The end of the coal era is here. At least in the UK

(Since this note was written the UK has seen 4 hours of zero coal generation. Between midnight and 4am on Tuesday 10th May, no coal-fired power station was working on the UK grid. As far as I can see, this has never happened before. A highly symbolic event).

At about 15.30 on Sunday afternoon (8th May 2016), the only coal power station working on the UK grid throttled back its operations. The 400 megawatts or so being generated fell to around 280 megawatts for about half an hour. The reason was probably that the system electricity price had declined to about minus £30 a megawatt hour. It made sense not to generate at all but coal-fired power stations take some time to reduce or increase their output.

At coal’s minimum generation, it was producing about 1.2% of all grid-generated UK electricity. If we included in the wind and solar not on the high voltage National Grid, the figure would have probably been below 1%. 1.2% is the lowest figure ever recorded in the UK since the dawn of the electricity age.

The chart below shows how coal has declined dramatically in importance over the past year and a half. From nearly 50% of generation in early 2015, the average figure this spring has been little more than a tenth of this. More wind, more PV and low gas prices are pushing coal out of the generating mix. Whatever else is going wrong, this is very good news indeed.

Public opinion warms to renewables

DECC carries out regular surveys of public opinion on energy issues. Round 17 has just been completed. The first was in early 2012.

The most recent poll shows increased support for the main renewables.

·          Onshore wind reached a new high in support. The percentage of net approval (those in favour less those against) rose to 60%. The percentage thinking onshore wind is a good thing rose 3% from the previous survey while those opposing fell by 3%. The number against onshore wind was 9%, a new low. Only 3% of respondents ‘strongly oppose’ turbines on land.

·      Offshore wind also saw a new peak in approval. The net approval rate was 71% with only 5% opposed. The number ‘strongly opposed’ fell to a new low of 1%.

·      Solar PV has a net approval rating of 80% is close to the previous peak. Only 1% ‘strongly oppose’.

Support for nuclear is stable.

·      Net approval numbers have moved around in recent surveys but at 15% the current poll figures are unchanged from the last round.

Smart meters growing

·      20% of respondents have a smart meter. The numbers using the energy use monitor are rising sharply.

Climate change worries people more.

·      Those saying they are ‘concerned’ total 70%, a new high. Those unconcerned fell to 29%, a new low.

·      Those seeing climate change as being caused by man’s activities increased in number. Those who see it as a result of natural processes fell to the lowest number ever.

·      Climate change is one of the top three of a list of political issues for 22% of people. Those putting it top account for 6% of the respondents.

I saw no other obvious trends in the survey results but I may have missed something.

Port Talbot closure: the CO2 and energy arguments

There are two main ways of making steel: an electric arc furnace or a blast furnace. The electric arc furnace (EAF) uses scrap steel and puts an electric current through it to heat it to the point at which it melts. The blast furnace (or basic oxygen furnace, BOF) fires coal that melts the iron out of iron ore. In both processes, the molten metal is tapped off and processed into slab.

Both routes, if I understand the position correctly, can produce high quality steel.

Mr Gupta, the potential purchaser of Port Talbot, wants to convert it from BOF to EAF. Instead of using about a tonne of coal to make a tonne of steel in a BOF and about 0.15 MWh of electricity, Gupta wants to use about 0.45 megawatt hour of electricity (and no coal) in an EAF. (These figures are from http://www.steelonthenet.com/cost-eaf.html)

What is the CO2 impact? A tonne of coal burnt in a blast furnace produces mostly carbon monoxide. That gas is usually then combusted in air to make CO2. (Competitor Arcelor Mittal is working with US/NZ company LanzaTech to use the carbon monoxide as a feedstock for bugs that convert it to useful liquid fuels but worldwide conversion is some decades away).

A tonne of hard coal produces about 3.5 tonnes of CO2. At today’s average CO2 intensity, 0.15 MWh of electricity used in a BOF adds another 0.06 tonnes to this. So a BOF adds just over 3.5 tonnes of CO2 to the atmosphere for each tonne of new steel produced.

An EAF adds less than 0.2 tonnes of CO2 to the atmosphere for each tonne of steel produced.

Switching from BOF to EAF will save over 3 tonnes of CO2 for each tonne of steel. The UK has produced an average of about 7 million tonnes of BOF steel over the last few years. A complete change to EAF could reduce UK emissions by up to 20 million tonnes, or just under 5% of the total.

Does the UK have enough scrap to provide for a EAF at Port Talbot? Yes it does; Mr Gupta says that 7m tonnes is exported to EAFs elsewhere each year. His logic is that it makes more sense to process the scrap in the UK than ship to a EAF elsewhere in the world and then import the resulting steel. Whether he is right or not depends on the costs of making EAF steel here, including electricity charges, compared to elsewhere.

Electricity prices

Why, if energy prices are said to be a major barrier to steelmaking in the UK, would Mr Gupta want to triple the amount of electricity he uses per tonne of steel from today’s BOF levels?

Firstly, electricity isn’t a hugely important part of the cost of EAF steel. 0.4 MWh of electricity might cost £35 at today’s prices, or even slightly less. The value of a tonne of steel is, if I have researched correctly, about £300. Although power costs are not irrelevant, the cost of the scrap metal is a far more important element than electricity.

More importantly, perhaps, Mr Gupta’s family companies are developing a variety of new renewable sources that might supply Port Talbot. These include, as has been widely mentioned, the tidal lagoon at Swansea, just down the cost. Other new sources of electricity include from biomass from the Uskmouth coal plant near Newport on the Severn Estuary and the various other technologies being planned at the green energy hub next to Uskmouth. These include pyrolysis of waste, fuel cells and solar.

So Port Talbot seems to be part of a big plan to create electricity using renewable technologies and then exploit it in an EAF. This sounds rational at first. But none of the energy technologies being developed by Gupta businesses are yet competitive with today’s wholesale price of power. We know, for example, that the tidal lagoon company is asking for a power price at least as high as Hinkley Point.

Unless the government goes along with Mr Gupta and agrees to subsidise his chosen renewables, the price of power at a Port Talbot EAF will be higher than today. I can see no sign that the Energy Secretary will have any interest in putting in place agreements to give Port Talbot cheap power from renewable sources.

Nevertheless, this is a debate the UK should be having. Does it make sense to try to build leadership in technologies such as lagoons and pyrolysis at the same time as keeping open a lower CO2 EAF in a part of the country that needs the jobs that steel provides? I think the question is far more finely balanced than the market fundamentalists believe.

EdF (in the US) shows that wind makes better sense than nuclear

EdF’s travails over Hinkley persist. The FT reported this week that engineers within the company have written a memo asking management to wait to proceed with construction until the other EPRs in Finland and Normandy have been successfully completed. A director has said he will vote against the UK nuclear project. The £18bn project is stalled until internal debates within EdF are resolved. 

Within the same company, they do things very differently on the other side of the Atlantic; there EDF focuses wholeheartedly on wind and has no nuclear under development. It has just proudly announced that it has become the largest developer in North America with a portfolio in 2015 of over 1 gigawatt of newly constructed wind farms.

If it continues at the current rate, it will be generating more electricity from wind by 2025 than would be provided by Hinkley Point C. The numbers are as follows. Hinkley will generate about 25 terawatt hours a year. EdF’s 2015 annual portfolio of new wind projects will provide about 3 terawatt hours a year at average US utilisation factors. If it continues to develop new wind projects at the rate of 1 gigawatt a year, it will be generating well over 30 terawatt hours a year from wind by the end of 2025. 2025 is when EdF says Hinkley will be finished.

What about the capital cost of wind versus nuclear? The latest US estimates suggest a figure of about $1,700 per kilowatt of capacity. That means EdF’s projects completed in 2015 cost about $1.8bn. Over ten years, that rate of installation will mean a total cost of around $18bn or about £13bn. Wind is therefore at least 30% cheaper to construct.

And it is much cheaper to operate. The most important project it completed in 2015, the 250 MW farm at Roosevelt in New Mexico, has sold its electricity for the next 20 years to a utility for $23.39 a megawatt hour, less than 20% of the price agreed for Hinkley of £92.50/MWh. (The Roosevelt price is somewhat subsidised by Federal tax credits but even without this benefit the cost of wind would be less than 40% of the price of UK nuclear). Wind saves consumers money when compared to the nuclear alternative.

EdF finances many of its US wind projects on the back of power purchase agreements with major companies such as Microsoft, Procter and Gamble and Google. They commit to buy the electricity produced at a fixed price, not the inflation adjusted figure that the UK will pay for Hinkley. The EdF press release said ‘Corporate America is increasingly turning to renewable energy to power its business operations, based both on consumer preferences and because renewable energy simply makes economic sense’. (My italics).

