Saturday, 11 November 2017

How the Tory Government is close to collapse over Ireland

Whilst attention has mainly been focussed on the prospect of the UK Government being faced with making a humiliating Brexit divorce financial deal, potentially this issue could look be minor in comparison to the threat to the existence of the Tory Government posed by the Irish border question.

This is not exactly a new feature of British politics - but it is now returning with a vengeance, especially now that the Irish Republic, being a member of the EU, has now more influence over the issue than the UK Government.

The problem is that the Irish Republic demands that there be no re-imposition of the border after Brexit, and the EU is saying that the UK must commit themselves to this objective as a part of agreeing the Brexit divorce. But there seems no way of avoiding some sort of re-imposition of border controls unless the UK stays within both the Customs Union and the Single Market. But such a commitment would effectively leave the UK, politically, as a client state of the EU - being in the EU for all practical purposes but without any direct say in the government of the EU. That's the way it is going to be anyway in the so-called 'transitional period' which is likely to last a lot more than 2 years as negotiating trade deals takes a long time.

But the UK is now being asked, in effect to either agree to this solution in perpetuity or accept the option of Northern Ireland being given special regulatory status. This would leave it as an area that is part of the Single Market and the customs union. So in effect the border would be between Ireland as a whole (North and South) and the rest of the UK. It is the solution that is backed by the WTO as well as the EU. Indeed it is an obviously sensible idea.

Yet this solution is a nightmare as far as the Democratic Unionist Party (DUP) is concerned. To them it represents dividing the North from the South - a de facto, and even, in some senses, - de jure move towards Irish re-unification. So how is the DUP to be brought in line? With great difficulty I suspect.

But of course, as everybody who has read so far understands, this is also (apparently) impossible for the May Government to deliver simply because its survival depends on the support of the DUP to provide its Parliamentary majority. As long as the EU keeps up its Ireland demand, there seems to be no escape for the May Government. That is unless it somehow manages to get Labour support for its measures and somehow keeps the DUP on board meanwhile. It looks unlikely to me, especially as the Labour Party smells blood and is unlikely to offer any support to the ailing May cabinet.

Saturday, 14 October 2017

How the centralised generators are trying to strangle the decentralised energy revolution in the UK


Just as the UK Government has stopped onshore renewables (mainly wind power and solar pv) from getting all-important long term power purchase agreements (PPAs) through the feed in tariff system (the big one being now reserved for Hinkley C), so government agencies are moving to make sure that the rules of the electricity market favour centralised generators over decentralised ones. The Government says that no subsidies will be available for onshore wind and solar pv. Yet it is busy doling out subsidies and altering rules to favour big power stations over decentralised renewables.

In setting the regulations, the Government and the agencies, including OFGEM and the National Grid (NG) clearly seem to favour big power plant over other decentralised options for balancing electricity supply and demand including battery storage and demand side response (DSR). Really these technologies should now be routinely combined with renewable energy schemes to create 'virtual power plant' to deliver energy services for consumers. Yet despite the celebrated Clayhill 'subsidy-free' solar pv-battery project, progress is very slow. The revolution is being held back by the dead hand of the centralised power regime.

The Government's preferred solution of course is lots more large gas fired power plant - and nuclear power plants of course. Yet these technologies are falling behind the newer decentralised ones whose costs and information based technologies are becoming more and more economic. But instead of helping decentralised energy, the Government is pushing more and more subsidies towards the old, centralised, solutions.

This action to roll back the revolution is taking place in the 'boileroom' of the electricity system, with its  the arcane and often impenetrable rules and language of the electricity market, well away from the understanding of the wider public. However various trade and academic reports are flagging how the centralised generators are trying to hold back the decentralised energy revolution by whatever means are possible.

How is this happening? Essentially there are two strands. First there is the way that the so-called 'capacity market' is oriented to favour the interests of centralised power plant, and second is the way that the regulatory incentives are being geared to penalise smaller and more innovative players and to favour the big ones.

