking into account dubious 'costs' of emissions it comes in at well over $300bn. They have given it to the government to hopefully replace their rather tame effort at identifying savings of $19bn in order to fend off the inevitable legal challenges over there.
You obviously have all the same numbers for the UK available and it might be useful to present the same style of analysis so both can be presented side by side to our recalcitrant politicians and media.
The assumptions on which current policy rests are so egregiously wrong it begs the question are NESO just incompetent and not up to the task or simply a convenient front (ostensibly “independent” no less) source of propaganda for DESNZ and our Secretary of State?
They're just a front. The CCC are part of the same cabal, as are Ofgem
NESO is too influenced by what was good for National Grid Plc so quite happy to go along with Net Zero as it will make them a lot of money. Ultimately though they are directed by DENZ about what outcomes are wanted and that is heavily influenced by the CCC. So until you either change the remit of the CCC, unlikely, or until Starmer or Reeves grow a pair and wake up to the economic impact of this policy nothing is going to change. Milibrain will continue to lay irreversible traps with more CfDs and long term contracts for grid upgrades. AR7 will be the straw that breaks the back here given the pricing and relaxing of qualification parameters we could see high participation. That outcome wont be known until Jan/Feb 26. There should be 3 or 4 opportunities to challenge in the commons under normal DENZ questions but as weve seen over 12mths Milibrain and his cohort never answer or engage anyhow. Then we may get select committee report into "Cost of Energy" although I doubt that will be that influential to our cause.
So im pretty pessimistic about stopping this or even getting a pause and see only the economic impact as the last chance here.
I'm not sure how much participation we will see in offshore wind. It's an industry in acute difficulties internationally, with project cancellations and failed auctions around the globe and governments facing the reality that if they really think they want wind they are going to have to pay a lot more for it. The Offshore pot results should be out in December, and Miliband will have peeked at the bid stack as soon as bidding is over. If there is a failure to procure capacity AR7 there will be pressure for an accelerated timetable for AR8, doubtless at even higher prices. If I were a wind farm developer I would hold off and look for the best opportunities around the world next year. Miliband is painting himself into a corner. Professors of game theory will be busy advising on (no) bidding strategy.
Note that there are separate pots for Scottish offshore wind where the connection and curtailment risks are higher.
A small request if I may, can we stop referring to these energy production sites/installations as farms. Farms are for food, which is far more important than net zero.
They are subsidy farms.
Clare Coutinho is an MP. Does anyone on here know why she is writing to a discredited Quango rather than using Parliament to question what she believes might be punishable malfeasance by the Civil Service and Ministers ?
Parliament is in recess. Let's see what happens when it comes back.
Shes proven to be pretty inept when it comes to questions in HoC but Milibrain and coterie are masters at evading answering the questions and just recycling the same mantra about energy security et al whilst teh Speaker does nothing to call any of them to account to answer the questions.
Ouchie? Deindustrialisation picking up speed?
Look...I understand that we have to keep playing the climate emergency idiots game by running these numbers even if they are all based on wacky logic.
But when are we going to face down the big one and cut the head off the snake and face that renewables and all of the other NetZero solutions are by a long stretch unnecessary, technologically unattainable, economically unviable and extremely foolish.
Why would we want to buy energy technology as an import when we could build using our own resources (Nuclear, Drilling and Fracking) and be forced to use up space we need for other things, and still not enjoy energy that is reliable lowest cost and abundant. How much lack of prosperity will result when no industry or economic performance remains due to hi energy costs..
The climate evangelists have spent decades brainwashing the population and its going to take a lot to dissuade the majority that they've been had. I can tell you from my own experience how friends and family wont be persuaded that there isn't a climate emergency and until you swing that pendulum I just can't see pressure coming to bare from that quarter. Economically its causing serious dislocation of industry in the UK much of which isn't probably isn't reversible even if we change tack now. Im staggered how impotent the unions are in this country over what is happening and they need to collectively break ranks and call it out before its too late which is a lot closer than people think.
The reversal cannot be done by only directly disagreeing against the noble notion of saving the planet… you need to say that attacking CO2 is not needed but you will always lose as who wants to be un-noble… But focus on attacking the economic impact of NetZero and the hit on prosperity….. It will take strong political leadership to say.. well we can save the planet but not this way… your family prosperity comes first and the planet a bit down the list.. and most people will buy that…. But keep it simple like Trump did..… no cost benefit analysis ..just how much we will hurt without affordable reliable and local abundent energy … comparing the cost of energy in the US with the UK will sort it out very quickly.
Use these presentation that shows the cost gap between technologies....
An Inconvenient Truth: Our climate policies cant save the environment. So what will? | Bjorn Lomborg
https://www.youtube.com/watch?v=dN_ARfPY9rY
WATCH: Gerard Holland lays out the staggering cost of renewable energy at ARC Australia
https://www.youtube.com/watch?v=sRhNOv1Uo4M&t=4s
It's also worth mentioning the absolutely awful (genuine) environment impact of the mining and refining of the raw materials involved in making solar panels, lithium batteries and wind turbines.
The high-powered analysis of the costs of different technologies is meaningless to people in the street and it not necessary to explain that a grid loaded with wind and solar can never be cheaper than the conventional grid.
Let’s invite the voters to join the energy debate and demand that the politicians abandon net zero policies that have wasted trillions worldwide to get more expensive and less reliable power with catastrophic damage to forests and farmlands.
Anyone who is interested should be able to understand the ABC of intermittent energy. That’s not an acronym, just three things that people need to know.
A. Supply must meet the demand continuously.
B. The continuity of supply from wind and solar is broken on nights with little or no wind. Nocturnal wind droughts are an existential threat to the supply of power, and hence civilisation as we know it.
C. There is no grid-scale storage to bridge the gaps at present or in the foreseeable future.
That means the RE-loaded grid is not fit for purpose, so it will never replace conventional power and we could be stuck with a hybrid power supply that can never get cheaper.
Of course RE enthusiasts think that the technology can be improved by innovations and spending more money but they missed the point that the technology is inherently not fit for purpose.
Think of the steam engine, no doubt they can be made more powerful and more efficient, but they will never be fit for the purpose of space travel.
As for storage, RE enthusiasts often say “we store water don’t we!” But they don’t realise that the overwhelming amount of stored water is in the soil, in the root zone of the forests and fields of the world. Man-made storage is an invisible percentage of the total!
Plants need a continuous supply of water in the same way that the grid needs a continuous supply of power. Imagine if the plants did not have water stored in the soil and they had live on continuous precipitation! They would die in a few minutes on a sunny day if the rain stopped!
The same applies to the wind-dependent grid when there is a wind drought. In Australia, severe droughts can last three days and nights, in Europe the dunkelflautes can persist for weeks on some occasions.
ONE MORE KILLER BLOW TO THE HOPE OF STORAGE
Many people have calculated the astronomical cost of storage required to back up wind and solar power. But according to McBratney’s Law, that will not help. The storage will never be charged beyond a tiny fraction of its capacity because the wind and solar grid will never generate enough surplus power.
This is the explanation of McBratney’s Law.
https://rafechampion.substack.com/p/grid-scale-electricity-storage-why