Global warming, climate change, all these things are just a dream come true for politicians. I deal with evidence and not with frightening computer models because the seeker after truth does not put his faith in any consensus. The road to the truth is long and hard, but this is the road we must follow. People who describe the unprecedented comfort and ease of modern life as a climate disaster, in my opinion have no idea what a real problem is.
Soaring energy prices… regulations…35% of German companies say country is too hostile to business.
Blackout News here reports on how a growing number of German industrial companies are relocating their production abroad, driven by soaring energy costs, stifling bureaucracy, and an increasing tax burden.
As Germany gets greener, more companies are shuttering, moving out. Grok AI image.
A recent survey by the German Chamber of Industry and Commerce (DIHK) reveals that a staggering 35 percent of companies now cite cost reduction as the primary motivation for their foreign investments – the highest such figure since the 2008 financial crisis.
That’s worrisome news for the country, which recently voted for a change in recent national elections. However, chancellor candidate and election winner Friedrich Merz has since broken his major campaign promises and instead will pledge to further accelerate the destructive green policies and to pile on debt like never before.
German companies looking for business-friendlier environments
The DIHK reports that the traditional driver of tapping into new markets abroad now accounts for just 30 percent, and that instead the focus has sharply shifted towards securing economic advantages in locations with more favorable cost structures.
Little hope of reform
Energy-intensive industries are particularly feeling the pinch, facing intensified international competition that is accelerating the trend of relocation. Although ongoing coalition negotiations between the CDU, CSU, and SPD are grappling with ways to reduce electricity taxes and halving grid fees, companies are skeptical these steps will stem the hemorrhaging.
DIHK President Peter Adrian has called for “more freedom, lower costs and faster administrative action” to restore Germany’s competitiveness.
Germany’s business attractiveness as an investment destination is demonstrably declining and has reached a critical juncture. Domestic investment is weak with two out of five industrial companies planning to scale back their investments within Germany.
Merz breaks all his major campaign promises
Without swift and comprehensive reforms, the long-term competitiveness of Germany as a business location faces a significant threat, potentially leading to a further exodus of its vital industrial base, warns Blackout News.
As Germany’s CDU party led by Friedrich Merz negotiates with the SPD socialists on forming a new government, early signals are showing that things are going to get a lot worse instead of better as Merz breaks his campaign promises. In a recent survey, almost 75% of respondents feel they got duped by Merz.
There is a powerful but misleading narrative supporting a green energy transition. A follow up piece will look more broadly at the general narrative supporting a transition to net zero. This prequel will provide some detail on a few components of the energy narrative and how this misleading narrative was established. The green energy narrative works somewhat like a magician’s patter, overemphasizing many things of irrelevance and distracting the audience from the important things going on. Misdirection ensures small truths are misinterpreted and magnified, leading to completely unrealistic hopes and expectations.
Prequel to “Unravelling the narrative supporting a green energy transition.”
There is a powerful but misleading narrative supporting a green energy transition. A follow up piece will look more broadly at the general narrative supporting a transition to net zero. This prequel will provide some detail on a few components of the energy narrative and how this misleading narrative was established. The green energy narrative works somewhat like a magician’s patter, overemphasizing many things of irrelevance and distracting the audience from the important things going on. Misdirection ensures small truths are misinterpreted and magnified, leading to completely unrealistic hopes and expectations.
Misleading green narratives often start with Academics. As I noted here:
Overwhelmingly the academic articles I read are good. Usually, the authors carefully describe the limitations of their findings and recommendations. Sometimes they hint as to what remains to be worked out. I’m afraid this does not stop individuals, the media, and some policy makers from ignoring the qualifications and limitations inherent in their findings. The situation is worse when they leave it to the reader to ferret out the limitations of their findings. In very rare instances some academics will go beyond what has been demonstrated with exaggerated claims. I don’t know if this is done through ignorance, accident, hubris or for purposes of self-advancement.
For example, there have been many simple studies examining how much energy might be produced by a green resource, or set of green resources, such as wind and solar power. These studies ignore important issues such as deliverability, timing, reliability and costs. Based on simple studies the media, activists and policy makers frequently conclude that such resources can be used near universally on a large scale to provide electric service to consumers effectively, efficiently and economically.
