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« Guardian goes full ecobonkers | Main | A new edition of the Hockey Stick Illusion »
Thursday
Nov192015

What's in a tax?

One of the most interesting parts of Amber Rudd's speech yesterday was the suggestion that renewables operators must pay for all the extra costs they bring to the system. Most people seem to be concluding that this means some kind of a tax on renewables.

This is all well and good, but the devil is in the details. So when the minister says:

In the same way generators should pay the cost of pollution, we also want 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.

Does she mean that the rest of the grid is going to have to pick up the tab for connecting all those hundreds of wind turbines to the grid?

Watch this space.

 

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Reader Comments (58)

Surely the logical meaning of that is that renewables will have to pay the fixed costs of reliable power generators whilst the reliable power generators are displaced from the system.
Otherwise the reliable power generators will go bust and we have no energy security at all.

That makes sense.
And if that is the policy then I would have no hesitation in praising that Conservative policy.

Nov 19, 2015 at 9:55 AM | Registered CommenterM Courtney

The way I read it is that the wind/solar farm operators should pay for the extra costs imposed on the grid by the need to keep backup capacity in service. This would be a timely and sensible intervention. There is no other product that attracts a premium price because its availability is intermittent. A programme this week about Ferrybridge 'C ' showed how devastating the current situation is. They were getting a price that was well below that the owners wind farm installations got AND they were required to keep the plant running even when they weren't being allowed to sell its output.

Net result running Ferrybridge 'C' is now a loss making proposition and so will now be closed, there goes another 2 GW of capacity.

Nov 19, 2015 at 10:02 AM | Unregistered CommenterKeith Willshaw

Eco no taking the mick

Nov 19, 2015 at 10:04 AM | Unregistered CommenterAnoneumouse

Diving Ms Rudd's green riddles, is a very taxing effort.

I am not sure at what she is getting at, though I am certain that - the lady who is premier energy secretary........... she doesn't know either. Whatever her inner rational, if it be to slash the boondoggle birdmincer industry - then to a certain extent it's all good. As I've [maybe - moi?] said before though, burning gas to turn turbines to generate electrical juice - is a pretty damn stupid method of keeping the lights on but one, that is infinitely preferable to a wing and a prayer reliance on boondoggles because prayer won't help when the wind don't blow and the sun don't shine - in January and February.

AND....

Interconnectors go 'dry' JUST when you need 'em most and as far as new nuclear is concerned - on the twelfth of never or sooner - if it ever comes to pass, mind you - 'little nukes' are a good idea.

Back to earnest prayer - it is then.

Nov 19, 2015 at 10:04 AM | Unregistered CommenterAthelstan.

Divining my script is sometimes tiresome - apols to all.

Nov 19, 2015 at 10:07 AM | Unregistered CommenterAthelstan.

I would say whatever she means the consumer will end up paying more per unit. I suspect that she has in mind that the unreliables operators pay the reliables costs when the reliables are unable to sell electricity but have to keep running. That should mean that neither is profitable.

Nov 19, 2015 at 10:12 AM | Unregistered CommenterSandyS

If it's correct that this means the Government is going down the Spanish route where the renewables industry are going to have to contribute for the additional cost they have imposed on the grid for the infrastructure they have required and for the back up capacity they require when the wind isn't blowing then there will be huge support for this position from the public. Let's just hope they follow through with this. They could even impose this as a surcharge and use the funds gathered to build new gas fired capacity through an arms length infrastructure company to ensue resilience in he system.

Nov 19, 2015 at 10:13 AM | Unregistered CommenterJohn B

BBC weather presenters understood the energy policy failure issues (5 years ago), why not the DECC?!

http://www.bbc.co.uk/blogs/paulhudson/2011/01/coal-takes-the-strainagain.shtml

http://www.bbc.co.uk/blogs/paulhudson/2010/03/2020-will-the-lights-go-out-wh.shtml

al the coal in the graphic (1st link) will be gone soon!!

Nov 19, 2015 at 10:21 AM | Unregistered CommenterBarry Woods

M Courtney

That would be my reading, but trying read politicians is like platting sawdust!

