Growing scepticism has led in recent months to a House of Lords inquiry into the economics of renewable energy, and into the practicability of achieving the government’s ambitions to dramatically increase the share that renewables plays in the UK energy mix, especially the usage of wind power in electricity generation.

Such concerns about the practicability of such policies are arising when Europe is experiencing dramatic changes in price and supply disruption to it’s imported energy supplies. In Britain the current credit crunch has further weakened the business case for renewables, especially wind power. In fact Simon Harrison, Chair, Institute of Engineering and Technology (IET) Energy Sector Panel and Director, Energy Mott MacDonald remarks such schemes are: ‘Being affected adversely by the decline in the pound.’

It is not surprising that energy companies such as EDF and Centrica revaluating their British renewable schemes. We have already seen Royal Dutch Shell withdraw from the offshore scheme planned for the Thames Estuary.

The inquiry committee included two former treasury ministers, Lord Lawson and Lamont, together with leading economists, major business leaders including the committee chairman Lord Vallance and technocrats. While the witnesses included industry professionals from E.ON and the National Grid, lobbyists such as the British Wind Power Association and Greenpeace. Together with leading experts on energy related issues including from Oxford University’s Malcolm Keay and government energy minister Malcolm Wicks.

As for the report itself, Dan Ilett energy blog editor of www.Greenbang.com described it as: ‘A fair assessment of the part renewables could play in the UK energy mix.’ While Andrew Walsh, partner in the energy team of law firm Shadbolt LLP: ‘As a well-balanced and commendably sceptical assessment of government policy on renewable energy.’ Simon Harrison, Chair, Institution of Engineering and Technology (IET) noted the quality of the report to be: ‘…generally high,’ and he added they had: ‘…listened to the right people and come broadly to sensible conclusions. It's refreshing to see the issues stated clearly and in a balanced way.’


The 2020 Targets
Currently, Britain has agreed to increase its proportion of electricity sourced from electricity from the present 5% to 30%-35% by 2020, as part of its EU obligations, in order that the UK can reduce its carbon emissions by 20m tons from the current 500m tons per annum.

The Inquiry found that the bulk of the evidence presented to it, casts doubt whether, under current policies and with current resources, it will be feasible to increase the share of renewable energy so much in the UK over the time available.

Such doubts are also expressed by Dr John Constable, Director of Policy and Research for REF (Renewable Energy Foundation). Dr John Constable notes: ‘The government has been unrealistic about the costs involved and the time needed to carry out such ambitious targets given the current low-level of resources provided by the government.’ In fact, as Malcolm Keay Senior Research Fellow at Oxford’s Institute of Energy Studies (OIES), has pointed out: ‘The one thing that UK experience shows us clearly so far is that every single renewables target ever in the UK has been missed and by quite a long way.’

Nor despite it seem the government recognizes that if it is serious about achieving their ambitious targets, they will have to make substantial increases in resources available to the industry, plus reform the current subsidy framework, the inquiry found. It is clear that the government is not taking such action, because despite the credit crunch and statements to increase public spending to create jobs in the renewable energy sector, new government funding has only increased just £120m, reports Dr John Constable at New Economic Foundation. In fact Dr John Constable of NEF views that current subsidy system: ‘Has killed research and development in the UK, by over-rewarding investors for projects providing little or no benefit to the public.



What are the implications?
Those who dreamed that renewables would produce a clean, cheap, simple, reliable and environmentally friendly solution are in for a big disappointment, suggests the report.

In its evidence to the Inquiry the government estimated that it would cost some £100bn worth of investment to achieve it’s targets, though others suggested this was a conservative estimate. Though, the inquiry calculated that: ‘the extra cost of electricity generation and transmission in Britain in 2020 with 34% renewables is likely to be £6.8billion a year, an extra 38%. Most of this would be met by the consumer; about £80 a year (at current prices) for the average household.

‘Consumers especially those concerned with fuel poverty are asking themselves, why wind power is proving such an expensive alternative,’ says energy consultant Hans Schmitt. In fact Inquiry member Lord Lawson has suggested about wind power ‘…as the most expensive way that anybody has devised to provide electricity.’

However, Bibi van der Zee energy columnist at the Guardian newspaper has commented: ‘There is much talk about the hidden costs of nuclear, but let’s not forget the there are also hidden costs to renewables.’ However, the costs revealed by this inquiry reveal that renewable energy is a lot more expensive than coal, oil or nuclear, even if you take account of the carbon trading systems in play. This is especially the case with the very competitive prices now available for fossil fuels.


Hans Schmitt, says: ‘They look like a simple concept, just like solar, hydro, wave and tidal. However, when you examine the details, the costs soon add up for development, planning, building plant and delivering the power to the customer. As a way to save money on energy imports, it’s not cost-effective currently. Nor does it achieve the government policy aims of improving energy security and reliability of supply. In fact the Inquiry suggests: ‘there are more cost effective ways of achieving the government’s ambitions.

Among the reasons that lie behind the cost complications of renewables is its failure to provide electricity to the consumers as needed.