Slightly more sophisticated studies or demonstrations will look at additional factors beyond potential availability of energy. But typically, not enough relevant factors to justify the hope and expectations they engender. Justifying a green energy transition requires that multiple critical factors all be compared in the same assessment. For example, looking at what reliability levels might be achieved without considering potential costs cannot inform policy makers as to the feasibility of such options. Similarly looking at potential costs without considering the reliability impacts of the resources does not provide sufficient guidance either. Millions of incomplete studies looking at various needs divorced from other critical needs when studied, cannot later be combined to provide the big picture needed for a major green transition.
As with the magician’s patter, the spun narrative saying “look here” at isolated “facts” distracts the audience from what is hidden. Mechanisms of narrative control and misdirection support the green energy narrative as well. A magician will make quite a showing that the levitating lady is not supported from below. He will then go on to focus your attention as he shows there is no support from the side. Concluding will show you clearly there is no support from above. But rest assured the whole time she is supported and not floating. The means of support shifts as the magician goes through his patter. In the green energy narrative costs have been demonstrated, environmental impacts have been demonstrated, reliability has been demonstrated, deliverability has been demonstrated and all shown to possibly work, BUT NOT AT THE SAME TIME. In the eyes of many, such demonstrations cumulatively strengthen the green energy narrative. However, the gullible audience will be shocked when wind, solar and batteries are not at all well suited to support electric generation on their own.
The green energy narrative may be losing steam at this point, leaving many to wonder, “why is that movement stalling when this narrative is so compelling?” This piece and the follow up will provide some explanation as to why the narrative is not what it appears to be. This “prequel” posting will now highlight three tricks of the green energy narrative: misleading language, false problem and narrative control.
Misleading Language
It’s often not possible to know what is being claimed for various green alternatives because of vagaries in the language employed. There are crucial differences between installed capacity, effective capacity and firm capacity. However, it’s not uncommon to see references only to similar capacity levels when comparing installed wind capacity to firm hydro capacity. Costs can be referenced as fixed, variable, incremental, sunk, avoidable, O&M, lifetime and more. It’s not uncommon to see comparisons of resources where the type of cost being compare is not specified and even in some cases where resources are compared on using incompatible cost comparisons. There are many misleading uses of language that could be referenced, but perhaps the term “renewable” itself is one of the most misleading bits of language advancing the green agenda.
All “renewable” options have a variety of pros and cons. In terms of providing reliable power that supports the grid, hydro power is a great resource. Hydro dams are among the strongest resources on the grid for serving challenging loads, but they cannot be conveniently located in most cases. In terms of the environment and ecosystems, hydro raises serious concerns for many. Biomass too, provides good support but it also is plagued by environmental concerns. The availability of geothermal plants, another grid supporting resource, is severely limited and some take issue with them because they emit CO2. Wind, solar and batteries are usually seen as less environmentally challenging. Additionally, many areas can harness some wind and solar more readily than hydro or geothermal energy. Unfortunately, these resources do not readily support the grid.
Different “renewable” resources have vastly differing capabilities. There is vast potential to develop some ‘renewables”. Some “renewables do a great job supporting the grid. Some “renewables” have low energy costs in some areas. Some “renewables” are environmentally sound in some areas. No matter how well individual “renewable” resources might be combined to tick off all the boxes of importance, that doesn’t mean that any combination of “renewable” resources can be found that will work well for any given area. It means little that hydro and geothermal provide excellent support for the grid in an area where you can only add wind and solar. Similarly, just because solar and wind have potential environmental benefits that doesn’t cancel out environmental concerns around hydro in delicate ecosystems.
The green energy transition hopes to obtain high penetration levels of seemingly generic “renewables”. Unfortunately, for most areas, there are no compatible combinations that at any significantly high penetration level that can provide affordable, environmentally responsible energy in a reliable manner. Referring broadly to what “renewables” can and might do, serves to hide this inconvenient truth.
The terms renewable and nonrenewable command a lot of undeserved power and influence with the public and policy makers. Rather than educating and informing, they often serve to confuse and misdirect energy policy. More sophisticated understandings around what is clean, green, sustainable, environmentally sound and workable are needed. The renewable/nonrenewable dichotomy is hurting our ability to move forward with potentially valuable workable technologies and giving too big a boost to poorly thought-out boondoggles.
The False Problem – Intermittency is not THE problem for Wind and Solar
It is a fallacy to assume that because part or some of the difficulties associated with a technology can be overcome, that therefore all of the problems associated with a technology can be overcome. Worst case for a “partial solutions fallacy” is when a major problem is hidden by presenting a minor problem as the major stumbling block. Primarily focusing on the minor problem incorrectly implies that there will be smooth sailing once this solvable problem is overcome by hiding the large problem.
