Can we afford it?
The horrendous cost of renewable energy is highlighted in a report for Civitas by Dr John Constable of the Renewable Energy Foundation who claims that, together with VAT, it “would bring the annual additional cost to consumers to upwards of £16 billion a year in 2020, over 1% of current GDP. One third of this cost would hit households directly through their electricity bills, regardless of income, making it an intensely regressive measure. The remainder of the cost would be passed through from industrial and commercial customers and eventually be met by households from increases in the cost of living. The total impact would be in the order of £600 per household per year, assuming 26 million households.”
But there are also other problems. He points out that the renewables are not only capital intensive but inefficient with low load factors – no more than about 10% for solar and around 25% for wind. There are additional operational costs. “It is simply facile to say, as the industry often does, that ‘the wind is free’. Coal and gas are free in the ground; but we have to extract, convert, and deliver the usable energy to a consumer, all of which activities have costs. Exactly the same is true of wind power, and for renewables the extraction, conversion, and delivery costs remain extremely high compared to fossil fuels”.
“The crude subsidy levels confirm this point. Even onshore wind, a relatively cheap renewable, needs a near 100% income top-up, and if systems costs, extra grid and balancing costs (a hidden subsidy since these costs are socialized over the entire system), are taken into account the cost to the consumer of onshore wind is three times that of fossil fuels. Offshore wind is still more expensive, perhaps four or five times as expensive as conventional energy”.
From speeches by the Energy Minister and the Prime Minister, Constable suggests that their purpose is to facilitate a move towards a ‘green economy’, in effect a return to towards life before the industrial revolution. He then observes that, as renewable energies are not competitive with fossil fuels, nor as economically productive, the consequences could be severe. “Consequently, shifting to current renewables for the bulk of our energy would result in a reversal of the long-run economic trend since the industrial revolution. More people would be working for lower wages in the energy sector, energy costs would rise, the economy would stagnate, and there would be a significant decline in the standard of living. The population would begin to step back towards the condition of ‘laborious poverty’ noted by Jevons of the pre-coal as characteristic era.”
This could be too pessimistic a view. The knowledge gained since the days of the Industrial Revolution would not be lost; advances in medicine, science and technology, would still be available and could continue, as well as advances in the production and application of low energy technologies. But the point at issue is whether on not society will, or needs to continue along the path of continuous economic growth. When is enough enough?
How Much is Enough?
This question is examined in a book by the father and son economists, Lord and Professor Skidelsky, who ask how can Western societies reverse the onslaught of insatiability and redirect purpose towards a good life. As the cover blurb puts it – “How much money does any of us really need? Anger towards ‘greedy’ bankers and their ‘obscene’ bonuses has recently given way to a deeper dissatisfaction with an economic system geared overwhelmingly to the accumulation of greater and greater wealth with huge income disparities and an ever-growing gap between the richest and the rest of us.“
This is a particular problem for the UK; where since the late 1970’s the income of the richest fifth has increased four times as fast as that of the poorest fifth. This raises the question why do people who ‘have everything’ want more. The authors argue that the main explanation of insatiability is a relativity of wants “At no level of material wealth will I feel satisfied with what I have, because some one will always have more than I do. As I spend more on prestige goods, I gain status but cause others to lose it. As they spend more to regain status they reduce my own. There is no reason why the escalation of income to maintain and acquire status should ever end”.
This is, as the title shows, is the main topic of the book, but the discussion
takes the authors away from their economic background into a more
controversial philosophical discussion of their personal views.
“Experience has taught us that material wants know no natural bounds , that
they will expand without end unless we consciously restrain them. Capitalism
rests precisely on this endless expansion of wants … it has taken away the
chief benefit of wealth: the conciousness of having enough. (pg 69). Referring
to the ancient Greeks “Aristotle knew of insatiability only as a personal
vice: he had no inkling of the collective, politically orchestrated
insatiability that we call growth. (pg 77). And from ancient China the first
century historian Sima Qian – The desire for wealth does not need to be
taught; it is an integral part of all human nature… Thus men apply all their
knowledge and used all their abilities simply in accumulating more. They never
have any strength left over to consider the question of giving some of it
away. (pg 85) But why? – the Skildeski’s argue that happiness is affected by
relative not absolute wealth …. the happiness of the rich is an expression of
their being at the top of the pile, the unhappiness of the poor their
frustration at being at the bottom. (pg 104).
On global warming they take a near-sceptical view arguing that we should value the welfare of the present generations above those of the future who are likely to be richer than ourselves and more able to bear the costs of global warming – “despite the serious threats to the global economy posed by climate change, little should be done to reduce carbon emissions in the near future; that controls on carbon should be put into effect in an increasing but gradual manner, starting several decades from now” (pg 130) – Nigel Lawson is valued above Lord Stern. They then propose that the environmental case for growth reduction cannot be explained as a pragmatic response to known facts. It betrays a passion, a will to believe, to which the facts are incidental. (pg 131).