Capacity Market (CM)

Matthew Lockwood, in a recent working paper, tells the story of how the CM has largely been shaped to be a riverstream of income for the existing gas and coal and nuclear power plant. First came the decision to reward all existing generators for providing capacity, providing a subsidy for plants that have been built a long time ago. A much cheaper option would have been to operate a 'strategic reserve' that would fund a dedicated set of assets to be brought in to balance supply and demand. But that. of course, would not help the centralised power plant. Of course the mere term 'capacity' is biased against the decentralised solutions which include DSR and battery storage.

Then has come a series of decisions that have given centralised power plant an inbuilt advantage over decentralised options for balancing demand with supply. Cornwall Energy as well as Matthew Lockwood has written about some of these decisions and how they adversely affect the decentralised players.

First, DSR and battery storage are given much inferior terms compared to the big power stations in the CM. Their contribution is deliberately de-rated, subject to expensive monitoring and accorded much shorter contracts compared to the big power plant operators.

Second, OFGEM has issued rules which slash payments earned by distributed generators, that is small generators, through the TRIAD system. This is a mechanism whereby the system rewards companies which can reduce peak power requirements.

Third, the rules seem to favour the big operators even when it comes to providing storage solutions in what is called 'frequency response' services. This is a mechanism that incentivises those who can produce instant remedies to keep national electricity frequencies with a prescribed margin. Yet the decisions of the National Grid in awarding the contracts seem to favour the big boys.

Clearly the dinosaurs are thrashing about to great effect in an effort to delay the decentralised revolution. They will not win the war, but at the moment they are managing to delay the onward march of decentralised energy.

Without doubt they are winning the propaganda war. Any incentives given to renewables are deemed subsidies, whilst the reality is that these subsidies have been eliminated whilst the effective bank of subsidies given to big power station operators is growing rapidly.


For further info, read:

https://theenergyst.com/ofgem-outlines-deep-cuts-to-small-generators-triad-payments/

http://projects.exeter.ac.uk/igov/wp-content/uploads/2017/10/WP-1702-Capacity-Market.pdf

https://www.cornwall-insight.com/newsroom/all-news/latest-frequency-tender-results-exacerbate-battery-challenges

https://www.carbonbrief.org/in-depth-how-smart-flexible-grid-could-save-uk-40-billion

Tuesday, 10 October 2017

Three cheers for Sturgeon as she announces pro-renewables Scottish energy company

In what must come as a welcome boost to the flagging hopes of renewable energy workers and supporters Nicola Sturgeon has announced the Government's intention to establish a publicly owned energy company that will be fuelled specifically from renewable energy.
See


Credit, of course, should also go to the Scottish Greens upon whose votes the SNP depend for a majority and who have been very influential in pushing forward the green energy agenda.

Of course a lot of detail remains to be worked out, but if what's in the can matches the label then this should be a big opportunity for an industry that has been laid low by Westminster's refusal to fund any further land based wind or solar projects.

The Scottish Government's emphasis is on keeping costs down, but that is not a problem for onshore renewable energy whose costs have been declining rapidly in recent times. What they lack at the moment is long term guarantees about income to be earned for energy generation. Nicola Sturgeon's proposal seems likely to plug this gap.

The Scottish Government (SG) could carry out its mission by various means, provided it achieves the central necessity of issuing long term agreements on levels of payment per unit generated from renewable energy projects. It would also be popular if priority could be given to schemes that are community based, that is owned whole or in part by ordinary people. This is what myself and others were arguing in The Scotsman this morning:
See.....
and......

Long term power purchase arrangements are needed if renewable energy projects are to get cheap financing deals with banks and investors. Among the options there are two routes to progress in how the Scottish company could buy energy and give long term guaranteed incomes flows to solar, wind, and micro-hydro projects. One is that the company could conduct auctions for the right to be given long term power purchase agreements (PPAs), with companies competing to offer the lowest price per MWh to supply a given tranche of contracts. A second, perhaps more suitable for community renewable schemes, is to, in effect, offer them a standard rate for their power, perhaps linked to the wholesale power price (as argued in the letter to The Scotsman).

