This article is addressed to Lord (Gavin) Barwell, Theresa May’s former chief of staff, concerning some observations he made about Net Zero last week.
Dear Lord Barwell
A FEW days ago, you took the commentator Darren Grimes to task for what you called ‘misinformation’ on the electricity system, and you speculated that he might be paid to disseminate falsehoods in the media.
It’s probably best to draw a veil over the more conspiratorial aspects of your thinking. However, some of the other things you said suggest that your own understanding of the facts of the energy system is a little shaky. This article is intended to put you right. I hope you find it useful.
Let’s start with the good news. You say that energy bills have gone up ‘because they are determined by the most expensive of the various sources that generate the electricity’. This is true. However, you go on to draw some entirely unfounded conclusions when you say that ‘if we had already decarbonised our energy generation, your bills would be lower’.
Your mental model of the electricity system seems to be based on two underlying assumptions.
· It’s cheaper to get electricity from renewables than from gas-fired power stations.
· We can completely decarbonise our electricity system so that (low-priced – or so you assume) renewables become the most expensive generator on the system.
You certainly seem convinced that renewables must be economically viable. You say that the International Energy Agency has shown that ‘in three years, renewables will be the largest form of electricity . . . globally’. Leaving aside the small problem that the IEA’s claim was about ‘low-carbon energy’ (i.e. including nuclear) and that it was about new, not existing, capacity, I am surprised that you don’t appear to understand that renewables are heavily subsidised (or made compulsory) across the world, and therefore that the link between their economic viability (the price at which they can sell) and the extent to which they are deployed is entirely broken.
This means that to assess the first of your assumptions, it is necessary to look at costs. The gas-price spike last year meant that gas-fired electricity was, for a time, more costly than all renewables. However, the gas price fall this year has taken that cost back below that of almost every offshore windfarm in the UK.
The poor cost performance of the windfarms has been calculated from audited accounts of renewables generators and their official metered generation data. The results have been widely reproduced, so there is no doubt about it. You should therefore treat with extreme suspicion the unsubstantiated claims of the renewables industry and green activists (including those in Whitehall). Ask for hard evidence. You should also be wary of siren voices asking you to look at Contracts for Difference strike prices. These are misleading, because nobody is taking up their CfDs any longer. No new capacity has been added under this programme since October 2021.
As for your second assumption, have you stopped to ask yourself whether a decarbonised electricity system is a practical possibility? If we are to eliminate gas-fired power stations from the grid, we will need to solve the electricity storage problem. However, once the costs are examined, it becomes clear that it is a pipe dream.
Perhaps the most important thing to note is that electricity comes out of storage more costly than it went in. Here again, you need to be wary of the siren voices who will tell you that storage facilities will be getting ‘free’ electricity, which is currently being curtailed. This is to conflate cost and price. The fact that something has to be given away doesn’t mean that it has cost nothing to produce. Whether a windfarm delivers a megawatt hour of electricity to a battery or a consumer, the cost is exactly the same.
The next thing to understand is that putting electricity into storage and then converting it back to electricity involves losses. For hydrogen, this might be around 65 per cent. So, if we turn some offshore wind power, produced at a cost of £125 per megawatt hour, into hydrogen which we later burn to turn back to electricity, our cost is well over £300 per megawatt hour (even before you consider the cost of the equipment and storage facilities involved). By comparison, the long-term cost of gas-fired power is around £40.
Power from storage will then be the most expensive generator on the grid, and market prices will be commensurate with those we have been ‘enjoying’ for the last couple of years. In other words, the energy crisis becomes permanent.
Do you think batteries might play a part? Again, think about the costs. The US National Renewable Energy Laboratory puts the cost of a gridscale lithium ion battery at $350 per kilowatt hour. Storage for a day’s electricity for the UK might therefore cost £300billion at current demand levels, and perhaps £1trillion for a Net Zero Grid. But we need to be able to store perhaps 50 days of demand, so you are getting up to £1 million per household. And the batteries need to be replaced every ten years or so.
Do you see the problem?
So Darren Grimes is right that we cannot have both energy security and Net Zero, at least not if the electricity system is based on renewables. For that to work, you need a viable storage technology to go alongside the wind turbines, and that simply doesn’t exist at the moment.
You seem to hold out hope that scientists will come up with a way to solve this conundrum. To that I would observe that going ahead with any project, but particularly one as vast as Net Zero, while simply hoping that any technical hurdles will be solved along the way, is an extraordinary gamble – as one wag put it, ‘it’s like jumping out of an aeroplane and hoping someone invents the parachute before you hit the ground’. Moreover, as I have pointed out, storage only adds cost. So even the best imaginable battery technology wouldn’t take us below the cost of offshore wind, which appears to be stuck at around £125 per megawatt hour at present. That means a poverty-stricken future for our children.