Bishop Hill Energy costs in the absence of policy
Feb 9, 2015 DECC Energy: grid Since the government published its most recent estimates of the costs of renewable energy policy I have been trying to get to the bottom of the question of how they estimated what the costs would have been in the absence of policy.
After several months of effort I have managed to get the underlying spreadsheet and a bit of a steer (link).
In relation to your question on the price before policies, page 66-67 of the prices and bills report, sets out that the wholesale price in the baseline (no policies) is modelled using DECC’s Dynamic Dispatch Model, and requires making a number of assumptions, particularly about the no policy baseline. To estimate the electricity wholesale cost in the baseline, we used historical trends in build rates and plant characteristics where possible to match capacity margins, and plant efficiencies as closely as possible to what is most likely to have happened in a world without policies. This is therefore a modelling output, and not a result of a simple calculation.
So on the price of electricity generation, the numbers come from a computer model - which means that it is likely to be somewhat tricky to confirm. Worryingly, DECC advises that "the resulting wholesale price effects are sensitive to the assumptions chosen".
DECC also says this:
Adding network costs, and supplier costs and margins and VAT as set out in rows 88-92 of the purple supplementary tables results in the retail price before policies presented in the household central scenario in the supplementary tables of £50/MWh for gas in 2014, and £140/MWh for electricity (cell references C70 and D70 respectively). These can be multiplied by consumption before policies (16.6MWh for gas and 4.5MWh for electricity, cells C55 and D55) to arrive at the energy bill before policies.
The Supplementary Table referred to is shown below (click for full size):
;)
If you look at the second column, you can see that the costs that are said to be affected by policy do not include anything to do with the grid or with supplier margins. So, as implied by the wording of the quote above, the government appears to be assuming that the costs of grid connections for all those windfarms is not a cost of policy.
So it seems fair to say that DECC are pulling the wool over our eyes. But until the Dynamic Dispatch Model can be examined it's hard to say just how much wool they are using.
Reader Comments (54)
A dispatch model models dispatch. Capital costs and network costs are not a part of that. This is therefore the wrong model to look at the total cost of policy.
Somewhat similar then to the energy budget you need now to sell a house where they tell you could save say £200 a year by efficiencies but they don't tell you it would cost around £30k of new installation costs to achieve it: Crucial fixed costs that are also missing from the Decc calcs that tell us all we'll get a net saving from greening up our home
Richard
The question is "What is the cost of policy". They assume the costs are only generation and use the dispatch model to generate the numbers. The cost of policy on capital and network need to come from somewhere else.
Or am I misunderstanding you?
Your Grace
like you I am concerned about the true cost of UK energy policy. Clearly, any cost associated with connecting wind farms to the grid are a direct result of policy. There are clearly other costs that flow from connecting so-called renewables to the grid. The sad thing is that we live in an age where those who are supposed to serve us, prefer to mislead, misdirect and obfuscate.
keep on keeping on
"The numbers come from a computer model - which means (prices/future climate) effects are sensitive to the assumptions chosen".
Basically it is all a massive scam. Choose your assumptions and you can choose your output.
Thank you for beginning to open this particular basket of eels, Your Grace. But I fear that it will take some dedicated full time investigatory effort, supported by an organisation such as the GWPF, to get to the bottom of this. DECC will do everything to hide the real costs.
A look at this analysis might cast some light
https://edmhdotme.wordpress.com/2015/01/22/charting-the-effectiveness-of-renewable-energy-in-europe/
Perhaps establishing (if possible) the actual cost of connecting a specific windfarm to the grid and then extrapolating would help move things along a bit.
Surely that cost must be included somewhere in the application to construct the windfarm in the first place. At the very least it has to be built into the overall development cost and it ought to be possible to access that figure.
Please ignore me if I'm talking nonsense!
It should be a very simple calculation, at least to get todays ball park figure.
Take the cost of electricity today and then remove ALL the costs generated by the green blob not forgetting VAT reduction on lower figures.
In the ALL is everything, subsidies, cost of connection to the grid, cost to generators (conventional power plant) of complying with government green regulations. I would even throw in there the cost to the consumer of taking land out of food production to use for solar panel farms.
The list goes on and I suspect that a lot of the actual costs are hidden like the cost to the consumer of the various government flunkies that administer the green agenda (no green agenda no need for government flunkies).