The RenewableUK response to Government energy policy speech demonstrates they still don't get it:-

"......Onshore wind has already achieved the kind of cost reductions needed to be competitive and is now one of the cheapest sources of home-grown power in the UK. If we want to cut emissions and keep bills low, Government needs to show that it won’t stand in the way of subsidy free forms of power, like onshore wind, being able to access our energy market and compete head-to-head with options like nuclear and compete head to head with options like nuclear and gas"

It is now obvious, even to our politicos, renewables can only be allowed to compete head to head when they can guarantee a similar security of supply. They can only do that by paying for back up systems.

Nov 19, 2015 at 10:22 AM | Registered CommenterGreen Sand

M Courtney 9:55 agreed. Why are Unreliable producers of electricity paid when they can't produce electricity? If they believe it is not their fault, but an Act of God, they should not be seeking financial assistance from taxpaying mortals.

Nov 19, 2015 at 10:32 AM | Unregistered Commentergolf charlie

"The wind is free", "wind energy is free", "wind power is free". We've been told this endless times, so it must be true. Wind turbine owners can easily pay for the backup they need to keep the grid operating in a stable manner.

Nov 19, 2015 at 10:32 AM | Registered CommenterPhillip Bratby

I agree with the readings of Courtney and Wilshaw. I think this is what the greenies call 'paying for externalities'. Whoops!

However, there is a problem in defining the level of taxing. For example, just what is the spiv/operator of a 5 MW solar farm going to be accountable for in terms of firm capacity? Who decides what that is? Perhaps a requirement that all operators connected to the grid have to guarantee, within reasonable probability and excepting breakdowns and planned maintenance, at least 60 % of nameplate capacity. And because of the nature of the people we're dealing wih here, any subsidy will only be scaled against their declarations of firm capacity.

That should be suitably eye-watering.

That Amber Rudd woman is just marvellous. How has she managed to grab this brief so well in such a short time?

Nov 19, 2015 at 10:35 AM | Unregistered CommenterCapell

Green Sand "........... one of the cheapest sources of home grown power ...."

If they want to reap the wind, they should work out how to sow it, and not expect everybody else to subsidise their failed harvest

Nov 19, 2015 at 10:41 AM | Unregistered Commentergolf charlie

Capell

"That Amber Rudd woman is just marvellous. How has she managed to grab this brief so well in such a short time?"

Tis sure starting to look that way. I wonder who is advising her? Don't it is Baron Deben & Co!

She appear to be on to a conflict of interest that has slipped under the radar (copy of post from unthreaded):-

National Grid could be broken up, Amber Rudd suggests

" ...Amber Rudd, the energy secretary, said she believed there was a "strong case for greater independence for the system operator" in order to cope with the changing power system in as "productive, secure and cost-effective" a way as possible.

The comments follow concerns raised by other energy industry players about potential conflicts of interest between National Grid’s high-profile role balancing supply and demand on UK gas and electricity networks, and other strands of its business, especially developing interconnector cables to trade power abroad.

Peter Atherton, analyst at Jefferies, said other utilities were unhappy about National Grid as system operator offering advice to the Government on keeping the lights on, such as advocating more interconnectors, while another part of the company stood to profit from building them.

Interconnectors are in “direct competition with generation capacity”, he said, including for subsidies through the Government’s capacity market system, which National Grid administers. ....."

Nov 19, 2015 at 10:57 AM | Registered CommenterGreen Sand

As is often the case, there is quite a good article by Emily Gosden about this.

"Wind and solar farms must pay their true costs, energy secretary Amber Rudd vows

Amber Rudd says wind and solar must bear the burden of dealing with their intermittency and says UK could double its offshore wind capacity if costs come down

Renewable generators will be held "responsible for the pressures they add to the system when the wind does not blow or the sun does not shine", she said, under new plans being drawn up by the Department of Energy and Climate Change."

Nov 19, 2015 at 11:01 AM | Registered CommenterPaul Matthews

Rudd is doing Osborne's bidding and they both have realised that the false god of green will not deliver what's needed to keep the lights on at the right price.