We never hear this line from EdF in the UK.

EdF cannot guarantee the wind will blow or the sun shine. Unlike in Britain, its US business is also investing heavily in energy storage. The US company has announced 100 MW of battery systems in the US saying ‘Energy storage is an attractive, cost-effective addition to intermittent energy generation projects’. However there’s no mention of batteries on EdF’s UK web site.

For sensible reasons large international companies often pursue varied market strategies in different countries. EdF in the US has decided to back wind while the UK has gone for nuclear. But even a quick look shows that the energy and financial returns to the US strategy seem far clearer and better for the company, and its customers, than the tactics of the UK business.

First sighting of California Duck this year

Today was sunny. Most predictions were for at least 5 gigawatts of solar PV arriving into the UK electricity system. This number hasn’t been reached for almost six months. (My website at Solar Forecast was a little more conservative and I think the algorithm was too pessimistic).

The electricity market didn’t predict the abundance of sun. As a result, it was hugely oversupplied in the middle of the day. If you’d been buying, you could have bought electricity for less than £10 a megawatt hour (1p a kilowatt hour) in the early afternoon. In fact, for the entire day so far the system price has been less than £30, a strikingly unusual state of affairs.

Phil Harper wrote to me a few minutes ago pointing out that today was the first obvious sighting of the California Duck in the UK this year. Electricity demand in the middle of the day was seriously dented by the superabundance of PV-generated electricity, an increasingly important feature of the Californian power market from March to September. Last Monday, the UK need for electricity was flat from noon to late afternoon at around 40 gigawatts. Today, it dipped sharply as the sun burnt off the haze. At 14.30, demand for other sources of power was around 35 gigawatts over 5 gigawatts less than a week ago. (I do not know why demand remains somewhat lower even now at around 10pm).

The chart below shows the dent in demand. The pattern will get even clearer over the next six months. Some sources suggest that UK PV installations will top 10 gigawatts by mid year, meaning that early afternoon power needs will dip by at least 8 gigawatts below usual levels on very sunny days.

As usual, DECC is either disguising these numbers in its monthly releases or is still unable to cope with the rate of installation. Despite being warned by National Statistics for fiddling with its estimates, it continues to make huge ad hoc changes in its statistics from month to month without acknowledging its problems in keeping up with solar volumes.

Solar is making a significant difference to the operation of the UK electricity market. 

The demise of Hinkley C is near-inevitable. This will save the UK money and help us build a truly flexible energy system.

The amount of capital earmarked for Hinkley C (£18bn) would produce more electricity over the next 25 years if it were invested in onshore wind or PV. Based on the projected economics for the first three lagoons, tidal power would be about 65% as productive but the projects would then last twice as long as nuclear. 

If it operates at 85% of capacity, Hinkley C will produce about 24 terawatt hours of electricity a year, about 7% of the UK’s consumption. At today’s prices, PV on which the same amount was spent would generate 25 terawatt hours annually and onshore wind about 31. The Swansea lagoon and its proposed follow-on sites would produce about 15 terawatt hours.

The economic arguments for using renewables rather than nuclear are therefore increasingly strong.

There is very little uncertainty about the actual costs of wind and PV, or the direction of travel. Both are reducing in cost, with solar declining at about 6-9% per year around the world and wind somewhat more slowly. We do not know what will happen if Swansea and other lagoons are built but it is likely that we will also see substantial cost reductions there. Hinkley C is subject to much more uncertainty. The new nuclear sites in Normandy and Finland are proving hugely problematic and even the constructibility of the EPR is in doubt.

The annual running cost of Hinkley C, including its fuel, will be about £360m. This compares with estimates of £130m for £18bn of PV and £310m for onshore wind of the same cost. The lagoons will cost about £75m. All three alternatives to Hinkley will therefore be cheaper to operate, perhaps by over £200m a year.

£18bn worth of PV would take up about 0.2% of the UK’s land area. This is not an obstacle.

Nuclear power is proving difficult to fund and is subject to many concerns, both technical and financial. The only remaining argument for supporting Hinkley C is that therefore it will produce a constant flow of electricity 24 hours a day, if it is successfully completed.

In some circumstances this is an advantage but as wind and solar increase in importance this benefit will die away. There will be times when the UK would like Hinkley to produce less than its maximum output. Even this coming summer it is conceivable that on a sunny, windy weekend day that the UK will not need its full existing output from nuclear power stations and would prefer that they operated at less than 100% output. This is currently impossible. As the maximum output from PV and wind increases over the coming years, the inflexibility of nuclear will become an even more significant problem for the UK grid, particularly if electricity demand continues to fall. 

A portfolio of tidal lagoons with storage capacity – something that can be engineered in - combined with PV and wind would represent a cheaper way of achieving a fully decarbonised electricity supply. Extensive use of ‘demand response’ and time-of-use tariffs could help shape demand to the expected availability of power.

In addition, battery storage is becoming cheaper by the month. Grid operators around the world are installing banks of containerised batteries to help maintain stability. The latest example in Korea has just seen the installation of a 50 megawatt system to replace older fossil fuel plants that used to provide power for hours of peak demand. This operator expects to save three times its cost over working lives of the batteries. In the UK, batteries can provide short-term storage overnight and could deal with unexpected swings in the availability of power.

An effective 21st century energy supply system will almost inevitably be based around renewables and batteries. The pace of cost reduction of PV makes this almost a foregone conclusion. It is already cheaper than nuclear per unit of capital invested. Automation and control of electricity consumption is making it easier every month to deal with the variability of wind and solar supply.

The only remaining problem is long-term storage. It must be provided by the conversion of surplus electricity in the summer, or in periods of gales, into methane for injection into the gas grid. The technology for turning power into hydrogen through electrolysis is simple and well understood. Several types of microbe can then take the hydrogen and a stream of impure CO2 and turn it into methane quickly and cheaply. The new Electrochaea pilot at a waste water pilot in Copenhagen will show how this can be done. The German company Microbenergy offers a similar route to so-called 'biological methanation'. Turning surplus electricity into stored gas and also into liquid fuels is possible, and probably cost-effective. But techniques are not yet commercially proven at large scale.

UK universities and research institutes have outstanding capabilities in biochemistry. My guess is that the country could built a worldwide lead in the use of living organisms such as archaea and acetogens to convert hydrogen and CO2 into useful renewable fuels. The UK should begin large scale research and development of ‘power to gas’ and ‘power to liquids’ projects to deal with the increasingly likelihood that the Hinkley site will remain empty for ever. The likelihood is that this will enable us to to build a energy system that is cheap, reliable and non-polluting, both here and in other parts of the world.

'Peak Stuff': households now spend more on services than physical goods

IKEA’s Steve Howard announced the arrival of ‘peak home furnishings’. He seemed to be saying that households were tending to consume fewer of the products his company sells.

In 2011,  I think I wrote the first article on the plateau in the UK’s consumption of material goods. It was entitled “Peak Stuff’ and is available on this website.  I looked at a variety of indicators of falling demand for physical objects, ranging from water to cement or fertiliser. I also suggested that other phenomena, such as the decline in the use of energy and the fall in the number of miles travelled, were also occurring in other developed economies.

Steve Howard’s much quoted comments prompted me to go back to look at the data on materials use. The most obvious fall in growth has occurred in the production of steel and concrete. The sharp slowing in Chinese GDP growth has flattened the output of both of these industries. The country is responsible for about 50% of world use of both commodities. So for the first time in living memory global steel and cement use is down. Aluminium, the next most important metal, is more robust, but only slightly.

Controversial in 2011, it’s now accepted that energy use is also falling across most of the OECD countries and Britain’s requirements continue to fall 1-2% a year, even as the economy continues to perform relatively well. Our aggregate use of materials is continuing to fall, as is also the case in the EU as a whole.

I looked quickly at one other aspect of ‘Peak Stuff’. Using government data, I’ve tried to assess whether British households are indeed spending less on buying physical objects. Is Steve Howard’s downbeat assessment of IKEA’s prospects in the UK justified by recent patterns of domestic purchases?

The answer is ‘yes’. British consumers devoted 26 % of their total household purchasing to physical goods in the early part of the last decade. This fell to about 21 % by 2014, the last year for which good data is available. Spending on all major categories of items fell as a percentage of income. That includes furnishings, clothing, cars and consumer electronics. The fall wasn’t regular but the direction of change is clear.

Source: ONS Family Spending

The uptick in 2014 was driven by increased spending on buying cars. However all sectors of expenditure on physical goods saw a decrease between 2002/3 and 2014.