What a surprise, DECC comes up with a model to answer a question. I would put money on the model, should anyone outside DECC ever get to see it, being complex to the point of incomprehensible. Politicians like complex and convoluted answers. It allows them to change their minds further down the line and maintain they had been consistent. That is why you never get a straight yes or no out of them.
I asked my energy provider last year what extra costs were loaded onto my bill due to green policies. They said it was already stated in the bill, a nice round 10%. That in itself makes me suspicious.
Have the extra costs of conventional power stations running inefficiently in order to cope with intermittent renewables been counted? I'm sure that these are costs which the government would also be happy to downplay.
'this is therefore a modelling output, and not a result of a simple calculation.'
I looked on Amazon but they don't seem to have one, has my BS meter just broke when it went off the scale , can anyone tell me where I can get a new one ?
On top of what Ivan and Artwest list, if there was no renewables policy, without windfarms and solarfarms there would be a need for more gas-fired power stations. Their development would result in the need for more gas. Therefore, shale would have been developed, cheaper gas would be flowing and bills would be lower.
"DECC will do everything to hide the real costs."
Perhaps a parliamentary question is required?
On Countryfile yesterday evening, the spokesman for National Grid was rubbing his hands with glee at the profits to be made from the £1billion that would be spent on a new undersea grid line from Glasgow to Liverpool to get rid of unwanted wind-generated electricity from Scotland.
It could be worse. Theoretically the national grid could be bought by Russia.
Something tells me the Decc models wouldn't predict any oil/gas price drops.
Mind you, even on their figures, a 37% increase in electricity cost by 2020 is quite arresting. I'd love to hear Andrew Neil put that to Ed Davey.
You realize Brian Williams wrote all the models? Really !!
I think caught someone up-comments using the word "renewable" or "renewables".
I believe it is now policy to append the words "controversial" or "intermittent" whenever the previously mentioned words are used.
(Well done Artwest, you complied with policy)
SimonJ
Phillip
"unwanted wind-generated electricity from Scotland"
Have they really got more than they can consume locally?
"Perhaps establishing (if possible) the actual cost of connecting a specific wind farm to the grid and then extrapolating would help move things along a bit." Mike Jackson
I imagine the costs could vary wildly but start off cripplingly expensive and rise from there. It would vary where the windmills are based. How far out to sea; where is the nearest existing grid; do the cables need to be buried once on shore; who owns the land it has to cross; etc.
Now it may be that initially connecting to the grid is part of the cost to the builders. Which might be the reason several projects were scrapped last year. They may decide that even the high subsidies offered are not enough. Even higher subsidies may be demanded.
Another thing to consider that probably isn't included above, is the government's Green Investment Bank and the money it's involved in that. The bank invests in renewables ventures including those in the UK. If any of those projects go bust then we also lose out that way. eg The UK's Green Investment Bank records a loss of £5.7m, its annual results for 2013/2014 show. Fair enough, it's barely started but will it ever make a profit?
Wool, yes, and smoke and mirrors. Some very patient work required to clear this up. But two baseline points at the outset:
(1) 'Network Costs' can't conceivably be lower (vs DECC's claim), for the obvious reason that the grid has been greatly modified, not to mentioned greatly stressed on an ongoing basis, to accommodate wind.
(2) From previous DECC pronouncements, the single greatest part of their 'reduction' is from efficiency savings made by consumers as technology improves. That could conceivably be true. But (a) much of this could have happened anyhow - technology works that way, and only sometimes can policy truly claim the credit; (b) the headline 'bill' doesn't (AFAIK) recognize capital costs for those installing the new, more-efficient kit; (c) the 'policies' that might have helped towards this in some cases reach back into periods before this government took office; (d) such gains are already banked - and nothing to do with EMR / the Energy Act, as is often claimed by sleight-of-hand.
Falling energy demand across most of Europe is a secular trend. Recession and technology take the major plaudits: policy-makers are for the most part just spectators, if not actually making thigs worse.
If the original question was "how much are renewables costing?", the answer seems to be "we are not really sure, but if it was good news, we would be able to demonstrate it".
From this, it would be logical to conclude that from DECC's point of view, the costs are worse than we thought, but, someone has to pay the salaries of an entire Government Department, which has to exist, to justify it's own existence.
Since DECC's creation, it is worth remembering that the climate has not changed. Mr Miliband fails to get the true recognition he deserves for this achievement.