Hence no more onshore wind subsidies, lower offshore subsidies, holding renewables to account for lack of supply, new nuclear, expanding gas and abolishing coal - but ONLY if new gas comes along. (Nice quandary for the anti-fracking brigade there; protest and delay fracking and get more coal instead!)

Fair play to Amber Rudd (and by extension Osborne) They've indicated that 'climate change' will no longer be at the very top of the agenda as of right. It's a very positive change of tune.

Nov 19, 2015 at 11:02 AM | Unregistered CommenterCheshireRed

Courtney is correct.

At the moment, all generators pay three taxes, which are used by the National Grid to finance the grid and its operation, and to purchase reserve capacity and peak capacity. Rudd has announced that there will be a fourth tax, used to purchase additional reserve capacity (and, presumably, frequency stabilization); this tax will only be imposed on non-dispatchable resources (read wind, solar).

This form of regulation is well accepted in the technical literature. It is a sign that Rudd is listening to her expert advisers in OFGEM and the E part of DECC.

Nov 19, 2015 at 11:02 AM | Unregistered CommenterRichard Tol

I think Capell is right about Rudd and I get the impression she is straining at the leash to do more but that would be a poke in the eye for Cameron. I wonder if Cameron is wanting to announce the scrapping of the Climate Change act himself so as not to give credit to Rudd?
If the plans for a truly competitive market are real then there must be a plan to scrap our dear CCA.

Nov 19, 2015 at 11:05 AM | Registered CommenterDung

AA Gill's ex seems to be getting into a terrible tangle over this, to put it simply she does not seem to understand her brief. I mention Gill, because it shows just how tiny the ruling metropolitan class is. She should have been removed after her poor handling of the tax credit issue on QT on which she also seemed poorly briefed.

Nov 19, 2015 at 11:19 AM | Unregistered Commentertrefjon

Is it better to get a diesel or a petrol generator? What type of transfer switch will be appropriate? How much power does my genny need to run the calor gas boiler controls and pump?

These would appear to be the most important questions with the quality of personnel running the countries electricity system and the level of skill shown by the Minister.

Nov 19, 2015 at 11:23 AM | Unregistered CommenterIvor Ward

Capell:

That Amber Rudd woman is just marvellous. How has she managed to grab this brief so well in such a short time?
I'm reserving judgement on her, Capell. I still remember this grilling she suffered under Andrew Neil.

Nov 19, 2015 at 11:24 AM | Unregistered CommenterHarry Passfield

Nope a different woman that was the DEFRA Minister Lynn Truss

Nov 19, 2015 at 11:31 AM | Unregistered CommenterArthur Dent

The only thing that worries me in all this is whether the government will end up being forced to subsidise the Unreliables to the tune of these "true" costs.
Forgive me for seeming cynical on this but they keep wittering on about how cheap the product is and how it can compete with traditional energy sources but I wonder if their definition of "cheap" and "can compete" is the same as mine. I haven't seen any suggestion yet that energy prices are about to come tumbling down to reflect the current costs of the raw materials, ie coal, gas, wind, and the sun.

Nov 19, 2015 at 11:45 AM | Registered CommenterMike Jackson

A `common sense` special operative, parachuted into the house of fools.
She has an awful lot of vested interests to overcome,as well as the usual band of deluded virtue signallers.So expect inconsistances.
I wish her well.

Nov 19, 2015 at 11:47 AM | Unregistered CommenterBanjo

Worth watching BBC4's 'Power To The People' about the closure of Ferrybridge coal-fired powerstation.

http://www.bbc.co.uk/iplayer/episode/b06q4z6j/power-to-the-people-1-keeping-the-lights-on

Suprisingly frank and balanced for the BBC (apart from one section where they blame the extra wear of intermittent operation on privatisation - rather than curtailment due to wind)

Uniquely for a BBC program, a number of engineers were given airtime to criticise the intermittency of wind power (although the program makers appeared to be relying on viewers dismissing their opinions as those of biased or uneducated workmen in greasy overalls).

They even allowed one gentlemen to point out that for the money spent on the neighbouring 68MW waste-burner, they could have fitted desulphurisarion equipment to Ferrybridge allowing it to provide 1000MW. Heresy!!

Worth a watch.