Source: ONS Family Spending

You would be entitled to respond by saying that rising fuel costs, increasing rents and larger mortgages had drained householders of their purchasing power. Every type of discretionary expenditure might therefore be down over the last decade or so. That actually isn’t the case. Spending on services, such sports admissions or satellite subscriptions, rose from 21% of all household expenditure in 2002/3 to 22% in 2014. It is a small percentage rise but in the last few years we’ve seen the money going to services growing to be larger than the cash spent on all forms of goods.  Holidays have been particularly buoyant. (These figures exclude rent, utilities and mortgage interest payments). 

Source: ONS Family Spending

Services beating physical goods for the household pound is a new phenomenon, here or elsewhere. Steve Howard is right to be anxious. IKEA better start selling us pleasurable and enticing leisure services rather than trying to flog us more strangely named articles of bedroom furniture. We already have enough.

More generally, those who worry about a secular stagnation in the West probably need to look closely at whether Peak Stuff is going to depress economic growth over the next decades.

A quick note on method.

ONS publishes a fascinating yearly survey called Family Spending (and has done for many decades). It records the actual expenditure from thousands of UK households, ranging from funeral plans to bananas. Spending is split into hundreds of categories. I’ve decided whether each category is predominantly a physical good or a service. I excluded food from the ‘goods’ section but kept in clothing, furnishing, books and newspapers and many other lines. I did the same for services.  You could quibble with some of these allocations but I think the general conclusion is robust. There is a swing away from things made of metal, textiles and plastic towards spending on experiences. You can have a copy of my spreadsheet if you would find it useful, but it is a bit messy.

Will the switch to an energy system dominated by solar PV cost the world money?

A research paper by Chris Goodall

Will the switch to an energy system dominated by solar PV cost the world money? (Link to PDF)

Abstract

What follows is a thought experiment. I compare two scenarios to decide which will cost more. In one, fossil fuels continue to provide most of the world’s power and solar photovoltaics do not provide any more electricity than at present. In the second, solar PV grows very rapidly and provides the world with all its energy, not just electricity, by 2041. Each year, the amount of cash spent on fossil fuel energy each year is reduced by this switch. The experiment tries to answer the question ‘which scenario costs more?’.[1] Is decarbonisation costly, or financially beneficial?

For the first scenario, I estimate the total cost of wholesale oil, gas and coal from now until 2041. In the second, I add the total amount of capital invested in solar to the gradually lowering expenditure on fossil fuels, as a result of increased PV, to get an estimate of total expenditures, running and capital, on energy. With these figures I can provide an estimate of whether a fast switch to solar will cut the world’s expenditure on energy or not. As far as I know, no-one else has ever done this calculation.

The comparison shows that if the world makes a sustained push for growth of solar photovoltaics the total global cost of energy between now and 2041, including all the capital spent on PV, will be slightly less than if the globe continues to use fossil fuels. As time passes after 2041, the balance will swing even further in favour of PV because solar panels already installed will continue to provide near-free electricity for many years whereas fossil fuels will, in contrast, cost money.[2]

The critical assumptions going in to this analysis are a) that PV continues to grow at an average of 40% a year and b) that the rate of cost reduction of solar energy remains at 20% for every doubling of accumulated production and, of course, that fossil fuel prices remain at the February 2016 level. Any rise from today’s depressed levels will increase the benefit of the switch.

The experiment also assumes that one terawatt of fossil fuels needs one terawatt of PV power to replace it. This may be unfair to PV because it delivers a high quality energy (electricity) whereas most of the energy value in, say, coal, is lost in the power station in the process of conversion to electricity. Nevertheless, for the reasons given in the paper, I thought it appropriately conservative to assume that the amount of PV electricity needed is the same as the gross energy value of all the fossil fuels used.

The idea that solar PV could replace all use of fossil fuels sometimes seems absurd. What will happen at night or in mid-winter in high latitudes? But, as is increasingly clear, demand response will cut night demand, overnight storage will be provided by batteries and longer term buffers will come through the conversion of solar electricity to renewable gases and liquid fuels.

Reactions to this draft will be most gratefully received.

[1] I use PV as the main competitor to fossil fuels because I believe photovoltaics will become very clearly the cheapest and easiest way to generate electricity within a few years. But the arguments in this paper could also be made for wind energy. Or PV and wind could be combined to create the energy transition.

[2] I am very deeply indebted to Professor Nick Jelley of Oxford University for his mathematical work modelling PV growth and creating the ‘S’ curve. This thought experiment would have been wholly impossible without his help. Errors are mine, of course.

What the oil companies think about the divestment movement

A couple of weeks ago, 300 academics from Oxford and Cambridge issued a statement asking their universities to work with the fossil fuel divestment movement. Energy scientists such as Sir David MacKay joined professors from across the full range of subjects to ask for ‘morally sound’ investment policies.

Last Friday, a very senior executive from one of the world’s largest oil companies participated in an open and good humoured discussion with undergraduates at one of our leading universities  in a meeting convened under ‘Chatham House’ rules. I was present. The executive, who I will call Harold Schreiber, said that the divestment movement was ‘anti-industry, emotional and populist’. He said that the role of the ‘energy producers (is) to produce energy’ and that those who worried about climate change should focus their attention on the consumers of energy, not those who extract it. Schreiber said that oil companies will not respond to outside media pressure but that ‘constructive engagement’ might be more effective. He based this opinion on what he saw as the positive effect of those oil companies that remained in South Africa during the apartheid years working to build the country’s energy system and, in Schreiber’s words, ‘helping to avoid violence’.

Whether or not the divestment movement succeeded the world would continue to burn large quantities of fossil fuels for the rest of the century, he continued. About 80% of energy needs are met from carbon-based fuels today and in his assessment that number would still be about 25% by 2100. Oil would have to be extracted and burnt in large amounts, although its role will diminish beyond 2030.

Some of his company’s scenarios for the future suggested that it might be possible to get to ‘net zero’ emissions by the end of the century but these were not necessarily the most likely. Moreover, they would require technologies that extracted CO2 from the atmosphere. He referenced work at MIT that showed that the best the world could expect is a temperature rise of about 3 degrees above pre-industrial levels, well above the figure of less than 2 degrees agreed in the Paris conference. He implied that he regretted this probable failure but that the energy companies are not to blame. Governments and energy users are responsible.

Faster change is hugely difficult, he implied. One example was the UK’s poorly insulated housing. Although it may be possible to reduce heat losses in homes, people would need ‘softening up’ for a long time before they agreed to have contractors in their homes for six months of insulation work. More generally around the world, people need proper energy infrastructure to live decent lives and the anti-fossil fuel activists don’t understand that this cannot be provided by ‘iPhone apps’ or other digital tools.

1.3 billion people have no access to electricity at all and these people require the mainstream energy companies to provide them with the means to obtain a reliable energy supply. A decent standard of living demands steel for buildings and the anti-fossil fuel movement has no idea how this might be provided without coal in blast furnaces. Transport needs liquid fuels and no-one, he said, knew how this would be provided without oil from the ground.

As well as criticising the divestment movement for its anti-commercial and antagonistic attitudes, Mr Schreiber said that politicians were making huge mistakes. The UK’s decision to abandon Carbon Capture and Storage (CCS) was ‘frankly stupid’. Obama was wrong to block the Keystone XL pipeline. Sensible policy-making is ‘paralysed’ at the Federal level. More generally, politicians around the world ‘have to reach beyond grandstanding’ and take decisions that are ‘rational’, not driven by attempts to gather short-term popularity by appeasing climate activists.

When questioned on why the major oil companies operated in countries with poor human rights records, he asked whether the audience would rather the energy extraction in these countries was carried out by small private companies or businesses like his employer’s, which are subject to high levels of scrutiny and requirements for transparency.

In summary Schreiber suggested that companies such as his are the servants of the international economy, not its masters. The role of the international oil company is to organise the efficient deployment of capital for the production of inexpensive energy, not to drive the low-carbon future. He said that ‘we are only in the foothills of the move away from fossil fuels’ and his company would continue to invest heavily in oil and gas exploration rather than renewables.

After listening to Schreiber I went away to look at the latest accounts of some of the major energy companies. They show, of course, reduced profitability in the face of declining energy prices. Nevertheless, the divestment movement has a steep hill to climb. Few, if any, oil majors  have any need for new outside capital in the next few years. It might make sense for the financial health of pension and endowment funds to get out of fossil fuels but selling oil shares to another investor (‘divesting’) will have no direct impact whatsoever on the speed of the energy transition.

I think it may be more important to continue asking oil companies the question ‘is drilling for hydrocarbons the most productive use of your huge resources of available capital’? To suggest an answer, I looked specifically at Shell’s worldwide accounts because these have just been published. Excluding its new acquisition, BG, the company spent about $29bn on its exploration and production activities last year. That money enabled the company to just about stand still in terms of the total amount of energy to which it has access in its proven oil and gas fields. It produced 1.1 billion barrels of oil from reserves that dipped slightly to about 11.7 billion barrels. (This is a complex area; Shell has to write down its reserves estimates to reflect that portion of its portfolio that is no longer economic to operate because of low oil prices).