To implement a green transition bolstered by heavy wind and solar, all associated problems must be addressed. The major problem associated with wide-scale use of these resources cannot be ignored.
The real problem is that wind, solar and batteries do not readily provide essential reliability services and support the grid. Most of the talk is around addressing intermittency through batteries and other storage approaches. Misdirection here focuses on intermittency, the smaller problem, while ignoring the major problem.
The intermittency of wind and solar certainly produce challenges for a green energy transition. These challenges are likely not insurmountable ones. I have written on the problems of intermittency and how accommodating the impacts of wind and solar will raise costs and lower reliability above projections. These assessments have been proven correct over the intervening years. Yes, intermittency can be addressed through storage and backup, albeit at substantial costs and complexity. The long-term problems associated with wind and solar due to their intermittency could and may likely be made manageable with improved technology and decreasing costs. But such changes will not make wind, solar and batteries comparable to more conventional generating resources, such that they can play a large role in a green energy transition, because the large problem is not intermittency.
Overcoming intermittency though complex and expensive resource additions at best gets us around a molehill which will leave a huge mountain ahead. Where will grid support come from? Wind, solar and batteries provide energy through an electronic inverter. In practice, they lean on and are supported by conventional rotating machines. Essential Reliability Services include the ability to ramp up and down, frequency support, inertia and voltage support. For more details on the real problem see this posting. “Wind and Solar Can’t Support the Grid” describes the situation and contains links to other past postings provide greater detail on the problems.
The green energy narrative is misleading in presenting intermittency as the major problem and implying that as we address this problem, wind and solar become comparable resources to more conventional generating resources. The green energy narrative hides the problems of asynchronous inverter-based generation when it can, and minimizes the concerns around this technology when it can’t.
When forced to confront the fact that inverter-based generation causes problems, the green response is that inverter technology can be made to perform “like” conventional rotating generation. “Like” will not be near good enough in the foreseeable future. As the real problem becomes more apparent, the narrative falls back on misleading language to further hide the real problem.
Narrative Control – Shameless Hucksterism and the Media
The green energy narrative is propelled by stories of success. Often these “successes” are very different from what seemed to be represented. We see great stories of planned projects that should do wonderful things, but they go down the memory hole as they prove not to work out. We see incomplete stories where they talk of power generated but not of associated costs or how much better other alternatives might have been. There is no shortage of examples relating to the green overhype that we could examine. Here is a recent one that I’ve been seeing advanced a lot lately: seven countries now use renewables for 100% of their energy. The narrative uses this story to tell us we can do the green transition. Let’s look a little deeper at what is really going.
Under the Headline that “Seven countries now use renewable energy for 100% of their electricity”, the UN’s Renewable Energy Institute bolstered by fluff, from a Stanford Professor of Civil and Environmental Engineering. makes the claim that:
Recent data has shown that in 2022, countries including Albania, Paraguay, Ethiopia & Nepal produced more than 99.7%of the electricity they consumed using geothermal, hydro, solar and wind power marking what scientists say is an “irreversible tipping point” that will see fossil fuels phased out.
An “irreversible tipping point” in “renewable” energy is quite a claim. Before buying into this “irreversible tipping point, let’s take a cursory look at those seven countries.
Albania – 98% hydro, 2% solar PV.
Paraguay, – 99+% from hydro dams. They sell excess hydro power to their neighbors.
Congo 100% hydro (only 20% of population has access to electricity)
Iceland stands out by being the only nation with geothermal, which make up almost a quarter of their energy supply. This is not surprising as geography greatly limits geothermal opportunities. Albania and Nepal are the only countries with solar making any significant contribution, at around the 2% level. Solar irradiation in these countries ranges from good to high. Ethiopia alone has a significant contribution to electric generation from wind at around 4%. Despite several other countries within this group having excellent potential for wind, they are not taking advantage it. I suspect the advancement of wind in Ethiopia may have more to do with the interest and goals of players in the international community, like France and China, rather than the interests of Ethiopians whose future generations have been saddled by considerable debt to pay for these large foreign sponsored wind projects.