Nov 19, 2015 at 11:59 AM | Unregistered CommenterChilli

Ivor Ward, the cheapest generators are all petrol. For not much more money you can buy a high output alternator for your car, and then use your cars engine to run some of your domestic electrical needs. Not viable if you do not have secure off road parking.

An MOT failure diesel car would be the cheapest way to acquire a diesel engined generator, and if you were handy with a spanner, you could attach more than one high output alternator. Some VW diesels may represent good value at the moment.

Nov 19, 2015 at 12:05 PM | Unregistered Commentergolf charlie

Your previous article about Timera and the Timera reference to a Daiky Telegraph article are instructive to the hidden cost of renewables facing Amber Rudd.

http://www.timera-energy.com/the-uk-ccgt-new-build-challenge/

http://www.telegraph.co.uk/finance/newsbysector/energy/11934616/New-penalties-energy-companies-fail-to-build-power-plants.html

Taken at face value and without the in depth knowledge that is needed nowadays to understand our electricity market, it appears that at least £40/KW in annual subsidy by us is required before a generator will build a CCGT. I have no idea how much CCGT capacity per KW of renewable is required - it can't be 1:1 can it? - but it's not before time that renewable generators were made to pay.

It would be good too if renewable generators were made to include the emission costs of ramping CCGT generation up whenever the weather fails them.

Nov 19, 2015 at 12:07 PM | Unregistered CommenterJTBroadhurst

Arthur. Mea culpa. It was Truss.

Nov 19, 2015 at 12:42 PM | Unregistered CommenterHarry Passfield

Richard Tol

those taxes.... the funds paid for being unreliable will be spent on FGDT sets and other upgrades for existing base load plant? thought not.....

The opportunistic windfall of sun + wind should have a weighting to be fair to the likes of Ferrybridge C and to underpin the capex required to replace senile plant. AFAICS the extended, comprehensivly inept meddling is preciptating utter chaos and profound uncertainty.

Nov 19, 2015 at 1:04 PM | Registered Commentertomo

This paragraph is not all it is cracked up to be.

It needs to be dissected:

In the same way generators should pay the cost of pollution, (cost of reducing SOx, NOx and particulates - billions!)

we also want intermittent generators to be responsible for the pressures they add to the system when

the wind does not blow (this is no good, because the wind generation very rarely produces zero kWh - better wording is "when NG needs the wind generation to be turned up and because it can't, depatchable generation has to be called up" - that is the cost which should be recovered from the windmills).

or the sun does not shine (this is OK because every day, in the late afternoon solar disappears and NG has to replace it with despatchable generation until the following day and the cost of that should be recovered from the solar mob which is the domestic size troughers not just the commercial multi-megawatt sites).

The cost of administering such a scheme would probably cost more than that which was recovered.

However, on the bright side, such a levy may cause the troughers so much pain that they shut down the whole boondoggle.

Trebles all round.

Nov 19, 2015 at 1:53 PM | Unregistered CommenterBrownedoff

Wind and solar operators should be forced to include backup generation to their proposals to qualify for a subsidy.

It is stupid for us to subsidise schemes which need for someone else to have to provide the backup facilities.

Nov 19, 2015 at 1:55 PM | Unregistered CommenterDoug Elliot

It is the renewable subsidies from Unreliable power that remain the problem. If the subsidies were made Unrenewable, it would be an improvement.

Any Government that wishes to stay in power, must maintain power supplies to the electorate. Subsidising Unreliability, and making it profitable to provide an Unreliable service, is no way to run a public toilet, especially if no other toilet provision is available. A series of stinking messes is inevitable, and those who have profited from creating the mess just want to wash their hands and walk away to spend their money somewhere with functional toilets.

Nov 19, 2015 at 2:11 PM | Unregistered Commentergolf charlie

Doug Elliot

spot on - especially if you're accruing an exceptionally generous green vanity premium and rigging the market. Enron is the model - and Ken Lay's successors are among us.

@GC not a bad analogy

Nov 19, 2015 at 2:15 PM | Registered Commentertomo

@Doug Elliot
Brilliantly simple. Have them assume responsibility for the obvious externalities. I see the proposals as kicking the can down the road and presuming those who collect the tax will adds the externality issues. Let's keep it simple.