Recently a report published by Scottish Renewables suggested that 1 GW of wind power was available for no more than £49 per MWh. Yet renewable energy costs (including the costs of solar pv as well as wind) have continued to fall. See https://www.scottishrenewables.com/news/most-competitive-onshore-wind-projects-baringa/

Solar pv costs have been plunging, and if the Scottish Government can offer long term PPAs (for 15 or preferably even 20 years) then they may be able to entice cutting edge solar pv (and battery?) projects up North as has been developed in the Clayhill project in the South of England. 

In recent times the wholesale electricity price has been £45 per MWh. Yet with production of the cheaper gas supplies from the British and Norweigian parts of the North Sea under decline and with our other major supplier (The Netherlands) now restricting future exploitation of gas fields the Scottish Government looks like it will be a winner if it signs up wind and solar projects. They may be competing with electricity from gas power plant fuelled by increasingly expensive supplies from Qatar or other places.

Scotland's proposal for a state owned energy company stands in stark contrast to the nationalisation proposed by Labour which is tinged with support for nuclear power. If Labour's planned nuclear expansion goes ahead it will result in heavy state losses, whilst Scotland's renewable expansion will result in cost savings. 

Sunday, 1 October 2017

How the Scottish Government could implement a 'subsidy free' scheme for community renewables


The Scottish Government (SG) should open discussions to establish a mechanism to enable ‘subsidy free’ community renewable  schemes. It is great news to see a decline in costs of offshore wind schemes, but as good as they are, they are not involving ordinary people. Community renewable schemes, using a definition given to me by Jon Halle of sharenergy are:

'Community renewable schemes are majority-owned and run by members of the public, including both people local to the scheme and supporters from further afield. They are open and democratically controlled, ensuring wide popular ownership of the energy system and maximising the sharing of both benefits and responsibility.'

This could apply to wind power, solar pv or micro-hydro. A 'subsidy free' scheme should be done on a pilot scheme basis to begin with.

Because of the decline in wind and solar power costs it seems likely that some renewable energy  projects in Scotland could be established assuming current levels of power prices that generators can receive on wholesale power markets. The projects would  certainly count as ‘subsidy free’. But they need long term assurances about income streams, something that the Scottish Government could provide at minimal risk to the public purse.

 A scheme could be established by the SG to set up a back-up loan facility to give ‘top-up’ payments for community renewable generators. This could  ensure that the generators received at least the income that they would do if wholesale power prices were at the current level of, say, £45 per MWh. Any loans paid would be paid back when power prices rose above the £45 per MWh level. This arrangement could be guaranteed for 20 years and could be enshrined in agreements issued by the SG to specific schemes. This would give schemes long term financial confidence that could allow them to raise money from banks and investors.
A pilot basis would consist of the scheme being restricted, for an initial proving phase, of no more than 100 MW of capacity.

A recent auction for community wind power projects in Germany saw the projects winning long term power purchase agreements for under £40 per MWh, and this is in a country with much lower windspeeds than are available in Scotland. See https://www.bloomberg.com/news/articles/2017-08-15/german-onshore-wind-power-costs-plummet-in-second-auction
The Clayhill solar pv scheme  has recently opened on a ‘subsidy free’ basis, and this is helped by being able to earn payments for electricity system services by co-locating the solar farm with batteries. See https://www.solarpowerportal.co.uk/blogs/inside_clay_hill_the_uks_first_subsidy_free_solar_farm

ARUP has published an analysis of market possibilities for ‘subsidy-free’ wind power suggested that schemes costing less than £50-£55 per MWh (in 2012 prices) would count as ‘subsidy free’. file:///C:/Users/Toke/Downloads/Enabling%20Investment%20in%20Established%20Low%20Carbon%20Electricity%20Generation%20(2).pdf

While the Westminster Government is reluctant to offer sufficiently good financial conditions to promote the development of much onshore wind, and solar pv, Scotland is in a good position to continue take a lead in promoting community renewable. Although £45 per MWh is not a large amount of money, it does at least ensure that the scheme is ‘subsidy-free’ and means that the Scottish Government, which does not have the power to levy charges on electricity bills (unlike Westminster), will not suffer large financial losses.