The above headline talks about how these countries get 99.7% of their electricity from geothermal, hydro, solar, and wind power. Without the spin, collectively those countries get close to 99% of their energy from rotating synchronous geothermal and hydro resources and less that 2% of their combined electric energy from wind and solar. The fact that some countries have high amounts of hydro, does not provide evidence that we are approaching a tipping point involving wind and solar. In fact, one could observe that high levels of renewable penetration are associated with low levels of wind and solar.
Let’s focus on the main commonality of hydro power. The base technology is not new and many do not consider large dams to be green. Untapped potential for hydro is largely limited in the developed world. First world countries saw their explosion of hydro dams between the 1930s and 1970s. Reliable power from hydro dams likely will improve lives and economic conditions within these developing countries. But it’s quite a stretch to suggest that their development in third world countries offer any optimism for “renewables” in say California, where they are reverting to older water flow patterns by destroying hydro dams and seeking to replace the energy with expanded wind, solar and batteries.
It should be clear and well known to anyone in the energy or renewable arena that there is hardly any wind generation found within these seven countries. But this wind energy trade association headlines the developments in these seven countries anyway. Somehow, they begin a push for more wind power with bolstering from these seven countries. As a transition they then bring in Norway with a hydro/wind mix. (Readers should note – Norway has only around 5% wind. Additionally, when you look at the total grid which Norway is only a part, the percentage of wind declines even further. Serving sub-components of a grid with high levels of inverter-based generation does not support any claims that an entire grid can have a similarly sized portion of inverter-based generation.) The posting then shamelessly mirrors the magician’s patter to go on about “renewables” and their generic capability, as if that were really a thing. Rounding out, they then talk about how much wind is being installed worldwide in completely different countries. It’s all bunched together in a jumble claiming that we are somehow moving together in the right direction to fight climate change, ending with a plea that the wind permitting process should be made easier.
Six developing countries using basic technology over a century old, joined with Iceland to approach targets nearing 100% “renewable” energy. This somehow is a bellwether for increasing wind and solar? It’s not a substantive argument, just a bunch of disjointed information in a jumble. But unfortunately. the quality of green arguments usually doesn’t matter. Much of the public and even policy makers gobble that stuff up despite the lack of rigor underling the arguments. Glowing headlines of advancements are shared all over social media. In the end, although low on meaningful evidence. it all propels the green energy narrative while feeding hope and increasing expectations. Confidence is built and the committed grow more committed.
Conclusion
It is becoming increasingly apparent that wind, solar and batteries when pursued at high penetration levels result in high costs, lower reliability and poorer operational outcomes. Expectations from the green energy narrative and real-world results are not consistent and this gulf will continue to widen as long as policy makers continue to reflexively buy into the green energy narrative. This piece has attempted to illuminate some of the mechanisms that served to produce and sustain the exceedingly and overly high expectations for a green transition. The narrative was built upon these and other various deceptions to provide disinformation and hide the real-world challenges. Such methods continue to be employed with increasing frequency. The follow to this piece up will more systemically examine the components of the green energy narrative and raise many items of critical importance considerations that the green energy narrative ignores.
Thomas Edison strongly advised Henry Ford to go internal combustion engine (ICE), not electric vehicles (EVs) in the late 19th century. EVs dominated the market until the advantages of ICE prevailed more than a century ago.
In conclusion, the article ends, “the journey towards adopting electric vehicles as a sustainable alternative to fossil fuel-powered transportation is fraught with complex challenges, particularly concerning the environmental and ethical implications of battery production.”
Thomas Edison strongly advised Henry Ford to go internal combustion engine (ICE), not electric vehicles (EVs) in the late 19th century. EVs dominated the market until the advantages of ICE prevailed more than a century ago. Yet multi-pronged government intervention at the expense of taxpayers and ICE owners is desperately trying to create an industry that consumers do not like.
The economic and environmental problems of EVs are on full display–and the mainstream press is not afraid to report on them (unlike with on-grid wind and solar). A shining example of this was a recent article in Auto Overload (May 11, 2024): “21 Unfortunate Electric Vehicle Flaws That No One Is Discussing.”
Twenty reasons were given, but the 21st pertains to the conclusion that better (“holistic”) public policy is needed. Make that no public policy except government neutrality toward energy technologies, and we are all set. After all, the 20 items to follow are reasons for not promoting EVs.
Limited Range: “Electric cars often face criticism for their limited range compared to gasoline vehicles. This range anxiety significantly affects potential buyers, especially in areas with a sparse charging infrastructure. While technology is improving, most electric vehicles still can’t match the range of gasoline cars, and their efficiency can decrease further in extreme weather conditions.”