Nov 19, 2015 at 2:22 PM | Unregistered Commenterbernie1815

@ Doug Elliot.

Of course, but that's what almost everyone has been saying from Day 1. Namely as all 'renewables' require back-up it becomes integral to their viability, therefore the cost of that back-up becomes an integral part of the true cost of 'renewables', therefore 'renewables' are more not less expensive than conventional power systems.

Nov 19, 2015 at 3:12 PM | Unregistered CommenterCheshireRed

Slipped into the Sky News piece last night without comment or challenge, was video of Drax burning wood pellets 'Imported from North America....' (and an interview with the lady CEO of Drax, who, needless to say, pronounced that this was a Good Idea with lower CO2 emissions....

Yeah, right - trashing forests in North Carolina, grinding the timber up, and shipping it across the atlantic to be burnt is a REALLLY sensible way of generating electricity..

As a previous poster says, I'm all for 'small nukes' - after all, the reactor that drives a nuclear submarine is apparently about the size of a dustbin - and presumably, submariners are passing to and fro within about two metres of the thing...

Nov 19, 2015 at 3:12 PM | Unregistered Commentersherlock1

@ Doug Elliot.

Of course, but that's what almost everyone has been saying from Day 1. Namely as all 'renewables' require back-up it becomes integral to their viability, therefore the cost of that back-up becomes an integral part of the true cost of 'renewables', therefore 'renewables' are more not less expensive than conventional power systems. Unless they're supported with battery storage (years away if at all) then they're a complete waste of time and money.

In the future people will laugh like drains at the stupidity of it all.

Nov 19, 2015 at 3:31 PM | Unregistered CommenterCheshireRed

sherlock1
There is (allegedly) some reason why the sort of nuclear "kettle" that powers ships wouldn't be "suitable" for power generation on land.
Since I'm sure I read that on here maybe that poster can explain why that is. I'm not saying he was wrong but it isn't it amazing how often something that works safely and efficiently in the stringent conditions of a submarine (for example) all of a sudden can't be used commercially and we have to spend countless millions on something which is a) unreliable; b) apparently out of date already, c) needlessly expensive, d) putting us in hock to a foreign country (so much for energy security!)?
If a nuclear submarine reactor can't be upgraded or up-sized sufficiently to make it an integral part of the grid what the hell happened to British know-how?

Nov 19, 2015 at 4:12 PM | Registered CommenterMike Jackson

what the hell happened to British know-how

Forty odd years of left wing educashun.

Nov 19, 2015 at 4:58 PM | Unregistered Commenterroger

Mike Jackson, anyone that has watched an in depth TV report on the world's latest/largest/fastest submarine/aircraft carrier knows that their nuclear power plant is big enough to supply a large town or small city.

All you need is a a few decommisioned submarines, take out the missiles, and buy an extension lead. Wouldn't need planning permission if moored on the seabed.

It would give maritime lawyers a bit of fun if Scotland gets independence, with nuclear powerstations on the Scottish sea bed, but the Greens would be welcome to set up a picket line around the perimeter.

Nov 19, 2015 at 5:07 PM | Unregistered Commentergolf charlie

The US Navy reactors are indeed small, and they last 20-30 years without refueling. They are simply buried whole at end of life. See essay Going Nuclear for an image of the Hanford Reservation Navy tractor disposal pit.
But that non-refueling life is because their fuel is highly enriched uranium, near weapons grade. Unwise for utility use because of proliferation concerns. And the typical Navy output is less than 150MW, far too small for economic commercial generation given all the associated overheads.

Nov 19, 2015 at 5:10 PM | Unregistered CommenterRud Istvan

Doug Elliot said:-

"Wind and solar operators should be forced to include backup generation to their proposals to qualify for a subsidy."

Here in Ireland we have just seen Apple announce that it has applied for planning permission to build a Data Centre in the middle of nowhere ( Athenry , Co.Galway a mere 10 miles from my home). What is interesting is that in their announcement Apple claimed it would be supplied with power from fully "renewable" energy. When you look at their Planning application it includes an emergency battery bank and a generator hall to house nine diesel generating sets. The application makes provision for another nine similar halls with a total of eighty five diesel generating sets. I saw a calculation that if they were all in use they would generate 8.4% of Ireland's total generating capacity!