So, very roughly, $29bn is the amount of money Shell needs to invest in order to continue producing 3 million barrels of oil a day (1.1 billion barrels a year). This money could instead either be returned to shareholders or invested in renewable energy technologies. Mr Schreiber said that at the start of the discussion that the role of the energy producer was to produce energy. In the case of Shell, as one example of this, is the $29bn going to produce more energy if it is invested in oil exploration and production or, for example, in solar PV?

The numbers are relatively easy to calculate. Shell’s yearly production of oil has an energy content of about 1,800 terawatt hours. That is, very approximately, the same as the UK’s total consumption of energy from all sources. How much energy would Shell’s $29bn produce if it were invested in solar PV farms? Assuming a 22% capacity factor (much better than the UK but below the average in the US), an installed cost of $1 a watt and a 35 year panel life, the number comes out just ahead of the energy value of the oil that Shell produces each year. In other words, if Shell really sees its role as producing the energy the world needs, then its $29bn would be better going into exploiting solar energy rather than drilling wells and building pipelines. Rather than trying to destroy Shell, one of the world’s most efficient allocators of energy capital, we need to persuade it to divert its considerable skills towards the renewable economy.

Or take BP. In the UK alone the company spends about £175m on energy R&D. This compares to DECC's boast of putting about £100m into clean energy research as year, of which half is devoted to nuclear. Were a oil major to divert its efforts away from fossil fuels and towards the next generation of energy sources, the skill and knowledge in the private sector could make a dramatic difference to the speed of the switch to low-carbon sources.

I made this point clumsily to Mr Schreiber after the discussion. Wouldn’t his company’s exceptional skills and resources also be better directed towards – for example – using solar energy to make renewable liquid fuels, an endeavour Bill Gates sees as one of the most productive areas for new capital going into energy? Schreiber disagreed, saying that this area involved a lot of difficult science not within his company’s area of current competence.

Nevertheless Harold Schreiber knows there is an energy transition happening. Renewable sources of energy will eventually become very cheap and strand the existing assets of the major oil companies. Even the CEO of Shell said in September last year that solar would be the ‘dominant backbone’ of the energy system.

This may suggest that outsiders, such as Oxbridge academics mentioned in the first paragraph, need to engage with the oil company to show how they should redirect themselves - and their huge resources of capital - towards those energy sources that are going to be cheaper than oil. PV already produces more energy per dollar invested than oil. Shouldn’t Schreiber’s company be moving as fast as it can into exploitation of the sun’s energy? Won’t shareholders’ interests be best served by a rapid redirection of the company toward the most productive new sources of energy, rather than drilling for ever more recalcitrant sources of oil?

The vital role of time of use electricity pricing in the energy transition

Wadebridge in Cornwall is the centre of the first UK pilot of daytime cheap prices for electricity. This summer, 240 households will be paying a tariff of 5p a kilowatt hour during the 10am to 4pm period. Outside that time slot, the rate rises to 18p, almost four times as much. In winter, the price reverts to 13.4p across the full 24 hours.

This scheme is offered by innovative electricity retailer Tempus with the participation of the very effective Wadebridge community renewables group. The rapid increase in the generation of solar and wind electricity around the world is driving many similar ‘time of use’ tariffs in places such as Hawaii and California. Mostly these are compulsory, not a voluntary decision as in Wadebridge. In Cornwall specifically the electricity network is struggling because of the strict limits placed by the distribution grid on solar power exports to the rest of the UK and time dependent pricing is a highly important innovation.

Oahu, the most populated of the Hawaiian islands, has a peak late afternoon price about three times the price at midday. New rates such as these often reflect increasing surpluses of power in peak sunshine, which is not well aligned to the maximum need for air conditioning around 5pm, after the sun has begun to fall. In Ontario, peak prices are about twice off peak tariffs. California has now mandated time of use tariffs, likely to be about 15 cents a kilowatt hour for off peak and 37 cents for peak early evening times.

The aim of these time of use pricing schemes is to push electricity consumption into the periods of low tariffs and to minimise the amount used at times when supply isn’t bolstered by sun or wind. As solar grows from its current 2% share of world electricity supply, we can expect more and more use of pricing variations to mould power demand to align better with power production.

Time of use pricing has the vital secondary role of encouraging the purchase of domestic battery systems that take in power at cheap rates and provide it when the household needs it later in the day. As batteries become cheaper, we’ll increasing numbers of people use them to enable the purchase of cheap solar or wind electricity.

Do the new Wadebridge prices make sense from a householder’s point of view without a battery? Not unless the home can shift a reasonable amount of its consumption into the six hour low rate time slot.  With average domestic UK electricity usage patterns, the cost of the Wadebridge tariff would be about 109 pence per day during the summer, compared to 104 pence on the standard Tempus tariff. (Unusually, the Tempus ratecard has no fixed daily charge so although its standard tariff looks expensive at 13.4p per kilowatt hour, it is broadly comparable to the Cornish prices of the big electricity retailers, which might include a 25p daily fee).

The  Wadebridge summer tariff will save a customer money if the household switches about one tenth of its total consumption into the off peak period. That would probably be achieved by only running the dishwasher, iron and washing machine in the cheap rate period, something not easy for working families but perfectly possible for people at home all day.

In the future, of course, all the appliances in the home will be controllable from a phone app, meaning that machines could be turned on and off as electricity prices changed. Or all of main appliances could use switches that turn them on and off automatically as electricity availability changes. The French electronic controls giant Schneider is partnering California demand response company OhmConnect to do this. The promise is that households will get paid cash for allowing instant switch on and off.

The OhmConnect proposition isn’t exactly a time of use tariff. It isn’t aimed at systematically shifting demand from one time of the day to another. Instead it is a way of instantly cutting electricity use at times of grid stress, such as when a power station ceases to operate without warning.

One trial in London that raised prices to almost four times average levels for one hour periods of grid emergency (with notification by text message) in return for lower prices at other times enabled most participants to save money. More generally, it will only be politically possible to introduce demand moulding price structures for electricity if most consumers and businesses benefit financially. This should be perfectly possible simply because matching supply and demand will also save the utility companies money and stop needless investment in new generating stations that might work less than a hundred hours a year.

However a UK tariff that cut prices when the sun was shining or wind blowing is not yet likely to make a home battery financially logical, even if the ratecard operated all year, not just in summer as it does in Wadebridge. If the householder bought a 8 kilowatt hour battery, and used it to store electricity bought at 5p a kilowatt hour so as to avoid paying 13.p a kilowatt hour, the value might be almost £250 a year. The cost of the best battery and home control system is likely to be over £10,000 at the moment, bought from market leader Sonnen, a German company rapidly developing into Hawaii and California. That’s a forty year payback on a battery that will last about ten. But battery prices are going to continue falling rapidly for the next few decades. Home battery systems will make financial sense soon.

UK renewables generation up 31% in 2015

I compared 2015’s UK electricity production with that of 2014. Total generation was down 2.1% including estimated production from solar PV and smaller scale wind farms.

The percentage supplied by gas, oil and coal fell from 58.7% of the total to 52.1%. Especially carbon-intensive open cycle gas turbines (OCGT) and oil fell from 0.004% of all generation to 0.003%. This will surprise anti-renewables campaigners who often focus on the supposed need for wind and solar to be continuously backed up by OCGT power stations.

Coal’s share fell from its 2014 share of 30.9% to 24.3%. In the windy month of December 2015, electricity produced from coal was only just less than electricity generated by wind and solar. For a short period on June 6th 2015, wind and solar produced a new record of about 40% of all UK generation.

Wind and solar (including all smaller scale wind farms) rose from 10.2% to 13.1% of all generation, a rise of 29%. Of this total, solar PV increased from 1.1% to 2.5%, more than doubling in the year.

‘Other’, a category dominated by the biomass plants at Drax, was up from 2.4% of all generation in 2014 to 3.7% in 2015.

Nuclear had a good year in 2014, reaching 21.5% of all production, up from the figure of 19.1% in 2014 when several power stations had unexpected maintenance outages.

Pumped storage, imports and hydro produced about 10% of all electricity both in 2014 and in 2015.

In summary, renewables (wind, solar, hydro and ‘other’) produced 18.2% of all UK electricity in 2015, up from 13.9%. This represents a rise of 31% in the share of total generation.

Source: Elexon and National Grid’s Demand Data forecasts for embedded wind and solar. Please ask if you'd like data on other aspects of the 2015 figures.