@bish
No, you got me right. A dispatch model simply cannot answer the question. A dispatch model only has the variable costs. Network and capital costs are not included. Renewables add disproportionally to network and capital costs.
DECC spent a million pounds on this ex-box gaming suite: http://2050-calculator-tool.decc.gov.uk/pathways/11111111111111111111111111111111111111111111111111111/primary_energy_chart
http://www.thehindu.com/news/national/global-calculator-for-a-low-carbon-world/article6868782.ece
"Nearly 20 governments, including India, have developed or are in the process of creating their versions of the Global Calculator, which was launched in London and Beijing last week to calculate climate impact scenarios in their countries.
Showcasing the Calculator at the Delhi Sustainable Development Summit last Wednesday, Laura Aylett, of the UK Department of Energy and Climate Change (DECC), said the Global Calculator was an open source, free and interactive tool which can help you assess climate change scenarios over a period of time and make changes in lifestyle.
It can illustrate climate impacts based on different choices and is linked to the latest Intergovernmental Panel on Climate Change (IPCC) reports.
She said the world can have good living standards if green technology is taken seriously.” We need a radical move to low carbon electricity and allow forests to regenerate.
Businesses and government, apart from schools and universities are using this tool and some countries and cities were developing their own specific tools as well,” she said.
While experts have access to models it’s quite hard for normal people to envisage future scenarios and unlike the complex and difficult to use models, this opens up possibilities for a larger audience, she pointed out.
The UK department of energy and climate change has a law that greenhouse gas emissions are to be reduced by 80 per cent by 2050, and a team which includes the UK department of energy and climate change developed this online tool at a cost of a little under UK pounds one million.
The Calculator is in Excel format and can be used by policy makers, companies, governments and even schoolchildren - in the UK there is a simpler format for schools."
It pushes for a total electric economy by giving the "reward" of reducing emissions. Roll-over the scenarios for what is in their minds, e.g. Average room temperature for homes in 2050 is 16 deg C, 40,000 offshore wind turbines producing 430 TWh per year, 20,000 on shore turbines, 17% of land used for energy crops and so on....
It is based on the DECC 2050 Energy Pathways highlighted by Christopher Booker recently: http://www.telegraph.co.uk/comment/11305122/Forget-your-gas-cooker-were-headed-for-zero-carbon-Britain.html
This has been rolled out to schools and local councils so expect much more nonsense to come, as they all become "experts" at changing our life styles.
One of the 'selling points' I was able to point out during the Scottish referendum debate was the £6 Billion that's being spent on the grid in Scotland over the next few of years.
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/301772/2901910__ScotlandAnalysis_Energy_acc.pdf
Page 11.
Have they forgotten to include this?
All formulae in the spreadsheet supplied by DECC are based on other numbers in the sheet. Apart from simple additions, the formulae in section 1 rely on numbers in sections 2 and 3. The numbers in the red (2) and mauve (3) sections come from calculations elsewhere and are revealed as such by the long string of decimals behind them. (always a sign that they arise from another source, the basis for which remains a mystery) Their source is unknown.
We are presented with two mystery numbers that DECC multiplies together and gets a new number, presented as the answer.
It is not much different from asking "how do you know how many apples are eaten each day in England?" - "Ah", comes the reply, " we estimate that there are 4.5678334991 million people who eat apples in England and each eats 0.55419556281 apples a day. So the answer is 2.6 million. In 15 years time this will be 3.1 million."
Thus there are no traceable or verifiable figures presented, apart from the VAT figure of 5%. The supporting evidence for a policy is not given in this DECC response. It is just asserted again in a different way.
DECC show three scenarios for fossil fuel prices : low, central and high.
For instance, low assumes Brent Oil at $90, well above current prices. Gas is also slightly lower than their model.
https://notalotofpeopleknowthat.wordpress.com/2015/01/28/costs-of-green-policies-in-uk-underestimated/
The lower these prices, the greater the subsidy for renewables becomes.
Feb 9, 2015 at 11:33 AM | Registered Commenterjamesp
I'd certainly like to see Ed Davey arrested for criminal negligence in public office. Can but dream....
"....the resulting wholesale price effects are sensitive to the assumptions chosen"
And, omitted.
Qn 1. How much of UK electricity sold actually originates from renewables. Do you think ?
Qn 2. How much of UK electricity sold actually originates from new styles intermittent renewables ? ie take out hydro and burning rubbish.