There are some harbingers that suggest that average wholesale electricity prices will rise in future years. These prices are dominated by natural gas prices. The UK is able to access a declining proportion of its gas from cheap British sources. The balance cones increasingly from Dutch and Norwegian fields, yet both sets of supplies appear to have peaked already and there is every indication that they may decline. This will leave the UK increasingly dependent on supplies of LNG from Qatar and other sources which are much more expensive than those from the North Sea or The Netherlands.

Brief financial risk analysis

Let us assume that the scheme was limited to 100 MW in order to demonstrate test the concept, and that this 100 MW consisted of wind power projects.  Even if the long term income available from power markets  was £10 per MWh less than the level of £45 per MWh that the SG would guarantee paid to  wind power generators (eg £35 per MWh compared to £45 per MWh) then the annual ‘loss’ payable by the Government would be less than £3 million (under this pilot scheme). Recently the wholesale power price has been around the £45 per MWh level. Of course if the average income stream is higher than a ‘strike price’ of eg £45 per MWh then there would be a surplus of income.


Tuesday, 26 September 2017

Trust the Greens, not Labour, with renewable energy

John McDonell's speech to the Labour Conference came out with a lot of green sounding rhetoric on renewable energy but the commitments are vague and potentially fatally undermined by what could well end up as a commitment to centralised re-nationalisation of parts of the energy system.
Now I'm all in favour of the community owning our energy system provided it is local people - city councils, cooperatives, local not for profit companies, but not centralised monopoly nationalised industries. These aren't things that are controlled by the public or the Government, on the contrary they control the Government. This can be seen most graphically in the case of EDF, about which I talked in an earlier blog post:

http://realfeed-intariffs.blogspot.co.uk/2015/08/why-edf-is-good-example-of-why-we-dont.html

Really, one should not trust Labour's commitments, as vague as they are, as far as you can understand them, which isn't very far. I read John McDonnell's speech and the only renewable energy source mentioned was a tidal lagoon plant in Swansea. What about wind power or solar power? No mention - but, wait for it, whilst Jeremy Corbyn was busy saying he would cancel Hinkley C (really?), his junior energy spokesperson was busy telling people they would support a different nuclear project at Moorside.

Rebecca Long-Bailey interpreted the manifesto commitments on energy as consisting of ensuing 'that 60% of our energy comes from low carbon or renewable sources by 2030. To support projects like Swansea tidal lagoon and Moorside nuclear plant.' See http://press.labour.org.uk/

Oh I see, so renewable and low carbon involves nuclear power and a tidal lagoon scheme. Very clear.
Would Moorside be a better project than HinkleyC? No, it wouldn't. All proposals for new nuclear power faces the same crippling costs to reach modern safety standards. A terrible problem with a Labour Government is that its commitment to centralised public ownership could mean, in practice, a blank cheque to be given to nuclear developers who will gobble up lots of money that could otherwise be spent on solar and wind power. We would be left with never-ending nuclear building sites and little renewable energy.

The problem with Labour,  is that they can never stray far from their dinosaur pretensions kept alive (in their minds) by the GMB and others. That's what you'll get with their centralised visions of state ownership.

By contrast the green movement stands for decentralised, people's control of energy which will be thoroughly renewable, not nuclear. You can trust the greens to support that consistently, but not Labour.


Friday, 25 August 2017

Four plausible reasons why driverless cars might not be very green

Now, I'm not taking up an ideological position on this, and it may indeed prove to be the case that driverless cars end up reducing pollution by large amounts. But I feel that it is also plausible that we are going to end up being driven by a lot hype into a rather ungreen future or, more mundanely, into accepting a piece of 'modernisation' that makes little difference to pollution outcomes.