I understand that a Data Centre cannot ever be without power and the battery bank provides immediate back up but can only supply the required amount of power for a very short period - during which time the diesel sets can get fired up. I assume they are also used to re-chagre the batteries. Anyway is shows that Apple's engineers understand the implications of their master's claim that the Data Centre will run only on "renewable" energy. I suppose also that they can and will sell power to the grid at times.

Incidentally it also seems that a number of wind generator factories here (I can't call them farms) already have diesel back up so they can stay synchronised when the turbines are offline. One of them has lodged an Application for a " strategic energy project" of a large number of diesel sets associated with an existing wind project. Why would they do that? Would it be perhaps that there is only a meter on their grid connection to measure their supply but it can't distinguish if the power is being generated by the wind turbines or the diesel gen sets".

Or is it because they have worked out that with the increasing wind generating capacity and no new fossil fuel powered stations under construction they will have an opportunity to sell power at very high prices when the grid is in trouble

It has been noticed that at times in low wind conditions the grid gets supplied with more "wind power" than they are expecting from the actual wind conditions. Surely no one is cheating are they?

What does that all say ?

Nov 19, 2015 at 5:11 PM | Unregistered CommenterSpectator

Roger, British 'know how', became 'how now, Green cash cow?'

Nov 19, 2015 at 5:11 PM | Unregistered Commentergolf charlie

Mike Jackson

I think you'll find RR have had a submarine nuke whirring away in Derby since before they actually installed them on the vessels....

If only a fraction of what's been pi$$ed away on renewbabbles had been put into say Thorium salt / madcap fusion reactors.... But then again some money could have been spent on upgrading coal and providing a transition margin + exploring the options...

That BBC "Power to the People" program is notable for the jarring juxtaposition between those who actually provide the power and spineless prats / deranged activists around large tropical hardwood tables in swanky London offices....

The Green Blob has a *lot* to answer for.

Nov 19, 2015 at 5:12 PM | Registered Commentertomo

Just pray they don't arrive at the solution they did here in Ontario.
Here we pay the 'reliables' - mostly gas turbines - by their capacity (not their output).
In other words they get payed as if they are on constant full production, even if they are completely off.
That obviously keeps the renewable and reliable owners very happy, while to cover the extra cost my electricity bill has doubled in the last 5 years and is set to double again in the next 5.

Meanwhile our fabulous natural resource Niagara Falls' output has been reduced to about 50% to accommodate the oversupply to the grid.

Nov 19, 2015 at 5:49 PM | Unregistered CommenterJud

Spectator, diesel powered wind generators are more reliable for subsidy production, and the production of genuine power. Whether this situation is unique to Irish economics in the EU, is more than my 25% Irish genes can work out.

Nov 19, 2015 at 5:52 PM | Unregistered Commentergolf charlie

Jud, I hope your new Prime Minister does not over correct your current over supply problem. In the UK, we need to fossilise our Unreliables, and hope they become more combustible.

Nov 19, 2015 at 6:07 PM | Unregistered Commentergolf charlie

Thank you, Rud. I doubt that a weapons-grade nuke would go down well at the end of the street!
Even so, as golf charlie points out, they generate enough power for a small town without taking up half the countryside. The only nuke I know personally is Torness and the damned thing is massive! Could we not get the same output from a series of smaller footprint, less over-engineered stations around the country which can be built (and decommissioned) to a rolling programme over decades instead of this extortionately expensive white elephant at Hinkley Point that Cameron and Osborn think is so marvellous?

Nov 19, 2015 at 6:26 PM | Registered CommenterMike Jackson

Mike Jackson, make them small enough, and they could be containerised to roll out wherever, and whenever needed off the back of a lorry.

Nov 19, 2015 at 6:31 PM | Unregistered Commentergolf charlie

The English have Amber Rudd, the Scots Fergus Ewing, and the Welsh have Edwina Hart . . .

Nov 19, 2015 at 6:49 PM | Unregistered CommenterCapell

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