'Peak Stuff': a response to George Monbiot

One strand of environmentalism is always eager to see economic growth as inherently unsustainable. It says that all increases in income result in a greater use of the earth’s resources. That line of thinking was clearly represented in George Monbiot’s article yesterday. ‘Production appears to be indistinguishable from destruction’, he wrote gloomily.

He quoted me agreeing with him. Actually, I didn’t. What I said to George was that as countries take off into economic growth, they use vastly more steel, concrete and aluminium to build the infrastructure to house their people and give them transport and other basics of life. Once that period of explosive expansion of resource use is over, a country’s economic growth stops needing ever increasing tonnes of materials. Nations such as Japan and the UK, for example, have seen major cuts in the minerals and fuels that they need. Broadly speaking, for example, once an economy reaches a total level of about 10 tonnes of steel per person it has provided for society’s needs. At the other extreme, even food consumption is tending to fall in the richer economies. (Yes, British people are eating much less than they did).

It’s not just me saying this. UK government data shows a reduction in material use from about 12 tonnes a year per person to around 9 tonnes from 2000 to 2013.

The paper which George uses to buttress his antagonism to economic growth uses a simple method to show that although rich countries are indeed using fewer resources this fall is more than made up by increases in the weight of materials embodied in imports.

There is a single overwhelming reason for this: Chinese urbanisation. In 2008, the last year of the research, China was in headlong growth. Ten of millions of people were moving to cities every year. 10 billion tonnes, or about 15% of the world’s total use of physical materials – fuels, minerals, foods – was being used to build the houses and roads China needed to provide for its people. We tend not to recognise the extraordinary pace of the development China has undergone. Even now, the country is using about 25 times as much cement as America. In 2014 it produced half of the world’s entire production of steel.

In the latter part of the last decade, Chinese exports represented about 50% of its entire economy. The researchers on whom George relies make the crucial assumption that 50% of the steel and concrete used to create new Chinese infrastructure in 2008 should therefore be allocated to exports. All the goods imported into the UK from China bear their share of this embodied allocation.

The argument between George and me therefore comes down to this question. How much of the Chinese investment in steel and concrete, the overwhelmingly dominant materials used in urban growth, should properly be assigned to exports? The inner accountant in me says it is absurd that Chinese exports of consumer electronics in any one year should bear the environmental costs of the growth of cities in that country. China was building up an infrastructure that will last for many decades.

The right calculation to make is to spread the tonnage of construction materials over their period of use, perhaps sixty or more years. But in George’s world the materials used in the building of a flat for a manager at a Foxconn electronics factory should be loaded into the environmental cost of the computer in the year of its construction. In my opinion, this assumption is simply wrong.

Developed economies have almost certainly passed the point of peak use of materials. Even Chinese growth is also slowing. Its steel production grew 3 fold between 2000 and 2014 but it has now peaked and the industry has huge excess capacity. That is why the world steel price has collapsed, putting UK plants at risk.

The world has huge environmental problems. But economic growth in developed economies does not exacerbate them. It makes them easier to solve. 

Do less developed countries need fossil fuels to grow? The case of India

Commentators eager to arrest the move towards renewable energy are facing increasing difficulties finding arguments for the continued use of fossil fuel. The latest attempt to justify the use of carbon fuels is that 'otherwise people in poorer countries will never get electricity'. Coal is vital, they say, for the alleviation of the conditions of life in less developed countries. I have just finished a draft of a book chapter on the growth of solar around the world. The very unpolished extract below is largely based on an exceptional piece of work by KPMG India on the likely evolution of the costs of solar versus coal in that country. I think their conclusion - essentially that solar is already competitive with coal even after including distribution charges and grid integration costs, and will become much cheaper in future - is an effective response to the 'coal alleviates poverty' meme. 

*****

'Governments are increasingly using open auctions as the means by which they attract developers into building solar farms. Each participant offers an electricity price, expressed in cents per kilowatt hour, for power from individual locations. The past year (2015) has seen a sharp decline in the prices bid into these auctions everywhere around the world.

India is a good example as it begins its drive to get electricity to all its huge population. In 2014 developers offered to build solar farms for payments of an average of about 7 rupees per kilowatt hour. (That around 10 US cents, or 7 pence at current exchange rates). Three state auctions in the third quarter of 2015 in Madhya Pradesh, Telangana and Punjab saw offers of just over 5 rupees (5 pence). The Indian press openly speculated that these offers were too low to be profitable for their developers. But in November 2015 another round of tenders in Andhra Pradesh in south east India resulted in a low bid of 4.63 rupees (about 4.6 pence per kilowatt hour). This was for sites totalling 500 MW and was won by the US company SunEdison, the world’s largest renewable energy developer.  It currently claims to be installing 4 gigawatts of capacity a year around the world. In the face of this evidence of expertise from the bidder, this time the scepticism about the viability of the price was more muted.

Just before the Andhra Pradesh auction was completed, accountants India KPMG released a detailed report on the state of PV in their country. ‘We see solar power becoming a mainstay of our energy landscape in the next decade’, they wrote. As we all tend to be, they were still cautious about future solar PV bids. KPMG’S best guess for auction prices was 4.20 rupees per kilowatt hour (about 4.2 pence) by 2020, only about 10% more than the SunEdison November 2015 bid. 

What matters most in India is how well these numbers compare to electricity from inexpensive locally-mined coal. KPMG says that the current cost of power from this source is about 4.46 rupees per kilowatt hour, about 4% below the November 2015 record low bid in Andhya Pradesh. But in a power station using some imported coal, the accountants calculate, the cost would be higher than solar. In India, PV is now directly competitive with some coal power stations and by 2020 it will be 10% cheaper, KPMG conclude. They predict that the raw cost of solar electricity from big solar farms will be 3.5 to 3.7 rupees by 2025. (Around 3.6 pence). If history is any guide, they are being pessimistic.

All figures are per kilowatt hour.

2014 bids 7 rps

3rd q 2015

5.09 rps Punjab

5.17 rps Telagana

5.05 rps Madhya Pradesh

November 2015

Andhra Pradesh 4.63

For comparison

Electricity from Local coal 4.46 raps

Electricity at coastal coal plants using imported coal 4.76 raps

These numbers are not complete. We also need to include the cost of getting the electricity to the final consumer. In many countries this penalises solar but not so in India, says KPMG. Many of the coal plants are hundreds of kilometres away from the centres of electricity demand so the relative attractiveness of solar is improved when electricity distribution costs (‘network charges’) are fully included. In fact when the accountants have fully loaded the costs PV ends up as very slightly cheaper than using lndian-mined coal. And, of course, this advantage will grow as solar gets cheaper.

You are entitled to respond by saying that PV only produces electricity, even in the sunniest parts of India for an average of 12 hours a day. When people want light to read, cook or study, it isn’t available. (Solving this problem is what much of the rest of the book is about). But what we may not have known is that almost 20% of all Indian electricity demand at the moment is used for pumping water for irrigation. This can easily be carried out solely in the daytime.

At the moment PV only provides a tiny fraction of Indian electricity. But it will grow rapidly with strong backing from the Modi government and from the favourable underlying economics. As in other countries around the world, it will then start to become increasingly costly to run the grid to cope with the unpredictability and diurnal variability of solar power. More PV means more batteries to help stabilise the voltage of the grid, for example, in the event of unexpectedly high or low sunshine.

And, very sensibly, KPMG also includes a cost for the financial impact of coal fired power plants working fewer and fewer hours as solar soars. This is a real financial burden because running the fixed costs of these power stations will be spread across a smaller electricity output.

By 2025, what are the impacts of these charges, usually known as ‘grid integration’ costs, once PV has become a really significant portion of all electricity production? KPMG thinks the figure for India will be about 1.2 rupees (1.2 pence) per kilowatt hour. This is roughly in line with estimates for other countries. Even after including this figure, PV is still cheaper than coal in 2025 and then provides 12.5% of all Indian electricity from about 166 GW of installed capacity.

Most of the KPMG work is focused on the finances of building ground-mounted solar farms for large-scale production. But it also looks at two specific applications: driving agricultural pumping operations (a task often performed by highly polluting diesel generating sets at the moment) and, second, what the accountants call the ‘Solar House’. What do they mean by this?

The concept of the ‘Solar House’ refers to the condition when the entire power needs of a household can be met by rooftop and on-site solar panels, which combined with energy storage, can potentially make the household completely independent of the grid. This can happen when technology will bring the cost of solar power and storage systems to below the cost of power delivered by the grid. This event has the potential to change the dynamics of the power utility-customer relationship(s) forever.

They go on to get really excited about Solar Houses. When have you ever seen accountants write like this before?

The achievement of the ‘Solar House’ is expected to be a landmark in mankind’s efforts to access energy. The ‘Solar House’ will help India leapfrog technologies in the area of supplying uninterrupted 24x7 energy to its citizens. When the conditions for the ‘Solar House’ are achieved, (it) can override all barriers.

