A synopsis of Dieter Helm’s The Carbon Crunch. Part 2 of 3. Read part 1 here.

Renewables are not a magic bullet

Wind is one of the main renewable technologies. The quoted costs of wind rarely include all the direct and indirect costs. A major disadvantage is that the electricity generation is intermittent – the wind needs to blow, not too little, not too much. The quoted capacity is usually the output at optimal conditions. But the average output over the year is typically 20-35% of the quoted capacity (the load factor). Offshore wind should have a load factor at the upper end, although some experience suggests that this falls to around 20% after only a few years as the offshore environment is so harsh.

This intermittency requires the system to have back up when the wind does not blow. Winter in the UK often has weather system highs which bring cold, windless weather – peak demand is at 19:00 in February which then needs to be supplied from other sources, usually gas-fired power.

However on those occasions the wind does blow and demand is lower, wind power – with its zero marginal cost – will displace gas. The gas power plant has thus become intermittent itself as a result of the intermittency of renewables. This makes gas-fired power uneconomic. To ensure there is capacity in the system to meet demand at all times, gas-fired power is needed. Hence the inclusion of substantial amounts of renewables – only possible with subsidies – requires further subsidies for the rest of the system. These are all costs attributable to renewables, together with the transmission system investment to get the power from offshore or remote onshore developments, costs that are not included in the headline costs. Even these headline costs are substantial – onshore wind gets a price for its production of £90/MWh and offshore £150/MWh compared with the wholesale price of around £50/MWh.

Solar is mostly a bust. In Northern Europe is much more expensive than wind, can only work half of the day (and not at all when the peak demand is in the evening), doesn’t work well in winter weather, and has a minimal impact on supply. But the costs can be very substantial – Germany spent €53 billion in subsidies over 10 years.

Biomass globally is a significant energy source, but is mostly wood and animal dung burned in open fires. Biomass for power consists of trees or offcuts processed into pellets then burned in a conventional power station. The concept is that the trees capture carbon from the air and this is then reintroduced through burning. Biomass has become very controversial – energy is used in felling the trees, processing, transportation, and there is a timing aspect of decades to replace the trees. The UK government has terminated subsidies for future schemes.

Biofuels use crops to make ethanol which are used in transport fuels. These schemes mostly make even less sense than biomass. Crops need fertiliser, harvesting, transporting, processing. With corn as the feedstock, the carbon saving is small, or sometimes zero, and the costs substantial both directly and through the impact on food prices. Ethanol from sugar cane looks much more effective.

Nuclear has been a significant part of power generation, especially in France where it provides some 80% of generation. However its contribution in the next 20 years will decline. This is a combination of retiring existing plants, the NGO and Green hatred, the absence of falling capital costs, and the lingering issue of waste disposal.

Toxic politics

The example of German politics illustrate the issues. After the defeat of the Red-Green government under Schroder, Merkel gradually edged her centre-right coalition towards tentative pro-nuclear steps. This included lifting the deadline on closing the existing nuclear power stations with the possibility of life extensions, in exchange for a new fuel-rod tax.

Then Fukushima happened a few weeks later, and the German government did a spectacular U-turn. Now Germany would close all nuclear stations, including eight immediately. The change in policy was applauded by the Polish government as it opened up a huge new market for their coal-powered electricity exports (as well as nuclear powered electricity from France). Carbon emissions will be much higher as a result of the new policy.

So German policy went from a life extension plus a tax, to a partial closedown with a complete closure in a decade without any compensation, and a fuel tax as well. Little wonder that industry believes the regulatory risk is too great for an investment with a 60 year life.