Impact on Used Car Market: “The rapid technological advancements in EVs and concerns about battery longevity can affect the resale value of electric cars, impacting the used car market. This makes the purchase of a used electric vehicle potentially riskier than a used gasoline vehicle.”
Mining: “The pursuit of environmentally friendly transportation via electric vehicles (EVs) is not without significant drawbacks, particularly in terms of the socio-environmental impacts associated with mining. The extraction of essential battery components such as lithium, cobalt, and nickel results in various detrimental effects.”
Longer Wait Times for Repairs: “Repairing electric vehicles can require specialized skills and parts, leading to longer wait times compared to gasoline cars. This can be a significant inconvenience for EV owners needing timely maintenance or repairs.”
Longer Charging Times: “Repairing electric vehicles can require specialized skills and parts, leading to longer wait times compared to gasoline cars. This can be a significant inconvenience for EV owners needing timely maintenance or repairs.”
Resource Scarcity for Batteries: “The production of electric car batteries depends on materials like lithium and cobalt, which are finite resources. The growing demand for these materials could lead to shortages and increased costs in the future, impacting the sustainability and affordability of EV battery production.”
Higher Upfront Costs: “Electric vehicles generally have higher initial purchase costs compared to similar gasoline vehicles. Despite potential long-term savings in fuel and maintenance, this upfront investment can be prohibitive for many consumers. Although government incentives can help, the cost disparity remains a significant factor in purchasing decisions.”
Battery Degradation: “The batteries in electric cars gradually lose their capacity to hold a charge, leading to reduced range over time. This degradation raises concerns about long-term reliability and impacts resale value. Additionally, replacing a battery is expensive, adding to the long-term ownership costs.”
Limited Availability of Charging Stations: “The scarcity of public charging stations in many regions, particularly rural or underdeveloped areas, poses a significant challenge. This makes long-distance travel difficult for EV owners without access to home charging, deterring potential buyers.”
Performance in Extreme Weather: “Electric vehicles can underperform in very cold or hot conditions. Batteries are less efficient in the cold, reducing range, while high temperatures can strain battery cooling systems. The use of heating and air conditioning in such weather also consumes significant power, further diminishing range.”
Weight and Handling: “The heavy weight of their batteries makes electric cars heavier than their gasoline counterparts, affecting handling and braking. This added weight can also cause more rapid wear and tear on various components, like tires and brakes.”
Environmental Impact of Battery Production: “The manufacturing of lithium-ion batteries, essential for electric cars, has a considerable environmental footprint. Mining for lithium, cobalt, and other minerals leads to ecological issues like habitat destruction and water pollution. The battery production process also contributes significantly to carbon emissions.”
Recycling Challenges: “Recycling the batteries of electric cars is a complex and costly process. With a low recycling rate for lithium-ion batteries, there are environmental risks and resource wastage, highlighting the need for improved recycling technologies.”
Limited Model Variety: “The current selection of electric vehicle models is relatively limited compared to gasoline vehicles. This lack of variety can deter consumers looking for specific types or features in a vehicle, such as size, style, or functionality.”
Dependence on Electricity Grid: “Electric vehicles rely entirely on the electricity grid, which in many areas is still predominantly powered by fossil fuels. This reliance can diminish some of the environmental benefits of EVs, as their operation may indirectly contribute to greenhouse gas emissions.”
Reduced Towing Capacity: “Many electric vehicles offer lower towing capacities than their gasoline or diesel counterparts, which can be a significant disadvantage for users needing to tow trailers, boats, or caravans.”
Technology Obsolescence: “The rapid evolution of technology in the EV sector can render existing models obsolete more quickly than traditional cars. This fast pace of change can negatively affect the resale value and longevity of an electric vehicle as newer, more advanced models enter the market.”
Insurance Costs: “Insurance for electric vehicles can be more expensive due to their higher repair costs and the increased price of battery replacement. This elevates the total cost of EV ownership over time.”
Noiseless Operation Hazards: “The quiet operation of electric cars poses a risk to pedestrians, cyclists, and the visually impaired, who may not hear an approaching vehicle. Regulations are being introduced to require EVs to emit artificial noise at low speeds to mitigate this risk.”
Software Reliability and Security: “The heavy reliance on software for the operation of modern electric vehicles raises concerns about reliability and the risk of hacking. Maintaining the security and integrity of these systems is an ongoing challenge in the EV industry.”
