Something Really Interesting in ... Flitwick!

I have been a big, unapologetic and, OK, obsessive critic of subsidies in the energy sector for a good few years.  I'll come on to a possible, partial defence of them in a second, but let's pause to acknowledge a Big Day in the history of "green" energy.  A subsidy-free** solar-plus-battery-park has opened in our very own Flitwick, Beds!

Rather dull photo: Anesco

Steve Shine OBE, Anesco’s Executive Chairman said: "For the solar industry, Clayhill is a landmark development and paves the way for a sustainable future, where subsidies are no longer needed or relied upon. Importantly, it proves that the Government’s decision to withdraw subsidies doesn’t have to signal the end of solar as a commercially viable technology."

Yes, the government is quite properly chuffed about this, as may we all be.  Maybe it will work out, maybe it won't.  Maybe it's a dumb use of large-scale batteries, which (I strongly suspect) could make even more money selling quick-reaction services directly to the grid.  Who cares - ? because it's private money!  People make and lose fortunes all the time with their brilliant / dumb ideas: it's what makes the world go around.  C@W, see?

The collapse in 'costs' of offshore windfarms since proper competition was introduced for access to those subsidy-pots is another good sign.  They still want - and get - subsidies, though; and aren't made to contribute to the cost of balancing their intermittent output.

Of course, it's early days, and outrageous subsidies are still being paid to / on offer to:  legacy projects;  Hinkley Point;  biomass-burning power stations that, disgracefully, actually increase emissions of CO2 vs even coal ...  the list goes on.  But hopefully the points are slowly being registered that (a) subsidies needn't be required; (b) subsidies can lead to grotesque unintended consequences, as well as unnecessary costs being heaped onto (in this case) electricity users; and (c) whatever scheme you are going to come up with, it will be better if you put it out to auction / competitive tender.

Not required?  The subsidy lobby (which includes people who aren't even beneficiaries! - and who probably be most dismayed to meet the flinty-eyed subsidy-farming bastards they have helped to enrich) would argue that without the R&D and the 'new industries' helped into being by the first decade and more of crazy bungs for crazy schemes, we'd never have reached the happy position where this may soon no longer be needed.  There is, of course, a soupçon of truth in this.

But (a) it could have been done better by (i) funding only the R&D and (ii) ensuring proper competitive conditions every step of the way.

And (b) it didn't need to be done by us!  Let other coutries waste their money on the R&D - they won't fail to sell their stuff to us in due course.   We know this, because that's exactly what they do right now.

If, of course, every penny spent in the last decade of British subsidies went to British universities, R&D shops, engineering firms and manufacturers on competitive terms, it might be seen in a more favourable Keynsian light.  As we know, that is far from how things have been.  And we're not done yet with this monstrous waste.

ND

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** Everyone is saying "subsidy-free" but I wouldn't be surprised to learn there is actually some modest form of subvention going on here in one form or another.  Cynic?  Moi? 

Renewables: the Bums are Squeaking

Dr Doug Parr, chief scientist and policy director at Greenpeace UK, said: “Wind and solar energy are at the point of becoming really competitive with fossil fuels, but failure to support them for another few years will result in huge losses of potential jobs.” 

Inde, Renewable Energy Industry Is About To Fall Off A Cliff (sic)

He has been eight years upon a project for extracting sunbeams out of cucumbers, which were to be put in phials hermetically sealed, and let out to warm the air in raw inclement summers. He told me, he did not doubt, that, in eight years more, he should be able to supply the governor's gardens with sunshine, at a reasonable rate: but he complained that his stock was low, and entreated me "to give him something as an encouragement to ingenuity, especially since this had been a very dear season for cucumbers."

Jonathan Swift, Gulliver's Travels

If only it had been as few as eight years with the renewables: but the windies, in particular, have been at it for decades, with pitiful results.  The onshore wind industry has had its bluff fairly well called (though existing windfarms continue to be featherbedded) but the government is still pouring our money into the offshore sector and the best you can say about it is, Keynes would presumably have approved if more of the jobs etc were British.  I take the opportunity to repeat my oft-made prediction that the maintenance of over-the-horizon arrays will turn out to be a seriously under-estimated problem / cost.

Ever Been in the North Sea in Winter?

Solar PV is better: the vast amount of research into ever-improving solar generation shows every sign of paying off (eventually).  Let some other idiot governments accelerate the process with a different bunch of taxpayers' money.  Universities and tech labs all over the world (including UK) really have momentum now, and solar can safely be left to reach the status of "really economic" all by itself.