KPMG expects 20% of Indian houses to have PV by 2024/25. The authors make the point that once residential batteries have come down in price sufficiently, householders have a clear and unambiguous reason to switch to solar. It will be cheaper than being connected to what may be an unreliable and possibly expensive grid.

And, as we may be seeing in other countries already, once households drift away from being connected, or even if they simply use far less electricity because of the PV on their roofs, the costs of the distribution network need to be spread ever more thickly on those that remain. That further increases the incentive on those people remaining on the grid to switch to PV.'

(From The Switch, a book about the global transition to solar power, to be published in June 2016 by Profile Books). 

Never let the facts get in the way of a good hypothesis

(By Mark Lynas and Chris Goodall. Published on the Guardian website on 12th November 2015)

Our green obsession with windmills is bringing Britain's electricity system to its knees, if Tory press commentators writing about last week's short-term grid problems are to be believed. In the Times, Matt Ridley demanded an electricity policy "rethink", blaming the "emergency" squarely on the fact that "the wind was not blowing on a mild autumn day".

Over at the Telegraph, in a column headlined 'The obsession with global warming will put the lights out all over Britain', Charles Moore observed that "there was almost no wind" during the day in question, noting without irony in his climate denialist piece that it was nonetheless "very warm for the time of year".

Not to be outdone, Peter Hitchens thundered in the Mail on Sunday that the "pseudo-scientific dogma" of climate science is turning the UK into the Soviet Union, complete with accompanying (intellectual) gulags, and that because of "warmists armed with windmills" (to quote from the headline) "we came within inches of major power blackouts".

It all sounds very worrying, and no doubt the rising tide of elite Tory opposition to Britain's decarbonisation policies will be noted in both Downing Street and by ministers at DECC. There's only one problem: it isn't true. The reality is that last Wednesday's brief 'notification of inadequate system margin' (NISM) had nothing to do with wind power, as any of the writers quoted above could have discovered had they taken the trouble to call National Grid and ask.

We did so, and with the Grid's help pieced together the following sequence of events. During Wednesday morning last week, the National Grid experienced what it told us were "multiple failures" of coal and gas-fired power stations. Though the Grid won't reveal which plants were affected, other sources report that there were at least three major power plant failures, including the Fiddlers Ferry coal plant in Cheshire.

At 1.30 in the afternoon, the National Grid, anticipating a shortfall for ater that day, issued its NISM calling for additional generation of 500MW to be offered to cover peak demand between 4.30 and 6.30pm that evening. (500MW is about 1% of peak UK demand for the time of year, so hardly a huge amount.) Don't panic said the Grid, the NISM "is part of our standard toolkit for balancing supply and demand and is not an indication there is an immediate risk of disruption to supply or blackouts".

What happened next was equally non-dramatic. The electricity market responded to the request and more plant was brought online. 40MW of demand was also offloaded, thanks to a rudimentary smart grid system where big electricity users are paid to switch off at critical periods.

Ridley and other commentators breathlessly reported that prices reached a whopping "£2,500 a megawatt-hour - 40 times the normal price". This is true, but the £2,500 offered was to a single generator, and only for 70 minutes of production of 147MW.

Satisfied that sufficient margin had been restored, National Grid cancelled its NISM at 5.45pm, stating unambiguously once again that the "issuing of a NISM does not mean we were at risk of blackouts".

Note that none of this is about wind. As a spokesperson told us, "our weather forecasts are very accurate". Grid managers therefore had plenty of warning that Wednesday was likely to see very little wind generation, and planned accordingly. Yes, wind is intermittent - but that does not mean it is unpredictable.

This saga showed not that wind is driving the UK towards blackouts, but that reliance on a small number of large generators - coal, gas or nuclear - carries the risk of inadquate margin if more than one of these big plants fails at the same time. Wind, being composed of lots of smaller generators, cannot by definition all fail unexpectedly together.

This is pretty much the opposite of the conclusion reached by the Tory commentariat, which hates wind turbines spoiling views in the Shires and takes any opportunity to criticise renewables and oppose climate change action. Let's at least hope that the Government listens to National Grid's version of the story, not the misinformation peddled in the Tory press.

An unnoted reversal by the Committee on Climate Change of the costs of PV and nuclear

Last week the Committee on Climate Change brought out new figures for its estimates of the 2020 and 2030 costs of nuclear and solar energy.  The last time it produced numbers was in August 2011, just over four years ago. Given the huge differences between today and 2011, we shouldn’t be surprised that the CCC didn’t remind us of its earlier estimates. Or actually even mention the 2011 report.  But because it has almost doubled its estimates for nuclear costs and more than halved them for PV, the changes need widespread discussion. 

Estimates of costs per kilowatt hour for large scale ground-mounted PV

Source: CCC 2011 and 2015

For 2020, the CCC has reduced its cost forecasts by almost half ( in the case of the 'low' estimates) and almost two thirds (the 'high' estimates). For PV in 2030, the low estimate has been cut by about 30% but the high estimate has gone by two thirds . The reason may be that its 'high' 2011 figure for 2040 is about twice the underlying cost of PV today.

Like almost everybody (including me) the CCC got its 2011 estimates for PV cost declines hopelessly, embarrassingly, laughably, wrong. There’s no shame in this and little point in trying to disguise it. Actually, it would be better to tell everybody and get a discussion going on why the 2011 figures turned out to so inaccurate.

Just in case nobody else wants to do this, I’ll try to start that discussion. The 2011 figures were derived from a really detailed piece of work from Mott MacDonald, the engineering consultancy. This research postulated a learning rate for PV of 22%. This means that every time the accumulated total global installations of PV double, the cost falls by 22%. Mott Macdonald made its forecasts using this number but assumed that there would only be 1.46 doublings by 2020 and 3.79 by 2040.

Those rates of growth probably looked ambitious at the time the work was done. As it turns out, the world has already seen about two and a half times more PV on the ground than Mott MacDonald forecast for 2020. This has driven costs down through learning effects. As importantly, the rates of interest charged by financiers are lower than projected. In capital intensive projects such as PV, this has a striking effect.

Nuclear

In 2011, the CCC projected nuclear costs of between 4.4 and 7.7 pence per kilowatt hour by 2020. These numbers were projected to fall to between 4.0 and 7.6 pence by 2030.

Unlike PV, nuclear estimates have sharply risen. Last week the CCC suggested figures for 2025, half way between 2020 and 2030. The low estimate was 7.8 pence, almost double the midpoint of the previous 2020/2030 figures. The high estimate is 10.2 pence, about 30% higher than in 2011 and far more than PV today.

Obvious conclusions

Expectations of PV costs have fallen precipitously since 2011. Nuclear’s have spiked. Nuclear is now - according to the CCC – more expensive than solar. I am sad that the CCC, a body with intellectual integrity, didn’t point this out.

I’ll also say that if cost trends continue, the CCC’s new figures for solar costs in 2020 and, particularly, in 2030 are far too conservative. There is overwhelming evidence that the learning curve in PV is continuing. A fall from 8.4p to 6.4p suggests little more than one doubling in accumulated total installations between 2020 and 2030. I’d be amazed if there were less than five accumulated doublings in this period, suggesting a resulting cost figure of less than half the CCC’s 2040 number. 

DECC breaks National Statistics rules in order to hide its errors measuring PV

(I wrote to the UK Statistics Authority about the problems identified in this note. The Authority replied to me today (20.11.2015), saying it had asked DECC to use the correction mark where it had made changes in its statistics and also to make it possible for researchers to check how numbers had changed in running data sources such as the Renewable Energy Planning Database. DECC admitted its failure to properly identify its statistical changes in PV penetration because of an 'oversight'). 

The UK solar industry has been crushed and widespread bankruptcies have resulted. Part of the reason for the slaughter of PV seems to have been a perception in the Treasury that DECC had lost the ability to measure retrospectively the amount of photovoltaic capacity that has been installed, let alone control the future growth. For example, between June and September 2015, DECC increased its estimate of the UK’s installed PV capacity as of March 2015 by 1.2 GW, or over 15%. The yearly subsidy implication of this single error is almost £100m. So the Treasury was probably right to be concerned.

I looked today at DECC’s main publications that cover solar. There are at least four.[1] They show a consistent pattern of reacting to the problems measuring solar growth by blocking public data and refusing to tell researchers when substantial statistical revisions have been made. DECC has systematically broken many of the rules governing the release of government statistics over the last six months in order to disguise its failure to keep up with the growth of PV.

