Yves here. As much as a post about UK climate change policy might seem a tad parochial, microcosms can provide insight about macro issues. The fact that this article comes from a financial organ, City A.M., does not necessarily make its depiction less valid. In many different ways, the overwhelming majority of the citizens of advanced economies are making clear that they are unwilling to make even comparatively modest sacrifices to prevent worst climate outcomes. This posture, as we’ve said repeatedly, has been enabled by Green New Deal advocates, who have persistently engaged in climate cakeism: the bogus notion that better shopping, tax incentives and disincentives, and creating new infrastructure (which has environmental costs) will allow us to preserve nearly all of our current lifestyles while saving the planet.
The reality is that only very radical curtailment of energy and resource consumption could conceivably achieve that. In other words, our advanced economy lifestyles are soon to be over. The question is whether is whether societies as a whole or communities within them get in front of the problem of what to cut and what to keep to make the transition less calamitous, or whether governments react as unplanned breakdowns occur more and more often.
The press continues to deliver hair-tearing stories that confirm we are ruled by greedy, short-sighted morons. The lead story in the Wall Street Journal today is Tech Industry Wants to Lock Up Nuclear Power for AI:
Tech companies scouring the country for electricity supplies have zeroed in on a key target: America’s nuclear-power plants.
The owners of roughly a third of U.S. nuclear-power plants are in talks with tech companies to provide electricity to new data centers needed to meet the demands of an artificial-intelligence boom.
Among them, Amazon Web Services is nearing a deal for electricity supplied directly from a nuclear plant on the East Coast with Constellation Energy decrease; red down pointing triangle, the largest owner of U.S. nuclear-power plants, according to people familiar with the matter. In a separate deal in March, the Amazon.com decrease; red down pointing triangle subsidiary purchased a nuclear-powered data center in Pennsylvania for $650 million.
So instead of treating energy as a scarce commodity and making sure uses critical to collective survival get first dibs, instead we have rapacious squillionaires securing supplies to foist more humanity-dumbing-down AI on us. Frankly, we humans entirely deserve the bad outcomes we are creating. The sad part is we are taking a lot of innocent species along with us.
By CityAM.com, the online presence of City A.M., London’s first free daily business newspaper. Cross posted from OilPrice
With the election just one week away, Labour’s pledge to “make Britain a clean energy superpower” has sparked a debate on whether or not their net zero scheme is actually achievable.
Sir Keir Starmer revealed that Labour’s transition team is considering setting up an office for Net Zero, should they win the election, in order to reach their target of decarbonising the electricity grid by 2030, five years before the Conservatives. The party plans to allocate £28bn each year towards climate initiatives, citing economic limitations and emphasising the importance of fiscal responsibility.
But the costly ambition of this net zero roadmap has triggered discussions within the party about finding a balance between environmental goals and financial caution.
This 2030 deadline will be achieved with the creation of Great British energy, a publicly-owned clean power company aimed at strengthening energy security and cutting bills, which will be funded by increasing the windfall tax on oil and gas companies, and then preventing them from lowering their windfall tax bill.
Labour’s net zero secretary, Ed Miliband, believes that the 2030 target is attainable and an essential step towards a green economy.
However, the policy does not appear to be convincing everyone.
Javier Cavada, the European boss of Mitsubishi Power, argues that the party’s plan has little chance of success and said that the focus should be on creating “a path that is realistic, affordable and achievable”.
Despite Labour declaring that its schemes will ultimately decrease the price of energy bills, Cavada is not entirely convinced that less than six years will be enough time to achieve this. He fears that the project will also be extremely expensive and questions whether the whole country and its industries will be able to invest in it.
Sir Jim Ratcliffe, CEO of INEOS, also voiced his concern for Labour’s “absurd” manifesto, claiming that their policy will only lead to the UK importing their energy from overseas.
Electricity demand is expected to rise from currently around 300 terawatt hours per year to about 360 terawatt hours by 2030, and Ratcliffe said that the 2030 goal will increase the risks of energy crises and electricity shortages as it will coincide with the expected closure of most of the UK’s remaining nuclear power stations.
The GMB Union has said that the net zero plans will lead to “power cuts and blackouts”, tarnishing the reputation of the party and it is insisting that Labour reconsider their manifesto.
Sharon Graham, leader of the Unite trade union, said if Labour follows through with their proposal to ban new drilling licences in the North Sea, it could result in oil and gas workers becoming “the coal miners of this generation”.