“In conclusion,” the article ends, “the journey towards adopting electric vehicles as a sustainable alternative to fossil fuel-powered transportation is fraught with complex challenges, particularly concerning the environmental and ethical implications of battery production.”
What an understatement. But the politically correct article adds:
While legislative measures and research initiatives are making strides in addressing these issues, there is a critical need for ongoing commitment and innovation to ensure that the EV revolution does not compromise human rights or environmental integrity. The future of green transportation depends not only on technological advancements but also on responsible and sustainable practices throughout the EV battery supply chain. It is imperative that stakeholders across industries continue to collaborate and invest in solutions that prioritize ethical sourcing, improved recycling methods, and overall supply chain transparency. This holistic approach will be key to realizing the full potential of electric vehicles in fostering a cleaner, more sustainable future.
A new paper from the Net Zero Watch demonstrates conclusively renewables increase electricity bills — indeed, it is almost impossible that adding a new windfarm to the grid would ever reduce consumer prices.
A new paper from the Net Zero Watch demonstrates conclusively renewables increase electricity bills — indeed, it is almost impossible that adding a new windfarm to the grid would ever reduce consumer prices.
The author of the paper, Net Zero Watch director Andrew Montford, outlines a series of effects that a new windfarm will have on bills, showing that in each case households will take a financial hit. As Mr Montford explains:
In order to reduce bills, a new generator generally has to force an old one to leave the electricity market — otherwise there are two sets of costs to cover. But with wind power, you can’t let anything leave the market, because one day there might be no wind.
But as well as adding excess capacity to the grid, renewables also have a series of other effects, each of which will push bills up further. Mr Montford says:
Renewables need subsidies, they cause inefficiency, they require new grid balancing services that need to be paid for; the list of all the different effects is surprisingly long. There is only one way a windfarm will push your power bills, and that’s upwards.
The paper is entitled The Six Ways Renewables Increase Electricity Bills. It is available in plain text below, or can be downloaded as a PDF by clicking on the cover image.
There are many misconceptions about how electricity bills are affected by new generation capacity, and in particular by new windfarm capacity. Here I break down the main effects. To illustrate them, I will first look at a simple example of a ‘dash for gas’ in a fossil-fuel powered grid. Then I move on to look at the more complex case of a ‘dash for wind’ in a grid powered by gas and renewables. In both cases, the grid I describe is much simpler than the real one, so I close by considering whether what I describe is correct in practice.
Costs and markets
The electricity market tends to favour generators with lower fuel* costs: the ones with the lowest fuel costs always run, ones with intermediate costs run some of the time, and ones with high costs only get to run occasionally (this is called the ‘merit order’). However, it is important to understand that, no matter what its fuel cost, a generator still needs to cover all its costs (i.e. including capital and maintenance).
Some can earn enough in the marketplace to do this, but others can’t. How it works is all bound up in the way the market works, and the fact that electricity is a commodity; in other words, everybody in the marketplace is selling the same thing.
A concrete example should make it all clear. Let us look at a grid running wholly on gas- and coal-fired power stations, and assume that gas has lower fuel costs and thus runs preferentially.† When demand is sufficient to require both gas and some coal-fired units to run, the gas-fired units do not sell at a lower price, despite their lower fuel cost. Instead, they sell at the higher price demanded by coal-fired units – they are all selling megawatt hours, after all.
As a result, the wholesale market price for electricity tends to settle at around the fuel cost of the coal-fired units (we say the market price is ‘set’ by coal).
The market price varies though. At times of high demand, older coal-fired units will have to be fired up. Because these are inefficient, and also because they get to run comparatively rarely, they have high fuel costs and high total costs. But when they are called upon, they are indispensable, and they can demand very high payments. Since everyone in the market can see this coming, they all bid at the same prices they expect the old coal-fired station to get, and the market clears at a commensurately higher price. Consumers carry the cost.
Being able to charge those higher prices enables the gas-fired units to earn enough money to pay for their capital and maintenance costs as well as their fuel. However, this is not an option for the coal-fired units (or perhaps just the least efficient ones), which will therefore require a subsidy to keep them in the market.
A dash for gas
Now consider what happens when you add to the generation mix a new, lower-cost source of generation, such as a state-of-the-art gas-fired power station. How will market prices change?
It’s important to note that there is no direct effect, because market prices are set by coal. However, there are many indirect effects.