Even with oil at $30 for a while.  Meantime, stand by for more disingenuous whining from Parr, Legett and the vested interests they represent because, despite lots of whistling the in the dark ("It's good because it means more oil will stay in the ground") $30 will do for them more surely than a big shale gas discovery in George Osborne's back garden.

ND

Oil Price: More Whistling In The Dark

Before we get to the frantic whistling, here's an observation from Old Drew's collection of historical anecdotes.

Back in 1994 there was a big overhang of gas supply in the UK, which came about for a variety of reasons I won't bore you with.   The spot market had just started and liquidity was building nicely.  Over the period August '94 to January '95, the price fell from 22 pence per therm to 9 p/th and there it stayed, with seasonal fluctuations, for the next four years:  a fall of 60%.  Why it settled at 9 has no obvious arithmetic rationale - there was plenty of North Sea gas available at lower cost than that - but hey, that's how markets work.  The price of a house has little or nothing to do with the cost of bricks.

Anyhow, one cannot fail to be struck by the similarities between this, and what's been happening to oil.  Maybe January is a good month for bottoming out after a rapid halving of prices.  Then again, for anyone taking cheer at the prospect of finding a bottom there's the unhappy prospect of 50 (or 45?) becoming a new baseline for several years.  As I've pointed out before, only in 2008 did a big oil-price movement ever reverse inside one year.  

I'm not sure how all this sits with the conspiracy theories, but I'd be very surprised if anyone has seriously and consciously engineered $48 oil.  They may have to live with it anyway.

As we all know, among the many parties who'll suffer will be the greenies - amusing bedfellows for Russia and Iran.  The greens of course (and perhaps also the reds), hope in turn that frackers will be hurting to the point of extinction: they'll see the hurt happening alright, but that'll be the limit of their gratification, I suggest.

Here's another source of whistling and bleating - along with some more sensible reflections.  The International Renewable Energy Agency ('IRENA') is one of those annoying and spurious international bodies - 'an intergovernmental organisation', no less - that busies itself at our expense promoting a special interest group.  They've clearly been working for quite a while on a substantial report on the costs of renewables which contains some interesting stuff, albeit spun about with quite disingenuous and misleading puffery.  

Just as they get to publication date, the oil price kicks them in the goolies.  But their jolly Director General, one Adnan Z. Amin, puts on a brave face.

Renewable power generation will keep getting cheaper over time, even in a period of falling oil prices, which history tells us will in all probability be transitory. Renewables development and deployment represents the most secure long-term hedge against fuel price volatility, the best route to reducing greenhouse gas emissions, and a sound financial investment. Their future is bright indeed. 

That would be the long term future, Adnan, because a chilly draft is coming in the short- to medium-term.  'Transitory' won't be measured in months, and there may be a drop-off in demand for energy volatility hedges, ask Ed Miliband.  Ad's right about costs coming down though - they'll have to, it's the only response possible.  Oil costs.  Coal costs.  Wind costs.  Even, dare I suggest, nuclear costs.  Come on you engineers, you know you can do it - you always have done in the past.

And solar PV costs in particular.  Here, technology really is moving forward apace.  Based on some fairly uncontentious projections, it is well within the bounds of plausibility for solar power one day to be economic.  (That's really economic, not 'economic when supported by subsidy'.)  Some even say, we may not need to wait for cheap & efficient electricity storage before solar makes it to economic respectability.

In the meantime, despite the waffle they all still want subsidies.  Which will be in increasingly short supply, with the alternatives at rock-bottom price for a while.  That Paris jamboree will be pandemonium.

ND

Solar fun for the EU

I can't help but love the story about China dumping solar panels. It is so full of contradictions that it is hard to know where to start.

- Firstly, China has hugely over-produced the solar panels and has little internal demand. the panels are produced by State Owned Enterprises and this is a good example, as mentioned by Ryan in the comments of Monday's China post, of the mis-allocation of resources in China that will lead them to a bust.

- Secondly, many European industry companies welcome the dumping! Why you ask? Well they have had their precious subsidies turned off in Germany and elsewhere so now their business model is broken. One element saving that was that the cheapness of Chinese supply means that even without subsidies the reduced cost of panels just might enable them to have a profitable business model.

- Thirdly, European producers of panels clearly hate the dumping as they cannot compete with Chinese suppliers. However, they can't compete without subsidies anyway. Much like the windfarm industry there was due to be big consolidation in any event. So creating a protectionist environment may help to save the industry, but to what end - I have heard this story before and know how it ends..

How the EU can justify starting a trade war over this is hilarious when the underlying industry is in such a mess due to the distortions in such a regulated and subsidised market. One for the Greenies and Lefties to shout about for a while...