DECC has erred in four key respects

1)      Its publications have systematically underestimated solar growth over the last year (in retrospect, not just in prospect)

2)      DECC’s various publications today continue to publish very different figures about the amount of solar PV in the UK. Given that these estimates come from the same central statistical team, this is almost impossible to comprehend.

3)      The department has reacted to its failures by amending its previous estimates across its main databases. However it has broken Office for National Statistics rules by failing to note that it has made these retrospective revisions. Someone looking at current research will not be able to see that the numbers for previous months and years have been changed. 

4)      It has simply blocked access to previous published editions of two key data sources. Anyone seeking to look at previous editions of these databases is automatically redirected to the most recent report and cannot see the original data. Once again, this is a serious offence against National Statistics rules.

All these changes appear to have taken place within the last six months. At the beginning of 2015, DECC was aware that the reduction in subsidies for big solar farms in April 2015 would produce a rush to complete projects. It failed to realise just how much capacity would be installed. Despite spending significant sums on private sector suppliers of information, it had little idea of how much new capacity would actually be connected. Its database of planning permissions was incomplete. So it has acted to reduce the access of outsiders to its key data.

I’ll expand upon these points.

1, Systematic understatement of growth. In June 2014, Energy Trends estimated that the UK had 6.8 GW of installed solar (large fields and small roofs) as at the end of March 2015 when subsidies were severely cut back for new installations. In September 2015, this figure was raised to 8.0 GW. We can all understand how this mistake was made. DECC doesn’t give permission for farms to be built, nor are developers obliged tell it of completions so it is reliant on collecting data from 3rd parties. (By the way, I think the UK is the only large country in Europe not to have a comprehensive central database of solar installations). Ofgem - which handles the admission to the ROC subsidy scheme - is laggardly and uncommunicative about the applications it has received for subsidies. Although the dramatic March 2015 failure follows multiple upward revisions to solar PV estimates over the last few years for this reason, DECC’s error is excusable; it simply doesn’t have access to the stream of information necessary to monitor whether an individual farm is completed or not.

2, The variation in the simultaneous estimates of different government statistical reports is much less easy to understand. Energy Trends now says 8.3 GW for June 2015. Solar Photovoltaics Deployment, another Department publication, says 7.8 GW for the same date, a difference of 0.5 GW, or a difference in cost of up to £40m a year. The Renewable Energy Planning Database gives a figure of about 5 GW. This number is so wrong that I believe I must have misunderstood it.

3, I can readily understand the first two problems but I am very shocked by the latter two. Perhaps you will see these latter two statistical failures as largely technical but I think they seriously erode good government.

Point 3 is this: when the UK government publishes a statistic that it subsequently amends, it commits to publicising that revision by marking the new number with an (r) mark. This says that the figure is different from what was previously published. In the case of the solar estimates, DECC continued to tag its revisions properly until the numbers of Quarter 1 2014. These particular numbers were revised upwards for four successive quarters from September 2014 to June 2015 and each revision is marked. But none of the much more important revisions to quarterly estimates since the figures for Quarter 1 2014 have been tagged.  A user will not know the numbers have been changed by DECC.

For example, the shift upwards from 6.8 GW to 8.0 GW for March 2015 figures is untagged. And neither are any of the revisions to PV data over the past year. Without serious research, no-one can know how serious the errors in retrospective estimates have been.

This is what DECC says about correcting statistics.

Data that has been revised will be indicated by an ‘r’; the ‘r’ marker will be used whenever data has been revised from that published, either in printed form or on the Internet.

When it comes to PV, this has simply stopped happening, across all the many databases. I believe DECC has systematically broken the rules set by the independent Office for National Statistics.

4, Perhaps we can even comprehend point 3. No civil service statistician will want to flag errors of the size and expense of March 2015. It will have been easy to forget to make it clear to readers that the numbers have been changed. There is no such excuse for point 4, the removal of previous data series from the internet.

Until recently, if I visited the DECC site I could see the monthly evolution of the series it publishes called Solar Deployment Trends. I could compare the estimates of July 2015 and August 2015 for the amounts of PV in, for example, April 2015.

No more. Although these databases are still written down on the long list of DECC’s published statistics, the Internet links have been killed. Anyone clicking on the item is now redirected to the most recent estimates. The file has gone from the web. The government is now making it impossible for researchers and journalists to see what it said were the figures for installed PV just a month ago. Simply put, this is a reversal of all recent government policies on open data.

I know why DECC has done this. The figures in this particular database were often highly – and obviously – inaccurate. (For example, I wrote to DECC in April asking for an explanation of a 1 GW apparent inconsistency. Almost a month later I got an explanation which avoided the issue).

Similarly, the government no longer allows access to past editions of the Renewable Energy Planning Database, possibly the most flawed government data series I have ever seen, despite being assembled at considerable expense by an outside company.

As I wrote earlier, perhaps my concerns are inconsequential. What does it matter if the government is cagey about its past errors of estimation and removes the most obviously flawed reports?

I think the effect on energy policy, and on the process of government more widely, is potentially highly detrimental. The last year or so has shown that solar PV can be installed in huge volume in the UK at a speed that is almost uncontrollably fast. Massive forecasting errors were made – by almost everybody.[2] (My own flawed estimate for www.solarforecast.co.uk was that at end March 2015 UK solar capacity was less than 7.3 GW, a mistake of about 1.0 GW).

During a trade show in Beijing earlier this month, China is reported to have an announced a doubling of its targets for PV in 2020. The country now aims for 150 GW of solar within five years, up from a previous target of 75 GW. The lesson of last year is that the UK could easily have achieved a similar ambition, pro-rata to population. Instead, we try to hide the evidence of how unexpectedly successful we were, largely because the measurement errors are embarrassing and destroyed DECC’s credibility in the eyes of the rest of government. Much of the rest of the world has pretty much decided that solar PV will be the basis of national energy systems just as the UK throws tens of thousands of skilled solar installers into unemployment.

[1] Digest of UK Energy Statistics, Energy Trends, Solar Photovoltaics Deployment and Renewable Energy Planning Database.

[2] Some solar experts, such as Ray Noble, were much more accurate.

The Switch

This is the talk I give about the topics in my  book The Switch, to be published by Profile Books in late spring 2016. If I finish it on time.

In this presentation, I look at the probable future cost trends in solar  PV, showing that this technology is likely to be the cheapest way of delivering energy almost everywhere within ten years. The problem is obvious: how do we supply energy when the sun isn't shining? I briefly look at the many alternative ways of supplementing and complementing PV around the world, hoping to show that storage and new technologies, such as Power2Gas, are capable of providing power when PV cannot. 

VW and fossil fuel divestment

By Mike Berners-Lee and Chris Goodall

VWs diesel cars emit a much larger amount of nitrogen oxides (NOx) and fine particulates than regulators thought. Greenpeace estimates that an extra 60,000 to 24,000 tonnes of NOx have been emitted each year from 11m vehicles sold around the world. NOx and fine particulates have severe impacts on human health and are responsible for many early deaths each year.

We can put a crude financial figure on the impact of the loss of life. Roughly speaking, we think that VW’s actions resulted in costs of between £21 and £90bn for NOx pollution alone. The larger figure is greater than the stock market value of the entire company. VW would therefore be worthless if called upon to pay the full price for its actions.

Our calculation is based on three separate numbers. All are approximate and can be argued over. But we thought it might be helpful to do the arithmetic nevertheless. These numbers only estimate the social cost of early deaths, not the full burden of ill health, from NOx pollution.

1.       The World Health Organisation estimates that each 1000 tonnes of NOx emitted to the atmosphere costs about 70 lives. The total number of lives lost annually from the additional NOx from VW cars is thus estimated to be between 4,000 and 17,000. (These are numbers provided by Greenpeace).

2.       A UK academic study suggests that those dying early as a result of particulate pollution lose an average of over 11 years of life. If NOx early deaths are comparable this would mean that up to 200,000 total years of life are being lost annually because of the extra NOx pollution VW caused.[1]

3.       NICE, the UK government body responsible for deciding whether life-prolonging drugs are worth the cost, suggests that a year of extra life can be valued at up to £30,000. Depending on circumstances, NICE will agree that drugs costing at least £20,000, and sometimes as much as £30,000, can be bought by the NHS. Other countries, such as the US, use higher numbers for the value of a year of life.[2]

Simple multiplication of these three numbers gives a figure of between £1.4bn and £6.0bn a year. The typical VW car will be used for about 15 years, implying that the total cost to world health from VW’s higher-than-stated pollution from its 11m cars is between £21bn and £90bn. Before the revelations, VW was valued at about £50bn by the stock market.

