Friday 20 November 2015

Rudd's 'Energy Policy Reset' - Oh Ye of Little Faith!

Well here's something to brighten a stormy November weekend: Amber Rudd's speech!  Yes, after 'taking the summer off to review energy policy' she has at last got around to announcing what George Osborne's she's decided - and in some respects it's as good as I was hoping all those months ago. As part of our usual service to readers, I've read the whole thing (eight pages of 12-point*) - and here's what you might like to know.

The good bits (all verbatim quotes, in sequence as they appear in the speech) - and some of them are really good:
  • energy security has to be the number one priority (usually the last refuge of a scoundrel but in the current political context - i.e. displacing 'decarbonisation' as top priority - it's important)
  • in the next 10 years, it’s imperative that we get new gas-fired power stations built
  • we need to get the right signals in the electricity market to achieve that
  • subsidy should be temporary, not part of a permanent business model
  • we need to work towards a market where success is driven by your ability to compete in a market. Not by your ability to lobby Government
  • intermittent generators to be responsible for the pressures they add to the system when the wind does not blow or the sun does not shine. Only when different technologies face their full costs can we achieve a more competitive market
The potentially good bits (many require qualification, see below; direct quotes again, except the last bullet):
  • we now have an electricity system where no form of power generation, not even gas-fired power stations, can be built without government intervention (important she recognises this, and for what it is - a Bad Thing)
  • we are already consulting on how to improve the Capacity Market. And after this year’s auction we will take stock and ensure it delivers the gas we need
  • we will not support offshore wind at any cost (unfortunately this doesn't mean 'not at all', it means 'no blank cheques')
  • our most important task is providing a compelling example to the rest of the world of how to cut carbon while controlling costs
  • Ofgem ... will remove the barriers to suppliers choosing half-hourly settlement for household customers
  • National Grid as system operator has played a pivotal role in keeping the energy market working. But as our system changes we need to make sure it is as productive, secure and cost-effective as possible. There is a strong case for greater independence for the system operator (this needs careful interpretation, see below)
  • heat accounts for around 45% of our energy consumption and a third of all carbon emissions. Progress to date has been slower here than in other parts of our economy (another important thing to recognise)
  • we cannot support every technology (hopefully calling an end to the inane policy of 'the more stupid the idea, the bigger the subsidy')
  •  ... and she makes scant reference to CCS, which is highly appropriate since it doesn't exist
The residual depressing stuff  (my summary):
  • the ongoing fantasy-obsession with nukes
  • dangerous insouciance on the soi-dissant 'European Energy Union'
  • willingness to continue some subsidies and some 'support', even if on a reduced scale
With a list like that it's hard to go through all the necessary qualifying remarks, even for weekend reading, I could be here all day.  But here are a few:

-  'improving the Capacity Market' could be a recipe for even worse dirigisme, if Sir Humphrey is given the task
-  notwithstanding the amusing self-appointed task of telling the rest of the world how to control costs (a classic Osborne provocation!), we wait to see how much backbone the government has for the baleful Paris COP21 negotiations later this month and beyond
-  'half-hourly settlement for household customers' is a two-edged sword, dangerous in the wrong hands
-  the opaque reference to the National Grid is getting at a very important issue: in brief, they have every incentive to give misleading advice on 'what is to be done', because they get a guaranteed rate of return on their capital investment ... a pretty shocking instance of moral hazard
-  defining 'progress' on 'heat' could be a tricky business: it's a huge issue with equally huge potential for massive policy errors (and as Rudd has recently pointed out, DECC doesn't wholly own this one)
-  the European Energy Union might just work in our favour, but on balance I'm thinking the risks outweigh the opportunity: another post on this in due course

By the way, the "government declares an end to coal" is just a smokescreen (haha) for the headlines, duly swallowed by the MSM.  It's a heavily qualified 'policy' with minimal content and, notwithstanding its emptiness, acres of wriggle-room besides.

Anyhow let's put the caveats to one side, at least for this weekend, and give credit where it's due.  Well Done, George Amber!  

Next week you can crack on with the rest of my checklist:  scrapping the Hinkley deal;  toughing up the 'Energy Union', the Paris conference, little Gummer the Bummer + his useless Climate Change Committee, and the SNP's 'Scottish Energy Policy';  fixing the biomass regulations ...


* and that's before the redacted 'political' passages


dustybloke said...

Hmm, I'm a semi converted sceptic.

Having had the Labour Red light on energy (thanks Ed), we now have the Amber light.

Will we get the Green light to implement it properly?

And no, not that sort of Green...

dustybloke said...

And "redacted" I think?

But that's just petifogerry, well done ND.

Nick Drew said...

corrected! no problems with pedantry around here (though you'll have your work cut out with CU's posts ...)

thanks, JM

phil5 said...

'half-hourly settlement for household customers' - que? Not about paying bills I suppose

Nick Drew said...

phil5 - if it means anything (and to take your question at face value), it will mean giving (offering? forcing?) household customers a bill which is calculated (not billed!) by the half-hour and reflects the wholesale market price (which itself is by the half-hour, and varies - widely - all the time)

the aim is that if we all see that (say) the price for the period 18:00-18:30 is sky-high, we'll try to reduce our usage in that period, making the entire grid network a more efficient dynamic system and hence reducing average costs

bcause right now, the average costs (which we all end up paying) include the disproportionate costs of meeting demand in those crazy half-hours (where people 'in their ignorance' just continually add to the problem) - so any improvements to efficiency in this regard *must* reduce the system cost

it's obviously true *in theory* ...

Anonymous said...

heat accounts for around 45%

The insulate before generate has been preached for decades and yet the monies for this area have been cut. There more holes there are in the building regulations, the more heat will leak out. Plug the gaps in that and her job will be seen as a success.

phil5 said...

Aha thanks Nick I see (it was a serious question!). Perhaps smart Internet-connected appliances might be able to make a stab at this eventually.

rwendland said...

I've been reading a bit on the Capacity Market + SBR the last few days, and I have to agree it seems beyond a mere mortal of the amateur kind to understand it and the dubious forward incentives it creates. So a simplifying redesign seems no bad thing.

eg I see fairly modern Peterhead Power Station has been transformed from a ~2GW CCGT into a flexible 240-400 MWe CCGT, plus 750 MWe on an SBR contract. Hard to tell if this is a clever play for subsidies, or a sensible repowering project reflecting the fact that plant in North Scotland suffers 15-20% grid loss compared to a plant in southern England.

NB I'm worried by the sound of 'half-hourly settlement for household customers' - while sounding good to the technocrat, it seems to work directly against the sound policy of forcing retail suppliers to only offer a very limited number of tariffs, thereby preventing them from so confusing the customers that ~80% are on poor tariffs for them (and therefore profitable for energy company).

Devil's Kitchen said...

Yes, mostly decent stuff by Amber. But too fucking late.

Even a gas-fired power station will still take 5 years to come on-stream.

Next up—rolling black-outs. As predicted.


dearieme said...

Has she deferred the closure of the remaining coal-fired stations? Or taken any other steps to increase generating capacity to plug the gap until lots of new gas-fired capacity has been installed?

rwendland said...

dearieme - caught some discussion of this on the radio. She is not stopping all coal generation until 2025, so a good bit of time to sort out replacement. But the gist of the radio discussion was that there would by very little coal generation left in 2025 anyway under current plans, so this statement seems mainly to catch the headlines for something that was pretty much happening anyway.

Elby the Beserk said...

But will she do anything about this nonsense?

"BRITAIN’S green energy barons are getting huge taxpayer subsidies to install diesel generators — exactly the kind of polluting energy source their wind and solar farms are meant to replace."