An analysis of the energy crunch

Over the weekend, Jonathan Leake wrote a trailer for Amber Rudd's speech on energy later this week, in which she is apparently going to signal something of a change in direction in government policy, with a shift of the focus from decarbonisation to consumer bills. As Matt Ridley pointed out in the Times a few days earlier, the government is running a real risk of getting landed with the blame if and when the energy grid goes pearshaped, so it's nice to think that the message might be sinking in.

And the risk of chaos still looms large, as the power price spike last week made clear. There is some very interesting, if rather technical, analysis of those events at the blog of Timera Energy, a firm of energy consultants, and one that carries a fairly firm warning for Ms Rudd:

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Some weapons-grade sophistry

Take a look at Mark Lynas's latest piece in the Guardian, in which he tries to absolve the wind fleet of any part in the close call the electricity grid suffered last week. This is pretty remarkable, given that at the time - as readers will no doubt recall - the wind fleet was becalmed and delivering just 3% of its installed capacity. Meanwhile the ageing coal fleet was only delivering 65% of capacity because of breakdowns.

Lynas's position is that this was fine and dandy because the near-total failure of the wind fleet was predicted.

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What on earth is Ewing doing?

Cornwall Energy is reporting that Scottish energy minister Fergus Ewing is worried about the lights going out. Indeed, so concerned is he, that he has written a letter to DECC. I kid you not.

In the letter, issued on Sunday 8 November, Ewing suggested that capacity margins were "worryingly low" and that the problem was being exacerbated by the government's energy policies.

Helpfully, Mr Ewing has made some suggestions about what DECC should do to ameliorate the situation:

He said policy needed to focus on ensuring faster build of new power capacity...

Seems sensible. And what types of generation do you think Mr Ewing flags up for DECC's attention?

...renewables in combination with increased storage capacity as well as carbon capture and storage for thermal generation.

Face, meet palm

OMG moment

This from the FT's coverage of yesterday's power shortages.

Traders watched in amazement as prices surged, with the grid paying £2,500 per MWh to one operator, Severn Power, as it bought in emergency supplies; the usual going rate is around £60.

Dead calm

Yesterday it seems that National Grid had to invoke its emergency procedures as outages at coal-fired power stations and an almost complete lack of a contribution from the wind fleet led to generation margins falling to dangerously low levels.

Given that the weather is very mild at the moment, this is worrying to say the least.

Wind remains very low this morning, although it looks as though it will pick up later in the day.

Interesting times.

Walport tour dates

Following on from his climate change tour in 2014, Mark Walport is hitting the road again, this time to talk about energy policy. All over the country nubile young environmentalists are going weak at the knees.

Over the next 6 months, Sir Mark Walport will tour the UK to talk about how we supply and use energy today, and the options we have for the future...

Sir Mark said:

The UK faces a series of choices about energy. We all require energy to live and our dependence on it is total. But how we supply energy and how we use it in the future needs to change. We need power that is secure, affordable and more than ever we need it to be sustainable.

When world leaders meet at the UN Conference on Climate Change in Paris this December, energy will be at the heart of the debate.

Details here.

Green vision

This morning I chanced upon some interesting documents that set out the vision for the UK of Friends of the Earth. The docs are FoE's contribution to the 2050 Calculator site set up by DECC's former chief scientist David Mackay a few years ago. The site allows users to set down how they think the UK's energy mix should be achieved in the future.

In the graph below (click for larger), we can see that FoE believe that we are going to reduce demand by 30% or so, which strikes me as optimistic. More interestingly they seem to have recognised that we are going to need standby gas powered generation right through to 2050. However, in their wisdom, they seem to think that three quarters of this gas should be imported rather than produced locally. Their stance on oil is similar. Given their stance on unconventional gas this is probably the only choice, but the conclusion must be that FoE believe that when calculating the trade off between environmental posturing and carbon emissions, it is environmental posturing that should win out.

So much for caring about the planet.

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South Australia today, UK tomorrow?

The authorities in South Australia have been pretty right on in terms of their devotion to the green cause, and the state has been in the forefront of efforts to increase renewables' share of electricity generation. That being the case, the state is something of a leading indicator for us here in the UK. Over the weekend there were strong hints that the chickens are coming home to roost.

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Behind the CCC's numbers

Updated on Oct 28, 2015 by Bishop Hill

In my absence last week, I missed the latest from the Committee on Climate Change, a document entitled "Power sector scenarios for the fifth carbon budget". This was widely reported as showing that renewables would be competitive with natural gas by 2020.

A reader has sent me some interesting observations which I thought were worth sharing.