This leads to a more generalized discussion of the meaning and purpose of our lives. James Lovelock and the Gaia hypothesis are criticized as confused and morally dangerous along with the modern ecological ethics of the Green movement – the ‘shallow’ ecology exemplified by the Stern Review and the more extreme views of the ‘deep’ ecologists who urge us to view the flourishing of non-human life as an end in itself – what, they ask, can this possibly mean “for there is no single entity called non-human life, only a myriad of non- human organisms and species, many of them in competition with others.” (137). In its place the propose a ‘good-life environmentalism’– including protection of agriculture, restrictions on building of supermarkets, and encouragement of artisan food production – “where growth reduction is not a goal but an indifferent side effect of measures desirable in and of themselves”. (143)
High Energy Users – Civitas
The first half of this Civitas paper (Issue 6 May 2013) was taken by Jeremy Nicholson, the director of the Energy Intensive Users Group, an umbrella group that represents a dozen or so UK companies such as steel and chemicals, that compete in international markets and for whom energy costs are large factor – in certain cases up to 70% of their operating costs can be attributable to energy so they are particularly sensitive to the relative price of energy compared in to that of overseas competitors.
A chart shows that, with the exception of Italy, industrial energy prices in the UK (and also Denmark) are the highest in the EU, whereas German industrial energy prices are the next lowest after France – (which in rather odd wording is said to benefit from the “historical accident of having invested in nuclear for other reasons.”) Prices in Russia and the USA are even lower as these countries do not charge any additional costs for energy taxes, renewable energy mandate, energy efficiency measures and greenhouse gas carbon trading.
Nicholson explains that Germany has given huge discounts to trade exposed energy intensive industries in order to preserve their competitiveness. Instead of the German industrial consumer paying over €40 a megawatt hour for their renewable energy subsidies and €20 for their Eco-tax, as in the UK, they have a 90% discount on their Eco-tax and are paying only €0.5 for their renewable subsidy. Setting aside whether the German approach is good or bad for the German economy overall, this is why heavy industry has managed to cope with their countries’ ambitious renewable energy programme.
For the UK the independent Committee on Climate Change’s (CCC) estimates that the climate policies we have in place have already added 21% to industrial electricity prices and by 2020 carbon policies will drive up electricity prices by the order of 58%. Moreover Nicholson believes that they have not fully taken into account the costs of maintaining a back-up capacity as the country increases its reliance on wind power – which on current investment plans is expected to reach 30 gigawatts by 2020. Similarly they haven’t included the cost of upgrading and extending the transmission and distributions systems. These are increases which won’t be experienced by our competitors elsewhere.
In this situation shale gas is seen as a potential saviour. “If we can capitalise on the opportunity that shale gas offers in a similar way then the benefits for the UK will be numerous. It could facilitate a similar reindustrialisation here in the UK, improve treasury tax revenues and substantially improve the wider economy.” But this is far from certain. The costs of shale gas in the UK are unknown and will depend on the productive lifetime of the wells which may have to be continually redrilled to maintain production. There is also the question of greenhouse gas emissions.
Voimaosakeyhtiö
A more promising alternative could be to follow the example of Finland where a group of Finnish companies are cooperating under the name Voimaosakeyhtiö to build a nuclear power station Fennovoima together with the reactor supplier Rosatom. Voimaosakeyhtiö SF will own 66% of Fennovoima, of this 55% has already been allocated to Finnish partners . The remaining 34% will be taken by Rosatom.
The plant is to be built site on the Hanhikivi headland in Pyhäjoki and will be known as Hanhiviki -1. Construction of an access road has now begun. It is expected to begin generating electricity in 2014. The cooperating companies will take the same proportion of the output at the cost price.
It is claimed that the plant, a 1200 megawatt AES-2006 PWR will be built ”without any subsidies, now or ever” It is expected to cost roughly €6 billion and will deliver electricity at the cost price of “no more than €50 per MWh.” If this proves to be the case it would be considerably less than the inflation- indexed “strike price” of £92.50 (€110) per MWh EDF will receive for Hinkley Point C for the two 1600 MW EPR units (European Pressurised Reactors) which are expected to cost £8 (€9.55) billion each. The Finns have acknowledged that their choice of the Rosatom design had been influenced by the serious delays and cost increases for the Areva EPRs now being built in Finland and in France.
If this were to be followed here the Energy Intensive Users Group already have the partnership recently announced between Rolls Royce and Rosatom with the Finnish energy company to Fortum, seeking to become active in the UK.
The Vital Spark
Third Hartwell paper – subtitled “Innovating Clean and Affordable Energy for All” is an account of energy policy drawn up with 18 named authors from 7 different countries. Many of the conclusions are obvious, even though worth repeating.
“If we wish the world’s populations to spontaneously and permanently prefer low-carbon technologies, it is essential that these sources are as economically productive as the higher-carbon alternatives – or at least very nearly so. … Only when power from non-carbon fuel sources is more affordable to the consumer than that from fossil fuels, without subsidy to either, will they prevail spontaneously in the world’s markets and produce lasting change in the global energy mix.”