The Conservatives say they will continue licensing oil and gas production in the North Sea as they plan a slower transition to renewables. The move has come under considerable criticism. Ex-Tory MP Chris Skidmore revealed earlier this year that he would now be supporting Labour because he refused to support “a party that has boasted of new oil and gas licences in its manifesto”.
Nevertheless, the Tories still aim to reach net zero by 2035, and this transition will be aided by tripling offshore wind capacity, building a new carbon capture facility, expanding nuclear power and adding new gas power stations to support renewables.
The party claims it is taking a more ‘pragmatic’ approach in cutting consumers’ costs and limiting the creation of any green levies on household bills.
The Labour Party has recently received backlash from the Conservatives’ Energy secretary Claire Coutinho, who claimed a ban on North Sea oil and gas will result in large tax hikes for workers, and that this would only “accelerate the worsening climate crisis”.
She defined the opposing party’s policies as “a triple whammy on the UK: jobs lost, higher taxes and investment destroyed.”
The Tory electricity and energy policies under the net zero banner are crazy. The Labour policies are even madder, the Lib Dems are off the scale insane, and the Greens are imbecilic.
All of them would bankrupt the UK whilst leading to rolling blackouts on a regular basis.
This would do nothing to help national or global efforts to reduce or otherwise emissions, leaving aside the fact that the UK represents a falling less than 1% of global emissions. And co2 emissions are at most only part of the ‘climate’ equation.
It would though, definitely impoverish 70m or so people.
This is true of mitigation policies wherever you look, whilst adaption policies can be tailored to local circumstances and affordability.
By the way a certain SE Asian country produces about 85% of its electricity requirements by conventional thermal means. Possibly part of the reason for its BRICS+ membership application.
Much depends on definitions, but a net zero electricity system in the UK is perfectly achievable – arguably, given the extremely high price of natural gas, Labour is correct to say that accelerating a phase out of gas would lower prices, as spot prices are generally set by the most expensive supplier. Note of course that going for ‘net’ zero does not mean eliminating gas or other fossil fuels – the UK is increasingly interconnected with other European grids, so a little bit of creative accountancy can balance internal fossil fuel generation against imports of French nuclear, Irish wind or Norwegian hydro (and from wider afield, as interconnectors to Iceland and Denmark are planned). The UK is now a net importer, but this is likely to change due to the very large increase in off-shore wind in the pipeline.
The projections for an increase in electricity in the UK seem widely off- base – demand has actually contracted by around 14% in the last decade, for reasons that aren’t entirely clear (one possibility is that domestic solar has off-set a lot of demand). It seems unlikely, even with an increase in AI and EV demand, that this is going to reverse. If Labour do follow through on their spending commitment to investing heavily in renewing the transmission system (modern cabling saves a surprisingly large amount of energy) and investing in home insulation, then the decline is likely to continue. That said, one at present unquantifiable issue is the possibility of a lot of industrial plant switching from natural gas to electricity to avoid supply and cost implications of the conflict in Ukraine.
Fossil fuel use has been in rapid decline in the UK in any event – natural gas supplies around a third of electricity (well down from a decade ago) and is projected to fall further as North Sea supplies run down and the ‘dash for gas’ CCGT plant from the 1990’s reaches the end of its design life. Coal is just 1%, nuclear is 16%, wind is 25%, with solar around 4% but increasing very rapidly. The 1990’s was the last really big surge in capital investment in UK non-renewable energy, so a lot of plant is coming up for replacement anyway, whatever government is in power or policy is in place.
Labours projections depend on a number of assumptions – one is that there is a lot of capacity for on-shore wind generation, which will be released when they remove planning restrictions. The slowdown in off-shore wind investment depends very much on the interest rate environment. Labour are also gambling on the big nuclear plants now under construction at Hinkley Point, Bradwell and Sizewell coming on-stream before 2030, but given the record of the nuclear industry in the UK, this seems very unlikely. Even if on day one they give the go-ahead to some of the plants awaiting approval, they are unlikely to be built in 6 years. Another issue with nuclear will be keeping the older plants running – there were lots of unplanned outages in the past few years, possibly due to issues with spare parts, this isn’t likely to improve as time goes by.
The issue of storage and peak supply usage (i.e. making green hydrogen/ammonia, etc) is a little more complex. Its quite hard to find figures as a lot of investment is not always obvious as individual operators want to take advantage of arbitrage pricing. There is probably a lot more storage in place than is apparent from official figures. The massive surges in what amounts to nearly free electricity from solar during daytime summer peaks in continental Europe due to the notorious duck curve is promoting a lot of investment in supply led demand, although its not always clear what form this will take.