This lack of flexibility of renewables in meeting demand for electricity is well-known. What is less well known is the problems for electricity industry this causes. The Inquiry witnesses named renewables lack of guaranteed supplies as required as the ‘Intermittency Headache’. Bob Taylor CEO of E.ON suggested his twenty wind farms are only available to generate power between 8%-10% of the time. In fact E.ON has to keep on standby conventional power stations when the wind fails to blow. Though Malcolm Wicks and his colleagues from the Department for Business, Enterprise & Regulatory Reform suggested the UK operating average was between 10% and 20%, which inquiry member Lord Lawson remarked: ‘That is an unusually optimistic estimate.’

This problem of intermittency means the inquiry finds that: ‘The proportion of renewable generation which can be relied on for planning purposes at peak demand is considerably lower than for fossil fuel plants. So the Inquiry estimated that for every 25 GW of wind plant could displace between 2.5 and 5 GW of conventional plant.’

It is clear from what Malcolm Keay said at the Inquiry: ‘Unlike Scandinavia, Britain because of it typography cannot depend on an extensive chain of back up hydroelectric power stations that can be called on at a moments notice when the wind fails to blow, as Malcolm Keay stated at the Inquiry. Britain has very little ability to import or export electricity to other countries to mitigate the intermittency problem. BERR told the inquiry of Britain’s limited existing links to other countries electricity systems, including an interconnector link to France with 2 GW of capacity. Also National Grid and the Dutch transmission operator are building an interconnector to link the UK to Holland with a 1 GW capacity cable, expected to cost £480 million, due for completion in 2010. Three other lines-to Belgium, Norway and the Republic of Ireland-have been studied, but no contracts have been agreed. Even if all three were built, the total import capacity would be roughly 6 GW, compared with our peak demand of over 60 GW. Britain is, in effect, an ‘island generator’. This complicates the task of managing intermittent generation.

Though Dr Simon Watson, Loughborough University has stated that: ‘such interconnectors are known to go down at least once or twice per month’. Though the power lost is still less than Britain’s largest coal-fired power station, Drax in Yorkshire, which has a capacity of 4 GW noted the inquiry. But even if the UK was integrated into a European Super Grid, Britain’s intermittency problems would only be lessened not abolished, observes Hans Schmitt. Also improving Britain’s links would mean the UK increasing its energy import bill and its dependency on imports.

Currently, the inquiry has found that renewables depend on specific natural conditions to occur. In the case of wind, it is when the wind blows, and the trouble is it does not blow all the time and in the quantities needed.

One handicap renewables face due to intermittency is that when the wind blows and its power is not wanted, there is no commercial attractive industrial scale method of storing the surplus power the Inquiry found. Though it points out, current developments of the Redox Flow Battery looks promising says Professor Peter F Smith, University of Nottingham. However the inquiry has found in the UK a few pump storage schemes to store electricity working in the UK like the Dinorwig Power station in the mountains of Snowdonia National Park, North Wales. Though the report suggested a few more hydro-schemes in Scotland could be converted.



Impact on government policy
As to the impact of this inquiry on government policy, we have seen as the inquiry was preparing its report for publication the creation of a dedicated government ministry the Department of Energy and Climate Change, though Simon Harrison of the IET suggests: ‘we are certainly seeing a reappraisal of UK energy policy taking place.’

Though Andrew Walsh of Shadbolt LLP comments about the possible impact of the Inquiry on government policy stated: ‘without access to the decision-taking process at the centre, this is difficult to assess, but may become apparent on publication (expected in late May or June 2009) of the Government’s Renewable Energy Strategy. The report recommends increased emphasis on renewable heat, and in particular larger scale estate heating schemes, and on more reliable sources of renewable generation (tidal barrage and bio-mass), and that may influence Government policy.’

However, Andrew Simms, policy director of New Economic Foundation suggests that the government is losing interest in renewables. He has seen the governments position change since 2003 from a cordial dislike of nuclear power to an announcement that it is in favour of nuclear energy in 2006.

Though as Simon Harrison of the IET notes the governments ‘fence sitting’ on approving new nuclear and coal power plants is unfortunately as Malcolm Keay of the OIES points out:’ It’s not so much the government sitting on the fence as trying to have it all ways; i.e. the government wants renewables, nuclear, energy security, its climate change objectives and a free market all at the same time and doesn’t know how to keep all these balls in the air. As a result, it is failing to take the necessary measures on any of these fronts individually and leaving uncertainty about which way it will jump next. In the face of this confusion, companies will tend to hold off investment as far as possible and minimise risk by building (low initial cost) gas when they do invest. The result is bad for the environment (because the creaky old coal plant keeps going), security (because gas is the fallback and the consequences of absorbing a lot of intermittent wind have not been thought through) and prices (because of the exposure to gas price volatility).’

Also the government is in the process of introducing a series of major reforms to speed up the planning and approval processes required for such renewable related projects to go ahead, though there are concerns that there are likely to be serious skills shortages in the years ahead as the government reveals the number of students taking physical sciences and engineering at university, upon which the sector depends, is falling.

Overall, it could be said, that this report was again re-stating many of the obvious issues, that the government itself has in previous times, not itself wished to acknowledge, but as to far the government will have changed its mind because of this inquiry, we will not know until the Government publishes the ‘White Paper on Energy Policy’ expected in the Autumn. As for the rest of Europe, no doubt similar reassessments about the viability and expediency of renewables is taking place.

by Nicholas Newman - 8 August 2009