Friday, 16 October 2015

The true cost of energy

It is rather difficult to compare the cost of different sources of energy.

There is the notion of 'efficiency':
Futures Forum: What are the most efficient forms of energy?
Futures Forum: What are the most efficient forms of energy.. at a local level?
Futures Forum: What are the most efficient forms of energy? another look at nuclear...

There is the finance of subsidies:
Futures Forum: "... a reckless use of public money at a time when people are very concerned about energy costs.”

A couple of years ago there was a lot of noise about the dominance of the 'big six' in the UK: 
Futures Forum: "Community energy offers a long-lasting solution that protects against ‘big six’ price rises and pumps money back into local areas.”

Plus some comparison with nicely-insulated Swedish housing, clever billing in Norway and the German 'energiewende':
Futures Forum: Green levies and the cost of energy... the Energy Companies Obligation, the warm homes discount scheme and the Green Deal
Futures Forum: Norway's price structuring for energy bills.... no standing charges and higher price-bands for higher use
Futures Forum: “Energiewende” – energy transformation... reducing dependence on fossil fuels and changing the role of the large traditional utilities.

A lot has happened since a year ago:
Futures Forum: "Why isn't the renewable energy sector delivering what we need to keep the lights on and make us more sustainable?"
Futures Forum: "The disingenuous campaign to promote coal as the solution to energy poverty"

The Independent today noted that whilst the government has just cut subsidies to solar energy, it has maintained those for nuclear and coal:

Southern Solar: Ministers accused of sabotage as another solar firm collapses

Solar Trade Association warns that most companies in its industry are not expecting to survive next year

Ian Johnston
22 hours ago

Leo Smith, project manager with Southern Solar, at work in West Sussex, before the company went out of business PA

A solar panel company has become the latest renewable energy firm to collapse, with its chief executive claiming that the Government is “sabotaging” UK jobs and businesses.

The news that Southern Solar had gone into administration prompted the Solar Trade Association (STA) to warn that most companies in its industry were not expecting to survive next year.

The Government has slashed subsidies for solar power while maintaining those given to nuclear and fossil fuels.

Amber Rudd, the Energy and Climate Change Secretary, defended the Government’s decision and insisted that solar energy had a “great future” in the UK.

Southern Solar: Ministers accused of sabotage as another solar firm collapses | UK Politics | News | The Independent
Government slammed over subsidy cuts that forced two solar energy companies out of business | Home News | News | The Independent

Meanwhile, wind is proving to be the cheapest form of energy:

Wind power now UK's cheapest source of electricity – but the Government continues to resist onshore turbines

New figures show they not only produce cheaper energy than coal, oil or gas power stations, but also remain far cheaper than offshore turbines

Tom Bawden Environment Editor Monday 12 October 2015

Onshore wind energy has become cheaper than electricity from any other source in the UK for the first time, in what could be a landmark moment for renewable energy in Britain.

Yet the Government has been accused of scuppering Britain’s best chance of meeting the country’s ambitious environmental targets through its continued resistance to onshore turbines, despite growing evidence that they are the most affordable option.

However, new figures show they not only produce cheaper energy than coal, oil or gas power stations, but also remain far cheaper than offshore turbines, which the Government is championing.

The latest from the New Economics Foundation out today says the same:

New Economics Foundation
How can we compare the cost of different energy sources?

Economists like to use a concept called the ‘levelised cost of energy’. It’s simple in theory but hard in practice, because fossil fuel and renewable energy technologies are like chalk and cheese.

While fossil fuel energy requires continual costly inputs – like gas or coal – once you’ve paid for and installed a solar panel or a wind turbine producing the energy is (almost) free. This is why renewables are fundamentally disrupting current markets, where the prices of products like energy are determined by production costs.

Commentators from Jeremy Rifkin to Paul Mason see the breakdown of this link as big news. And we’re already seeing the consequences, such as the collapse of German energy company E.ON’s business model andpredictions of lower energy bills.

So what’s cheapest?
The cost of installation means the levelised costs of wind and solar are not zero, and up until now this has put renewables above fossil fuels. But this week, for the first time, analysts calculated that onshore wind is the lowest cost energy source in the UK and Germany, and solar isn’t far behind.

This is a watershed moment in a series of long-term trends: the cost of fossil fuels changing unpredictably, nuclear getting more expensive, and renewables getting ever cheaper. Adding in the very real costs to our health and the environment makes clean energy even more economic in comparison (see this week’s chart).

Do subsidies still make sense?
With wind now the cheapest source of energy, the government’s drive to cut its financial support may seem to make sense.

However, if what we’re trying to achieve through subsidies is a permanently clean and secure energy system then pulling the plug now is premature – there’s much more work to be done. Our existing infrastructure is so locked into carbon-intensive energy production that it may delay the energy transition even if renewables are as cheap as fossil fuels.

It’s also not just renewables that receive subsidies – financial support for oil, coal and gas in the UK alone is in the region of billions of pounds. It’s these subsidies which continue to prop up the increasingly outdated fossil fuel industry that should be the target for cuts.
The clean energy revolution has economics on its side; it’s the currently failing system that needs to be dismantled.

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In other news…

UK policy decimate renewables
As a predictable consequence of the government’s recent decision to dramatically reduce subsidies for solar energy, companies in the UK have started announcing they can no longer operate in this country. The solar developers SunEdison and Southern Solar, and energy efficiency company Climate Energy all announced they would go into administration, placing blame on the cuts, and the popular Solar Schools project is now under threat. The government also confirmed it would be ending subsidies for onshore wind.

Fracking to be fast-tracked
Despite a complete lack of popularity and a large protest movement, DECC announced a special planning process for fracking to ‘ensure shale applications can’t be frustrated by slow and confused decision making amongst councils’. This essentially gives the Communities Secretary, Greg Clark, the power to approve fracking sites in spite of local authority opposition. In contrast, Eric Pickles, the previous Communities Secretary,used a similar approach to deny numerous wind farm applications.

Energy lobbyists top the league
Analysis by Politico revealed that meetings between the European Commission and lobby groups on energy dwarfed all other sectors with 500 meetings since December 2014 (a lobbying visualisation can be viewed here). The number of meetings is especially high due to the looming COP21 in Paris. In the UK analysis from the Guardian earlier this year showed the extent of Shell and BP’s lobbying power compared to renewable energy companies.

The divestment battleground
Analysts calculated that UK pension funds made a loss of nearly a billion dollars on investments in coal, bolstering the arguments for divestment. Meanwhile in the USA, a new ‘anti-social’ investment company has been set up with the express purpose of appealing to those who wish to invest in fossil fuels and weapons. The company, Freedom Capital, insists it ‘isn’t an evil or irresponsible thing to do’.

Are individual country pledges on climate enough?
European Commissioners and officials met in Rabat this week to ask whether the sum of Intended Nationally Determined Contributions (INDCs), i.e. promises made by each country on emissions reductions, is enough to avoid two degrees of global warming. Their answer: no - we’re on track to hit three degrees – something more is needed. David Mackay, ex-Chief Scientific Adviser to DECC also argued this week that ‘[f]orty years of empirical and theoretical literature on cooperation confirms that individual commitments do not deliver strong collective action’.

The success of community energy in Scotland
Community energy projects are proving more popular than expected in Scotland, surpassing its target of 500MW of locally- or community-owned renewable capacity five years early. The target may be modest, but this is a heartening glimpse of progress at a time when UK-wide policy is barrelling in the wrong direction.

Energy round-up: the numbers are on our side | New Economics Foundation

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