That didn’t take long. The recent UK election means the conservative government has the power to get rid of some subsidies for “low carbon”, “green” electricity, and make it easier for oil and gas. Renewable energy companies are feeling the pain, and complaining bitterly. Of course, if they were competitive, they wouldn’t need the subsidies and the stock market would throw money at them. Such is the fear, that there is an emergency summit happening within the green energy sector. “Scottish Renewables has warned the move could put up to £3bn of investment in Scotland at risk.” So $3 billion dollars was placed on a bet that the subsidies would continue, that the voters would not get sick of paying too much, and their bets have failed. I have no sympathy. Anyone playing the subsidy market should have done their homework. With the science shot with holes, the subsidies were always built on vapor. GWPF has all the stories.
The green tax target is going
Tim Ross, The Telegraph: Green energy subsidies spiral out of control
George Osborne to abolish coalition’s green tax target as customers face paying £1.5billion more through their bills to subsidise wind farms, solar panels and biomass plants.
The cost of subsidising new wind farms is spiralling out of control, government sources have privately warned. Officials admitted that so-called “green” energy schemes will require a staggering £9 billion a year in subsidies – paid for by customers – by 2020. This is £1.5 billion more than the maximum limit the coalition had originally planned. The mounting costs will mean every household in the country is forced to pay an estimated £170 a year by the end of the decade to support the renewable electricity schemes that were promoted by the coalition. Tory ministers are said to be “angry” at the scale of the over-running costs. They are blaming the Liberal Democrats who ran the Department for Energy and Climate Change for the past five years for the spectacular failure to control renewable energy programmes. -
How different is UK electricity to the Soviet system?
The UK government apparently indirectly decides the price of electricity, and they decided that companies “could” charge consumers for their costs of developing green electricity. If electricity were a free market, companies could choose to sell and develop cheap electricity and consumers could choose to buy cheap electricity and not subsidize research they thought was pointless. I’d like to buy the 4c/ kWh coal type of electricity (that’s wholesale, but where is the retail version?). The Lib Dems put in contracts that can’t be changed — pay the patrons and the big-government cheer squad, but don’t let the public choose.
How many UK would families would be happy if a man turned up at their door once a year demanding a cheque for £68 (soon to be £141), to develop expensive electricity generators in the hope of making the weather nicer for their great grandchildren? (And that’s only a part of the green bill.) Taxpayers would revolt.
Under the coalition, ministers decided that investment in new renewable energy developments, such as wind turbines, solar panels and biomass schemes, would be paid for by energy companies, rather than through taxation. Energy firms were allowed to recover the cost of these subsidies from their customers by adding it to household bills.
In order to limit the impact of the green schemes on customers, ministers set a strict cap on the total amount that could be spent in these consumer-funded subsidies for renewable energy. By 2020, the maximum amount to be spent through these subsidies was set at £7.6 billion a year. But new projections from DECC show this cap will be exceeded by a massive 20 per cent, or another £1.5 billion. Official figures showed that environmental levies added £68 to the average household bill last year. By 2020 this had been expected to rise to £141. But the latest DECC figures suggest the true figure will be closer to £170 as costs continue to mount.
Government sources say there is little that Mr Osborne can do because the subsidies have already been agreed under long-term contracts signed by DECC while Liberal Democrat ministers were in charge. – The Telegraph (see link above)
The British Government is also set to scrap the climate change levy exemption and stop money flowing from UK taxpayers to foreign renewable electricity generators. The levy was started in 2001 to try to improve energy efficiency, and the amount was estimated to be GBP 3.90 billion. I think making renewables pay on a level playing field is good, but why have a levy to change the climate at all?
Thanks to the GWPF. See also Renewable Energy Trust Funds Tumble On Osborne Cuts.
Green investment funds in the US are falling as well and asking for more subsidies
The tax credits for wind power have run out, and by 2016 installations of new wind towers will fall by 73%. The tax credit for solar power is coming down and by 2017 that will mean a 46% fall. Financial Times
The US wind and solar power industries face a fall in investment in 2017 after tax credits expire, their trade body has warned as it appeals to politicians for more financial support.
The tax credit for wind power expired at the end of 2014 but the impact has been delayed because projects that had started construction by the cut-off date remained eligible. Installations of new wind capacity are expected to drop 73 per cent, from 8.4 gigawatts in 2016 to 2.3GW the following year. With a reduction in the credit for solar power scheduled for the end of 2016, new solar photovoltaic installations are expected to drop 46 per cent from 10.8GW in 2016 to 5.8GW in 2017.
US natural gas prices have dropped from more than $12 per million British thermal units in 2008 to less than $2.80 today, and the futures market puts the price at less than $4.50 per mBTU as far out as 2025.
- h/t GWPF
UPDATE: In Comments – why the real cost is so much more
The extra £68 a year that is added to the electricity bills vastly understates the problem. There are a number of reasons.
- Subsidies for renewables do not include the extra cost of extending the grid. Wind turbines are in remote places, such as the North of Scotland. Building the power lines to the centers of population is hugely expensive. Estimates have put this extra investment at £100bn over about 20 years, compared with about £20-£25bn annual retail sales of electricity.
- A free market would contract for electricity to be supplied when demanded. Wind power would thus get a lower rate than nuclear and fossil fuels, as we cannot predict when the wind will blow. The market is rigged the other way. At periods of low demand, wind turbine operators are sometime paid to switch the things off. More importantly, for the electricity from wind is given priority, so conventional power stations cannot predict load days in advance. Further, they end up running at lower than average capacity, further increasing costs.
- Any new nuclear or fossil fuel power stations are severely hindered by protests and planning constraints. We even had father of global warming James Hansen arrested for protesting at the site of a new coal-fired power station a few years ago. So existing energy suppliers are increasingly faced with less competition.
As an example, I read last year that in Wisconsin the power company can buy in electricity at $30 (£20) per megawatt. In the UK the wholesale market price is £40-£50 per megawatt and offshore wind turbines get around £120-£140 per megawatt.