Firstly, the coal-fired power stations all get to run less often. This will increase their fuel costs somewhat, since they will use coal less efficiently if they are switching on and off more often. So, counterintuitively, one effect of adding new, lower cost generation (in this case a new gas-fired unit) to the generation mix may be to increase market prices,‡ and thus the amount that consumers have to pay to every generator on the grid. In addition, since some of their costs are fixed (in other words they are unaltered by output changes – the obvious example being depreciation), their total costs per megawatt hour, and thus the price they need to achieve in the marketplace, increase even further. One way or another, consumers have to pay this too. We’ll call this the inefficiency effect.
It is possible that the least efficient coal-fired power station will decide that a reduction in operating hours is intolerable, and it will decide to shut up shop. If that happens, market prices going forward may well be set by a somewhat more efficient coal-fired power plant, thus tending to push market prices down again. We’ll call this the displacement effect.
However, grid managers may decide that these units are indispensible for dealing with periods of very high demand. They will therefore offer them a financial bung to make them stay around. We’ll come back to this subsidy, which we’ll refer to as the capacity market effect (after the mechanism currently used to deliver it).
If more and more gas-fired power stations are added, these effects will continue in tandem. However, eventually, there will be some periods of low demand when no coal-fired units are required at all. When that happens, the wholesale market price will no longer be set by coal, but by gas. This will cause a sharp drop in prices, which will then feed through to consumers. As more and more gas-fired units come on stream, average market prices steadily decline.
Thus dashing from coal to gas will eventually make consumers better off.
A dash for wind
When the new generation capacity is wind rather than gas, things are rather different. Imagine a grid that is a mixture of gas-fired power stations and windfarms – much like the one in the UK today – to which a new, state-of-the-art windfarm is added.
As in the previous example, the fuel costs of the new generator are lower (for wind they are zero!); in other words, wind will run in preference to gas. However, because of their very high capital costs and low output, wind’s total costs are – except in exceptional circumstances – so high that there is no possibility of them being earned back through selling electricity.§ As a result, subsidies will be necessary to get the windfarm built. These subsidies – the Renewables Obligation and Contracts for Difference (CfDs) – are levied on electricity suppliers and thus directly exert upward pressure on consumer bills (that is, outside the wholesale market). We’ll call this the levy effect.
Once it is operational, the windfarm produces effects that are similar to those seen in the dash for gas. For example, the inefficiency effect is still in play: each new windfarm will reduce the efficiency of the gas-fired power stations, thus pushing market prices upwards.
Similarly, the displacement effect will still be in operation too, with older, less efficient power stations eventually nudged out of the marketplace, and the market price thus tending to be pushed down again. However, this time there is a crucial difference. Because the wind turbines are intermittent, they are not a direct replacement for gas-fired power stations. If, say, we replace a 1-GW gas-fired unit with three 1-GW windfarms, delivering on average 33% of their nameplate capacity, the annual output is theoretically the same. But 33% is the average; at times, the windfarms will deliver nothing at all.¶ As a result, we still need that 1-GW gas-fired unit; if it has left the marketplace, we may sometimes be left with a catastrophic shortfall in supply. Thus, when renewables are involved, it becomes much more important not to let old, inefficient generators leave the marketplace; the capacity market effect will be seen to a much greater degree, and there will be little or no relief from the displacement effect. Consumers carry the cost of ensuring this back-up generation remains in place.
If we go on adding windfarms to the grid, there will eventually be periods of low demand and/or high wind generation in which the gas-fired power stations are no longer required to run. At these times, the market price will be set by the fuel cost of a wind farm. Since this is zero, the market price will drop to approximately zero too. (Such very low prices are already seen occasionally on the UK grid). In fact, windfarms in the Renewables Obligation can bid negative prices into the market because they will still receive generous subsidies on top of whatever they are paid for power. However, windfarms in the CfD regime have different concerns. CfDs essentially give generators an agreed fixed price, typically above market prices. However, the rules state that this top-up is only paid when the market price is not negative. Thus CfD windfarms will bid into the market just above zero, and this is the likely to be the price at which the market clears. They then receive a large top-up to take them back to where they expected to be. In other words, there is no gain to consumers – the low price inside the wholesale market is completely cancelled out by the high subsidy levied outside it. On the other hand, the Renewables Obligation units will take a (possibly large) reduction in income. This means a gain to consumers, at least in the short term. However, assuming the level of the Renewables Obligation is no higher than required to make these windfarms competitive, they will have to counterbalance periods of below-average prices with periods of above-average prices in order to make the necessary returns. Thus there may be no gain to consumers at all.