Now of course electric vehicles are to me something that represents a great gain, especially as electricity systems move more and more to be based on low carbon energy sources given the increase in renewable energy use. Of course also we need also to plan our environment so that other modes, especially walking, cycling and also buses and trains are given greater priority. We know (or at least I am sure) that these things will reduce pollution and improve quality of life.

But driverless cars and the sort of systems that they will involve are very unknown quantities. In many ways by comparison substituting electric for petroleum based vehicles is a fairly modest change in systems, give or take some changes in fuelling structure (which could have great benefits for balancing renewable electricity with demand). But driverless cars represent a completely new system. This brings me to four potential problems.

First, we do not know how how driverless cars will alter demand for road travel. What is there about a driverless system that would encourage people to travel less by car? Not much as far as I can see. Indeed, 'packages' sold to consumers might offer lower prices for using particular company offerings of ride contracts for driverless cars if they sign up to travel at least x000 miles a year which might actually encourage people to travel more. Alternatively why won't people simply buy their own driverless cars and carry on travelling as usual? After all a lot of people gain their identities form their cars! It will be necessary to offer them an incentive, that is to make things cheaper, and this may mean they will travel more.

Not having a driver of course cuts costs to (driverless) car/taxi companies, but that still doesn't eliminate the costs of buying, servicing and maintaining the cars in the first place. Getting a driverless uber is still going to be very pricey compared to the fuel cost (or marginal cost) of taking that trip in your own car.

Now I'm guessing here. I could be wrong, and miss out something important. I don't know. But what is the point is that the people who are being (no doubt with good intentions) optimistic about the green-ness of driverless cars do not know much more than I do about how this entirely new system is going to work out and interact with consumer demand for travelling by motorised vehicle, driverless or otherwise.

A second factor is that we should be very wary of the modernisation-bandwagon effect. We are witnessing a process whereby this paradigm shift to driverless cars is being dressed up as an inevitable part of modernisation, and its benefits seem to be in a process of being elided with electrification, which, as I have said, is not the same thing necessarily at all. The danger here is that planning systems are given over to this new, 'inevitable march of modernisation' and other important considerations cast aside. This has happened before with urban planning, with everything from road design to high rise flats, to bad effect.

A third factor is that claims made about driverless cars is that they will be used more efficiently than individually owned electric cars. These gains may actually prove to be pretty marginal gains or even non-existent. A problem with new technological systems is that before the practical engineering and socio-technical ramifications become clear the technologies are presented in a utopian fashion (remind you of anything?). Even now we can see some slightly heroic assumptions being made about how cars are going to be made use of all of the time. This on its own may have the perverse consequence of incentivising the companies who own them to encourage people to travel more than they do now. I hear that driverless cars will be much more efficient at braking and using gears etc. Maybe, but I suspect that conventional electric driven cars are being and will be adapted to incorporate at least some of these gains.

A fourth factor is. well, the unknown unknowns. Former US Defense Secretary Donald Rumsfeld famously made the point that there are three types of risk: the risks which can be calculated; the risks that cannot be calculated, and the risks which we don't know about at all (unknown unknowns). In fact he was popularising a economist called Frank Knight who wrote about this in the 1920s as he was discussing the difference between risk and uncertainty. We know about the risks of electric cars and where the uncertainties lie. Or at least we have a much better idea than with driverless cars. But we don't know the unknowns that will almost certainly jump out to bite us in the case of driverless cars. Whether these are minor irritating gremlins, or big monster ones, we don't yet know.

 But the point is that there are all sorts of unknowns which really seriously undermine the now widely (and unreasonably) accepted claim that driverless cars necessarily represent a major green leap forward.



Thursday, 17 August 2017

UK offshore wind prices predicted to fall to 25 per cent less than Hinkley C - but it could still be done much cheaper!