While obviously very optimistic, Labours energy policies are actually surprisingly radical given what we usually expect from them. And the fact that Sir Jim Ratcliffe of Monaco is annoyed by them does indicate they are proposing something right.
Some facts PK,
current weighted average Cfd strike price offshore wind £148/MWh
onshore wind £113/MWh
solar £110/MWh
ROC buy out prices ( above market price offshore wind £123/MWh
onshore wind £64/MWh
solar £92/MWh
Market price ( gas price) £75/MWh
Load Factor trend offshore wind 41.1% down to 39.7%
onshore wind 27.4% down to 24.5%
Add to these the current costs of system back up when sun doesn’t shine and wind doesn’t blow ( which ofen happens concurrently across northern Europe) . Plus NGs estimate of future grid enhancement necessary for new wind and solar connections of over £1.5tn.
Ratcliffe is a self made millionaire because he gets things consistently wrong? I don’t think so. He is following the movement of many German industrialists who seeing the present and future trends in European ( inc UK) energy prices is saving his investments by moving to cheaper energy locations.
The easy pickings of emission reductions in the UK have already occurred, mainly closure of coal-fired power stations and closure and relocation of energy intensive industries. NGs forecasts of demand contain the self contradictory combination of rapidly increased electricity usage of heating and transportation with overall demand reductions. the only way this circle can be closed is demand control on households and vastly reduced individual car ownership.
None of this is disclosed to the general public and certainly not by the two major parties before a general election. Turkeys may not vote for Christmas .
I have no idea where you got those figures from – they don’t match up with any published sources I’m aware of, although as CfD strike prices are highly dynamic I suppose some have applied at some time or other.. That you mix up strike prices and gas market prices along with the RO buy out price (which applies to next year, not this year) with some random load factor numbers indicates to me that you actually don’t understand any of the figures you are quoting.
Power costings are unusual in that they are generally open source and widely available. That you fall back on the ‘not disclosed to the general public’ line indicates to me that you simply making stuff up.
UK Government for CFds and Offgem for ROCs. All 2024 numbers.
Please don’t insult my intelligence or experience in the UK Electricity Supply Industry for over 25 years.
I read the “none of this disclosed” comment as referring to the policy consequences of “electrification without generation” (i.e. the UK policy of moving space and even process heating and transport from fossil fuels to electricity with no concomitant policy of actually building dispatchable power plants such as nuclear or a massive fleet of batteries and definitely no policy of protecting terms of trade of UK manufacturing from the high energy and transportation prices that will result).
I think the quoted prices were supposed to prove that renewable energy is more expensive. I think the dataset quoted is too small to draw that conclusion.
National Grid numbers:
https://www.nationalgrid.com/stories/energy-explained/how-much-uks-energy-renewable
December 2023 was the 15th month in a row where zero-carbon generation produced more than fossil fuel generation.
Zero-carbon power sources in Britain’s electricity mix outperformed traditional fossil fuel generation in 2023 by providing 51% of the electricity used, compared to 32% from gas and 1% from coal.
A maximum zero carbon record of 87.6% was reached on 4 January 2023.
Brett Christopher’s The Price is Wrong: Why Capitalism Won’t Save the Planet is the above essay long form. Basically, renewables front-load virtually all their costs (fuel is free!), and are less profitable than fossil fuel sources of energy, so optimism about non-subsidized renewables is misplaced. Interest rates on the loans, guaranteed purchase of power produce and (ironically) private power agreements like the server farms do are essential if greening electricity production is to occur.
Businesses determine where to invest based almost exclusively on profit. (Thanks Milton Friedman!) And renewables can’t beat oil wells now.
One corollary that occurred to me. Since perfect competition drives profit toward zero, firms do just about anything they can to avoid competition, including merging, buying competitors, etc. Biden’s feint toward enforcing antitrust law disturbs them no end for good reason. Monopolists and oligopolists are price setters, not price getters.
The other assurances of profit often pursued are unproductive activities, like military weapons technology. The Pentagon is a pretty enlightened research funder–80% of iPhone technology comes from government-funded research–but when it comes to weapons, expensive, but fragile is the rule, and since the contracts are cost plus (the bigger the price, the bigger the profit), Russia is still building purpose-built weapons while F-35s can’t fly in the rain. Capitalism, as Marx predicted, devours itself.