Qn 3. How much of all energy used in the UK originates from renewables ..ie electricity + biofuels etc.
.. If the number was say 5% but adds +10% to your total energy costs would that be acceptable to you? Maybe +20%?, +30% ? +50% ?
.. Funny how you don't see any proper cost benefit analysis results for CO2 mitigation projects afterwards.
http://www.iae.ie/publications/publication/iae-response-to-green-paper-on-energy/
See top of page 9 and reflecting most domestic consumers in the Republic are paying 19 to 20 cents per kWh, plus some considerable 'add ons' in additional levies 'associated' with renewables:
Without wind generation, Ireland’s electricity generation costs in the period 2005 to 2013 would
have increased by 1.2 cents per kWh due to the increased cost of imported fossil fuels. But over
the same period, Ireland’s business electricity prices actually increased by 4.0 cents per kWh and
household electricity prices increased by 8.85 cents per kWh. This clearly shows that increased
fossil fuel import costs were not the cause of electricity price increases in Ireland but rather
government policies which did not place appropriate emphasis on price competitiveness.
So - since 'policies' (whether they include connections to wind farms etc or not) have such a MASSIVE impact on gas and electricity bills going forward - isn't it time that these 'policies' were scrapped..?
After all, they are all in pursuance of a non-existent problem...
Jamesp:
James, according to Creep-Heap on Countryfile last night, wind is very often providing more than is 'required', which leads to constraint payments.
Now, any decent journalist would take one look at constraint payments and give government a very hard time, but not Creep-Heap: he actually looked as if he was pleased.
Have they really got more than they can consume locally?
Feb 9, 2015 at 11:39 AM | Registered Commenterjamesp
Yes, once wind generation gets above a certain % of consumption the Grid fails, so with a much higher wind turbine population per head (as per SNP policy) you have to export the power to a bigger grid. The Poles have stopped Germany from exporting too much renewable power as it is affecting their Grid.
My electricity in Texas seems to cost 8 US cents per KWH. I've seen 4.6 cents advertised but that's probably strings-attached or bait-and-switch. The UK could make electricity for that amount and sell it, if there was the will.
sherlock1, do you fully appreciate the consequences of scrapping these policies? This would make redundant all the people employed, in Green jobs, who exist, only to tell everybody else, how much better off, everyone else would be, if more people were employed in Green jobs.
I am not an accountant, but suspect that some economies might be possible.
Much the easiest approach to this is to consider costs back in the days before greenergy, and adjust for changes in commodity prices. It's quite difficult finding reliable sources of information, since the OFGEM Supply Market Indicator is subject to so many adjustments that it would make a climate scientist responsible for the temperature record blush. This is of course, entirely in line with OFGEM's legal obligation to obfuscate anything concerned with greenergy - as laid down in Ed Miliband's 2010 Energy Act, it is required to presume that greenergy is in consumer interests. This leads to all manner of contortions including not being able to investigate the industry properly.
However, the point remains that the grid was successfully delivering larger amounts of power and gas for about half the cost in grid charges. As ever the BP compendium of world energy statistics provides the history needed to look at wholesale coal and gas prices: the NWE coal marker is API2 in $/tonne, which has a GCV of almost exactly 7MW/tonne (6,000kcal/kg), and NBP gas in $/MMBtu.
For a real laugh,take a look at this special pleading from RWE, already despoilg the Lake District at Kirkby Moor:
https://www.politicshome.com/energy-and-environment/articles/opinion/rwe-innogy/david-cameron-has-energy-problem
Cameron has a problem? Not until the issue of re-winding his father in law's site some up.
simple way the gov could have dealt with pricing Greening electricity.
Option 1 The customer buys from a normal electricity corp
Option 2 They buy from a transparent Green Energy corp , which itself pays all of the greening costs and passes them onto its customers, thus its retail price would reflect the actual green costs. And all the marketing costs of convincing customers to buy Green Electricty would be that corps: It would be saying CO2 matters so much you should pay 4 times the price nongreens pay.
Transparency of source quantities would mean that GreenElec would show it uses renewables 40% of the time and switches to standby sources 60% of the time etc. That way customers can see thet are not being cheated by paying for energy which actually comes from conventionals 90% of the time.