On the positive side the report recognizes the perverse effects of the Jevons Paradox that improvements in the efficiency of a process or a device, by lowering the energy cost, may encourage a greater energy usage. But at the same time measures to improve energy efficiency always make good economic sense.
The poor nations must not (or more probably will not) be left behind “Only a high-energy planet is morally defensible or politically viable … it is not acceptable to pursue policies that will leave the bottom billion of humanity without the energy services they require for wellbeing and dignity.”
And it points to the high cost of renewables “In the electricity sector today, the direct costs of generating electricity from renewable technologies are greater than simply burning fossil fuels such as gas or coal by 50-300%. Wind and solar power are still, in spite of some progress, comparatively capital intensive per unit of capacity (MW), and when this is combined with low load factors (around 10% for solar, and around 25% for wind in Europe), the costs per megawatt hour (MWh) generated are necessarily also high. Furthermore, the integration costs of uncontrollable generators are high. Large fleets of conventional generation must, currently, be retained to ensure security of supply when renewables are not available, on a cloudy, windless afternoon for example. Additional grid lines must be constructed to prevent congestion, and special rapid response plants must be constructed to correct errors in the wind and solar forecasts”. Some studies conclude that these “integration” costs for even minority fractions of renewables are likely to be high – perhaps very high – and therefore to increase substantially the direct cost of energy derived from these sources.
Current carbon capture technologies, though very interesting, are nowhere near viable today, and may add as much as 50% to the cost of coal or gas power.
The report is critical of the German Energiewende policy which has promoted significant wind and solar deployment with the perverse effect in the short run of displacing nuclear and gas-fired generation in favour of more carbon- intensive coal-fired generation. As nuclear and gas-fired power generation have declined, coal and lignite generation have increased. The end result is that there has been no net change in fossil fuel-fired production between 2011 and 2012. And it calls for incentives and subsidies for fossil fuels to be abolished.
It recognises that South Korea has emerged as a nuclear power innovator to supply its own growing demand, and is building nuclear units abroad reportedly competitive rates and that Japan is aiming to export advanced nuclear technology and expertise to the Gulf States, to south-east Asia and to some western countries, including Poland and Turkey.
Population Growth
A report from an international research team led by Prof Raftery of the University of Washington predicts that world population by the end of the century, 2100, could peak at 11 billion – within a range of 9.6 -12.3 bilion. In 1950 it was 2.6 billion.
That may seem sufficiently far into the future (86 years) as not to cause any immediate concern, but the prediction of a steadily increasing population , rising from some 7 billion today to 10 billion by 2050, should not be ignore.
This growth is expected to be driven by increases in Africa, but the ratio of working-age people to older people is expected to decline substantially in all countries. There will then be fewer workers to support an increasing number of elderly, which will present economic challenges in places where elderly people are supported by public welfare programs. On the positive side the report notes that this growth could be moderated, by a greater investment in girls’ education and by family planning programs that provide contraceptives – both factors that could reduce fertility. Recent reductions in population Germany, Japan, the Russian federation and the outer fringes of Europe – Eastern European and the Baltic countries have also been observed.
An inevitable consequence of an increase in population is an increase in energy. With a growing concern about the carbon emissions when burning fossil fuels and an increasing awareness of the inadequacy and costs of wind and other renewables, this growth can only come from increases in nuclear power.
“I’m alright Jack.”
There are two possible approaches for the low-energy environmentalists to this state of affairs. One, featured in last month’s NI, is growth-led predicting that the growth in energy will end by the end of this century with the Anthropocene being replaced by the “ Sixth Extinction Event.”
The second, proposed by the American environmentalist Richard Heinberg ( The Anthropocene: It’s Not All About Us. May 8, 2014, Earth Island Journal) is energy-led. It recognises that we are at the point of “peak oil” and that fossil fuels won’t continue energizing civilization for centuries to come. Heinberg also accepts that although solar and wind are more environmentally benign sources, they are diffuse and intermittent. But he is unable to consider nuclear power on grounds of safety – referring to a 2012 article in the Economist “Nuclear Power: The Dream that Failed.” – Nuclear power will not go away, but its role may never be more than marginal. – his solution to the world’s energy problem is to use less. He argues that the ‘Techno- Anthropocene’ has an Achilles heel – energy – and must be replaced by the ‘Lean-Green Anthropocene’.
This is where Heinberg is on weak ground. It is to say the least hypocritical for an American, in a country where the average per capita energy consumption is, after Canada (with its colder climate), the highest in the world – twice that of the UK, 3 times that of China, and 14 times that of India – to call for reductions in usage.
Countries that are now developing their economies and raising their standards of living will not be deterred from the path of continuing development and with it of increasing energy usage. To the extent that fossil fuels are unavailable or become more expensive as production declines, and faced with threats of climate change, these countries, which make up the majority of the world’s population, will turn to nuclear power. We cannot expect that they will willingly adopt a continued lower economic status than that of the developed countries. Nor will they. “Populations armed with smartphones and an increased sense of their human rights will not accept a future of high inequality and low growth.” (Paul Mason, the Guardian 08.07.14).