Offshore wind prices are plunging fast. A leading wind expert says that the next round of UK contracts awarded (next January) for offshore wind projects will undercut the price given to Hinkley C by around 25 per cent. Not only this but the contract length will be only 15 years for the offshore wind projects compared to the 35 years for Hinkley C.  In Germany, meanwhile, the latest round of contracts for onshore wind are being issued at under £40 per MWh, a great deal less than anything a British gas fired power station could set up for. The last Danish offshore wind project at Kriegers Flak was awarded a contract last December for under £44 per MWh (no more than £55 per MWh after taking into account grid connection costs).

Gordon Edge, who served for over a decade as RenewableUK Policy Officer but who now runs an independent consultancy, is predicting that the 'strike price' awarded to offshore wind projects will fall to around £70 per MWh. Not only this, but Edge believes that over 3GW of offshore wind contracts could be issued to fit in with the Government's 'budget' for spending on power from new offshore wind projects. These prices are, however, calculated in 2012 prices as is done with the Hinkley C contract which is worth £92.50 in 2012 prices.

This could mean that in this second round of 'CfD' (contract for differences) allocation (the first was in early 2015) all of the 3GW+ of offshore wind contracts could be in place by 2022/3. This would generate over 4 per cent of UK electricity supply, possibly as much as close to 5 per cent.

Offshore wind contract prices have been plunging at a rapid rate in recent years, as can be seen from the second page graph on the KPMG report at https://home.kpmg.com/content/dam/kpmg/uk/pdf/2016/11/second-cfd-allocation-round.pdf

In general we are seeing a step change in declines in cost of wind power as 'capacity factors' (the average amount of time that a given generation capacity is operating) are rapidly heading upwards. Larger wind turbines with much increased 'swept areas' at greater heights are being deployed which can capture much more energy for a given wind speed per capacity installed. In the case of offshore wind costs are also declining because larger turbines reduce the large costs of installing each turbine, along with other factors such as greater experience in electrical connections and in financing offshore wind which reduces 'risk' and therefore cost.

Bernard Chabot, a wind economist predicts that this process will continue with wind power capacity factors climbing to 60 per cent.

Yet, the UK Government's own method of procuring offshore wind has become the least competitive and most expensive procedure in Europe. Gordon Edge's analysis reveals that in effect there are only three competitors in the race to pick up contracts under the current CfD round.

Competition is limited to a few companies that were granted leases some years ago, with no new leases being issued for several years now. And even in these three cases the companies have been saddled with sorting out planning and site investigation details - details which in other European procurement regimes are dealt with by Government agencies.

This 'laissez faire' process (ironically then micro-managed by Whitehall after contracts are issued) has also led to confrontations with RSPB over some Scottish offshore windfarm projects. On top of this the UK Government is setting onerous rules about how and when the projects that gain contracts should be deployed. All of this is in flagrant contrast to the freedom given to EDF to install Hinkley C. As I commented in my last blog post the Government needs to start the process of identifying new offshore wind sites. I commented in my last blog post that an urgent priority for the Government is that they should:

'Identify new sites for offshore wind deployment as well as quickly bringing forward the issue of power purchase agreements to existing projects with planning consent. The Government should take note of how, in Denmark, the uncertainties and thus the costs of offshore wind have been reduced by the Government taking on the task of researching and consulting on specific sites rather than leaving this to the developers. This only adds to costs which may be part of the reason why UK offshore wind costs are higher than costs in the case of Denmark, The Netherlands and Germany.'


Onshore wind prices, if only the Government awarded any contracts, would be likely even lower than the predicted offshore wind prices. Indeed wind power prices are now challenging prices for contracts for gas fired power plant if only they were awarded on the same basis. But the Government is giving backdoor preference to gas fired power plant over wind through the 'capacity mechanism'.

You can read Gordon Edge's analysis at https://www.linkedin.com/pulse/cfd-ar2-prediction-gordon-edge

Incidentally you can see my talk to the 'No to nuclear power, yes to renewables' conference held by CND in June at https://www.youtube.com/watch?v=1hMCbf_c4DY


Other References:

KPMG