Take this for example:

In a central scenario for gas prices and with a value attached to carbon that is consistent with meeting the UK’s 2050 target, the full cost of new gas generation would be £85/MWh for new plants coming on line in 2020 and £95/MWh for 2025. That assumes a gas price that increases from 46p/therm in 2015 to 66p/therm by 2025;

In fact, in a footnote, they note that the central scenario was in fact for a price of 72p/therm, but that they decided to reduce it by 6p "given sustained low gas prices".

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A gallery of rogues, spivs and wideboys

There's an article at the Guardian today that really takes one aback. Taking into account the author, the author of the underlying report, and those it quotes, it's quite a gallery of rogues.

Guardian energy editor Terry Macalister writes that wind energy is now the cheapest technology for electricity generation in the UK. Yes, folks this is the Great Levelised Cost Lie in action again. Here's how Macalister explains it:

The numbers drawn up by Bloomberg are a “levelised cost of energy” (LCOE) which takes into account financing, intermittency and other issues, so that different technologies can be fairly compared. However LCOE does not account for the cost of managing intermittent power in the national grid electricity system.

Everybody, but everybody in the energy policy debate knows that levelised costs are grossly misleading because the cost is only one half of the equation. The value of the output matters just as much, and the value of intermittent renewables is only a fraction of the value of dispatchable technologies. So when Macalister - or Doug Parr of Greenpeace, or Seb Henbest of BNEF - tell you that LCOE is a way to "fairly" compare different technologies it's not true. And when they tell you that wind is "fully competitive" with other technologies it's not true either.

They are behaving like the worst kind of city spiv, the most shameful dealer in dodgy share schemes.

Deccline and fall

The man running UK energy policy?According to an article in the Ecologist, DECC is now no longer much more than a shell. It seems that the Treasury and the new Infrastructure commission headed by Lord Adonis are taking all the decisions related to energy projects, leaving Amber Rudd with little to do beyond talking about the weather (or at least the climate) with colleagues from around the world.

Unfortunately Lord Adonis seems to be enthusiastic about wind energy, so the insanity may continue for a while yet. But at least energy policy seems to have been removed from the hands of the deep greens.

FiTs: a test of Cameron's conservatism

After Energy and Climate Change questions yesterday, several commenters wondered if the government might be about to backtrack on the swingeing cuts in feed-in-tariffs that were announced recently. MPs on both sides of the house had certainly been very vocal in their demands on behalf of their constituency energy companies and there was scarcely a voice heard in support of the proposals. MP after MP demanded that  FiTs be retained for renewables operators. Meanwhile, Aberdonian MPs wanted cash for North Sea oil operators as well. Pressure of the FiTs front continues today.

It's a vicious circle of course and the government risks getting generating a spiral of subsidy, with money having to be thrown at all market participants simply to keep them afloat.

This is going to be a test of Cameron's resolve. Is he going to play the Conservative, and put the consumer interest first, or is he going to cave into the producer interest?

We watch with interest.

The wisdom of the man in Whitehall

Yesterday came the news that another major power station is to close. Eggborough is a big 'un, its 2GW coal-fired capacity meaning that it generates as much as 4% of the UK's supply. According to the operators, electricity prices have now fallen so far that they cannot operate profitably.

Many might wonder whether this is a big deal or not. After all, businesses close all the time - markets have always weeded out the weak and old and uneconomic. But as the operators also point out, we are on the verge of blackouts this winter because of a lack of supply. Ofgem thinks they can avoid this, but only because the government is paying to have diesel generators on standby and because it is going to pay major industrial users to switch off when margins become unbearably tight.

So Whitehall has managed to get us into the situation where we are going to replace (relatively) efficient coal-fired stations and a productive population with inefficient diesel generators and (potentially) people standing around waiting for the power to come back on.

Such wisdom is not seen every day.

Thank goodness.

DECC's oil price forecast updated

I thought it might be interesting to see how the DECC fossil fuel price forecast - you know, the one that  is said to justify all those subsidies, feed-in-tariffs and renewables obligations. The comparison is startling - I've added a dot with today's Brent crude price.

The claim that decarbonisation would only cost a few percentage points off GDP seems to have been a fairy story.

In related news, GWPF have again called for DECC to be closed down.

In Poland, workers and windfarms sit idle

It's hot in parts of Eastern Europe at the moment - this happens in summertime I believe - and so people are switching on the airconditioning in droves.

In Poland this has produced some pretty major problems because the electricity grid can't supply sufficient electricity to meet demand. It's a familiar story: Poland relies on coal for the bulk of its electricity, but nobody wants to invest in new coal-fired power plants because the market is being rigged in favour of renewables and the EU is going to shut them all down anyway. Meanwhile there is hardly a puff of wind to be found anywhere in Europe so Poland's wind fleet is not helping either.

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