Diesel cars have been favoured by governments because of their lower CO2 emissions than their petrol equivalents. Diesel’s advantage over petrol saves about 0.5 tonnes of CO2 per year. When economists put an environmental cost on a tonne of CO2, they often use a figure of about £50 a tonne of CO2. Diesel’s better carbon emissions performance therefore has a value of around £25 a year per car. For the 11m affected diesel cars the CO2 saving over the 15 year life of the vehicle will be worth about £4.1bn, a small fraction of the extra cost imposed by the worse NOx pollution.

To us, this seems an interesting illustration of how current pollution costs may bring about faster action on fossil fuels than the longer-run but equally serious threat from climate change.

Unless NOx performance of diesel cars can be substantially improved, petrol cars are better, even taking into account the increased CO2 emissions. Electric cars are, of course, very much better both from CO2 and NOx perspectives. Proper accounting for the costs of pollution will take an inevitable and predictable toll on companies reliant on fossil fuels, directly or indirectly.

A pension fund manager recently said to one of us that she is resisting calls to divest shareholdings in businesses like VW linked to the fossil fuel economy. Her justification was that the risk of an unexpected deterioration in value was no different to other reputational or brand risks faced by companies in her portfolios. The potential cost of fossil fuel involvement is equivalent, she said, to the possibility of damage to a company’s value from its exposure, for example, to child labour accusations or to evidence of regulatory corruption.

We disagree; the ‘carbon risk’ is a systematic, visible and large threat to major companies around the world. Only today, National Grid is saying as clearly as it can that the future of electricity supply is based around solar power. No pension fund trustee can legitimately ignore the increasingly obvious likelihood of a rapid destruction of shareholder value as the world speeds up the switch away from coal, oil and even gas. The death of the carbon economy is not a Black Swan event. It is an entirely predictable and inevitable development.

Mike Berners-Lee is an authority on carbon footprinting and is a director of Small World Consulting. 

[1] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/304641/COMEAP_mortality_effects_of_long_term_exposure.pdf. Paragraph 18 of the Excutive Summary

[2] http://www.bbc.com/news/health-28983924. This is a more detailed assessment than we can find on the NICE website.

Correct figures for the current cost of renewables versus Hinkley

George Osborne went to China and offered loan guarantees for the building of Hinkley Point. Details are unclear but it looks as though Chinese power companies will now not bear the full cost of overruns. As is common, risk has been socialised and profit privatised.

DECC and the Treasury want us to believe that Hinkley remains a good deal for the British taxpayer. They attempted successfully to get the BBC to republish a chart showing the relative costs of various types of low carbon electricity sources. The numbers DECC used were wrong, both for nuclear and for renewables. DECC should not have issued this chart and the BBC should not have published it without checking.

Here is a table showing the real costs today paid for new renewables projects under the Contracts for Difference scheme for renewables. (The nuclear price guarantees are the essentially the same as the CfD scheme).

Prices paid per megawatt hour

 *Estimated by me by measuring the position on the bar chart. No figures provided.

**Solar PV for delivery 2016/17.

*** Hydo price under ROC scheme in England and Wales. Scotland is less.

Nowhere on the chart does it point out that Nuclear will get the subsidy for 35 years while all other electricity sources get CfDs for only 15 years.

You will notice that instead of Nuclear being relatively cheap, as the government pretends, it is actually more expensive than Onshore Wind, Solar PV and Hydro. And that is even before the huge difference in subsidy periods is factored in. Of vital importance,  it also before the continuing expected decrease in Solar PV, Onshore and Offshore Wind costs. At current rates of progress, Solar PV will be at grid parity in the UK before Hinkley ever sends its first electron out. In other words, Solar PV will almost certainly be less than half the cost of Hinkley.

Why Hinkley Point is a bad idea, even if you believe in nuclear

(This was a research note prepared as part of the preparation for an article written by George Monbiot, Mark Lynas and me and published on the Guardian web site. Full article here. )

The revival of the nuclear industry in Europe started in the frozen winter months of 2005 on an island off the Finnish coast. Alongside two existing nuclear plants, the ground was prepared for a new power station to be built to the latest design. Completion was scheduled for about four years later in the first half of 2009,

Construction went wrong from the start. The numbers of workers on the site ballooned, peaking at almost five thousand people from all around northern Europe. As time passed, the completion date was pushed back. In early 2009, the plant was supposed to start in 2012. By 2010, the date was late 2013. The press releases carrying details of delays came out with predictable regularity. Today, the latest estimate is that the power station will begin generating electricity at the end of 2018, almost fourteen years from the first shovels in the ground. Ten years after the start, a project that was meant to take about fifty months is still forty months away from completion.

The owner is suing the contractor for nearly €3bn and the contractor counter-claims for even more. Costs are probably quadruple what was expected when construction started. This new nuclear power station has nearly bankrupted Areva, the French nuclear construction company running the site.

There’s one other nuclear construction project going on in Europe and it uses exactly the same design as in Finland. This time it’s on the Normandy coast and is under the direct control of EdF, the French company behind the proposed nuclear plant at Hinkley Point in Somerset. Work was begun at the Normandy power station in late 2007 with completion promised at the start of 2012. Press releases with wording eerily similar to the Finnish texts come out almost as frequently. Each time EdF claims rapid progress on the site while pushing back the finish date a few more months. Full power from the plant is now expected in 2019, twelve years after the start of the project. Costs are over three times what was predicted in 2007.

EdF is the only company in Europe that still believes that the design it is using in Normandy -  and prospectively at Hinkley Point - can provide electricity at a reasonable price. Other major international businesses have quietly slunk away from nuclear. Siemens withdrew from the Finnish project as soon as it could, the huge Italian utility ENEL withdrew from the Normandy plant in 2012 (as well as from a commitment to the other five reactors it had intended to build in partnership with EdF) and British Gas owner Centrica wisely withdrew from the Hinkley Point consortium in early 2013.

EdF soldiers on. It now says that Hinkley will start sometime ‘after 2023’. Given that the Finnish and Normandy plants will take at least twelve and fourteen years respectively the lack of specificity is understandable.

Why has this new design of nuclear power station proved so difficult to build? Tony Roulstone, who runs the Master’s programme in Nuclear Engineering at Cambridge University, gave his view in a public lecture late last year. This type of new power station was ‘unconstructable’, he said, adding a comment that the Hinkley Point design was like ‘building a cathedral within a cathedral’. Huge numbers of inexperienced workers were crowded into a limited area, each unsure of exactly what they were doing or how it fitted into the master plan. The power station is over-complex and construction is unmanageable, he concluded.

Just for interest, we looked at exactly how long a cathedral might take to construct. Salisbury Cathedral, one of the biggest, took forty six years to complete in the thirteenth century. Hinkley Point probably isn’t going to take as long as this, but the difference is less than you might imagine.

Despite the evidence from other countries and the views of an increasing number of experts like Tony Roulstone, the government ploughs on with its unquestioning support for the EdF plan. And unfortunately, the main competing design also vying for permission to construct nuclear plants in the UK is also experiencing huge construction problems in China and the US. Electricity consumers in the state of Georgia have just had another 6% added to their bills to pay for the delays in the completion of the power station at Vogtle. As in Finland, the contractors and the owner are scrapping over who is to blame for the overruns.

All this might be acceptable if this generation of new nuclear plants was eventually going to reduce the costs of the transition to a fossil-free future. The chances of this look remote in the extreme. Hinkley will be paid at least double the current wholesale price of electricity if it is ever completed. This means it will receive a subsidy from UK electricity bill payers of about £1.1bn a year, more than the total cost of the Feed-In Tariffs for PV and wind that the government recently curtailed because of a shortage of money. This subsidy will continue for thirty five years, far longer than the support for any other technology. The UK is saddling itself with a billion pound burden each year for more than a generation. If the project takes until 2025 to finish, a baby borne today will be forty five years old when the subsidy ceases.

Against our pessimism the government argues that Hinkley Point is needed because of its ability to deliver large amounts of power reliably every hour of the day. Other technologies such as PV and wind cannot offer this security. Today, that conclusion is correct. But with sufficient R&D and government encouragement, by the time Hinkley is ready the problems of storage of energy will be solved.

Other countries – less bewitched by the allure of nuclear – are making fast progress on the road to energy systems that can cope well with daily, and seasonal, swings in power production from renewables. And in many parts of the world, solar and wind are now costing little more than half what the UK government is promising EdF for its risky Somerset plan. Solar, in particular, is now priced at less than a quarter of five years ago and the cost reductions are continuing. Construction is 50 times faster; a large solar farm takes 12 weeks to build compared to the 12 years for the Normandy reactor.

UK Government R&D support for all alternative energy technologies is probably running at about £250m a year, a quarter of what will be spent on eventually subsidising Hinkley Point. The rational choice today is for the UK to back away from this generation of nuclear power and invest properly both in next generation of atomic energy and in renewable energy technologies that can shift the UK rapidly to a green future.