High penetration of windfarms does require upgrades in the grid, especially in the weak UK grid. Often the connector between the wind farm and the grid is paid for by the grid owner, hence it is a hidden subsidy as it is cost that could have been avoided had the power source been different, say a coal or gas plant that could have been build at a stronger part of the grid and not require upgrades at the same level. Do also notice that often offshore wind is paid delivered at the wind farm, eg in the middle of the sea, and again the gridoperator pays the interconnect. Wind farms also require stronger transmission capacity, to even out the surplus power produced at times with high wind, see how much DK has invested in interconnects. The thing that when the wind blows in DK, it also blows in southern Norway and nothern Germany. So there is som externalities hidden here. Then there is the backup powerissue.
Stewgreen, more intriguing would be to work out how much profit Ecotricity has made, and whether any of it would be possible without Government subsidies. Dale Vince has done very nicely, and is hailed a genius by the Labour party, which he generously supports.
Does anyone know where Ecotricity get their electricity from, when customers demand more than eco sources can supply? Ecotricity must be tapped into some clever and economical sources of electricity.
I disagree with Richard Tol to a certain extent. Capital costs of wind turbines and fossil fuel power stations will be included in the costs. Currently a gas-fired power station has to cover the capital costs within the wholesale price. A wind turbine covers it from both the wholesale price and the subsidy (ROC).
A capital cost not included is to achieve the "energy efficiency savings". It is households who will bear this cost additional costs. Alternatively people will consume less by being less comfortable - living in colder, darker homes, with less appliances.
Another assumption is about fossil fuel prices. If shale gas takes off, fuel prices will go in the opposite direction.
Another assumption will be about market structure. The energy market is becoming less competitive as a result of giving preferential treatment to the less competitive renewables, and more highly regulated.
My Lord Bishop,
Could any of your congregation on here please enlighten this heathen.
A week or so ago Shell announced they were about to remove to Teeside and dismantle one of the Brent platforms.
The cost of this to Shell, was to be one billion pounds.
Remembering the Brent Spar saga of some years ago, when the green Taliban were soiling their underwear over Shells proposal to dump it in the North Atlantic trench, this time Shelly are very careful to describe how they propose cut Brent Alpha up into little recyclable bits.
This got me thinking as to what capital costs are added to all these useless windmills when they come become more redundant than they start out. Does the Prime Ministers father in law have to pay to restore the spoiled landscape to its original pristine condition?
Just asking
Please tell me I'm missing something obvious.
SimonJ
(Well done Artwest, you complied with policy)
------------------------------------
I try not to use "renewables" outside of quotes, if at all, usually but it was a dashed off comment before having to rush out.
I shall endeavour to be as uncompliant as possible in future.
"DECC’s Dynamic Dispatch Model"
There is some crossover here, but I have always understood 'despatch' to mean send and 'dispatch' to mean terminate or kill, but that's probably what they do mean. As you were.
@Kevin
Dispatch is decided on marginal costs, i.e., variables only. Dispatch models do not need to include the fixed costs, and if they do these are typically not accurate let alone validated.
Another hidden cost which is not mentioned is attenuation. So, if a wind or solar facility is a long way from the consumer, the amount of power actually delivered to the customer decreases with distance between A and B. This is a particular problem with offshore wind.
In addition to physical interconnection costs, if they are measuring what is "produced" at source rather than what is actually delivered, the wool is being pulled over our eyes yet again.
As I understand it, in the UK most conventional plants are located fairly close to their markets - which makes perfect sense. This is not necessarily the case with "renewables."
@Prof Tol
I rely respect you, (and commiserate at your being on the receiving end of a campaign by an intolerant propagandist), but based on 25 years of working as a management accountant, think you are wrong on this one.
In Britain consumers to not purchase our electricity direct from the generator, but from supply companies. They in turn buy wholesale from generators. Capital is a fixed cost for the generator (shown as depreciation in the P&L). For a supply company the capital cost is included in the wholesale purchase price a variable cost (variable with the quantity purchased) .
Although all the big six suppliers are also generators, they have to keep separate P&Ls for generation and supply. Each year OFGEM publishes a summarised segmental P&L of each of the big six. You can see how for a Supply company there is little capital cost (DA) as it is all in the wholesale price.
https://www.ofgem.gov.uk/ofgem-publications/89139/energycompaniespublish2013consolidatedsegmentalstatements.pdf
Similarly of you look at the table on page 10 of the DECC report, wholesale costs are included. Similarly network costs are variable, but include the depreciation on the capital costs of upgrading the grid.