There are other effects arising from windfarms’ intermittency too. The Balancing Mechanism is the grid’s process for ensuring that the electricity system remains stable. The costs of fixing any imbalances between supply and demand are passed on to electricity system users. The best known of these costs are constraints payments, which are incurred when windfarms in far-flung locations cannot get their power to market due to limitations in grid capacity. In these circumstances, they are paid to switch off, and another generator (typically a gas-fired power station) located closer to the consumer is paid to switch on to ensure the windfarm’s customer gets their required power.
The grid has also had to introduce a new service in response to the growth of wind power. Gas-fired power stations naturally stabilise the grid (providing so-called ‘inertia’); a fault in one place tends to propagate slowly across the network, giving managers time to respond. However, windfarms have no inertia, and faults can therefore propagate almost instantaneously, threatening major blackouts. In order to mitigate this risk, the grid pays for artificial inertia, typically in the form of flywheels and batteries. In other words, a service once provided for free by gas-fired power stations is now a further burden on consumer bills.
Finally, because windfarms tend to be built far from centres of demand (in the ocean, and in remote highland areas), they bring with them the necessity for major upgrades to the transmission grid. The costs of what we can call the transmission effect are charged to users of the grid, ultimately raising consumer bills still further.
Summary
In summary, adding a windfarm to the grid increases costs to consumers in no fewer than six ways:
The inefficiency effect
The capacity market effect
The levy effect
Constraints payments
Artificial inertia
The transmission effect
Only the displacement effect could theoretically reduce costs to consumers, but in practice this is likely to be zero, because of the urgent need to keep gas-fired power stations on the grid.
In summary, it seems implausible that windfarms will ever reduce costs.
Table 1 gives indicative costs for each effect, suggesting a total of £24.5 billion, or around £850 per household per year. Approximately half of this will be experienced as increases in household bills, and the rest as increases in the general cost of living.
I recently described UK government’s latest estimates of levelised cost of renewables as “a fairy-tale”. Well, if Whitehall’s effort was Rumpelstiltskin, then the equivalent document from the International Renewable Energy Agency (IRENA), which appeared yesterday, is Jack and the Beanstalk.
I recently described UK government’s latest estimates of levelised cost of renewables as “a fairy-tale”. Well, if Whitehall’s effort was Rumpelstiltskin, then the equivalent document from the International Renewable Energy Agency (IRENA), which appeared yesterday, is Jack and the Beanstalk.
Take the operational costs of windfarms, for example. IRENA claims that it’s difficult get hold of hard data on the subject. This is, not to put too fine a point on it, absolute nonsense. Guys, allow me to introduce you to Companies House, where you will find the audited financial accounts for every UK offshore windfarm and at least half of the onshore ones. Hard data, freely available to download!
For offshore wind, having conveniently overlooked the hard data for another year, IRENA appear to be relying on a 2018 modelling study from the US and a remark in an investor presentation from Orsted (science!). They conclude that opex is in the range £50-100,000 per megawatt of capacity per year.
Figure 1 shows what they might have concluded, had they stumbled upon the cornucopia of data at Companies House.
The data is divided into cohorts depending on the water depth of the windfarm in question. IRENA does not even allude to opex costs increasing over windfarm lifetimes – a trend that is clear in the data. But whichever way you look at it, their values are around half of anything credible.
It’s a similar story on capacity factors. Figure 2 is IRENA’s graph:
Figure 2: IRENA’s capacity factor graph
A few recent UK offshore windfarms have averaged 46% capacity factor over their first few years, but there is a trend to declining output as time passes. This is clear in Figure 3, which again divides the fleet into cohorts, but this time by size of turbine.
Figure 3: UK offshore wind capacity factors
IRENA doesn’t allude this issue, so they appear to be assuming no decline in output over windfarm lifetimes, just as our Whitehall bureaucrats did. As a result, when they look at the effect of opex on overall costs, they conclude that ‘O&M costs per kWh have therefore been falling’, and suggesting that a figure of perhaps £13/MWh ($0.17/kwh) might be expected for European windfarms commissioned in the last five years.
Again, let’s see what effect using some real data has on that value, rather than basing it on throwaway remarks in an industry presentation. I’m not sure I detect anything resembling a decline, let alone anything resembling £13/MWh. It looks as though IRENA’s figures are out by a factor of three.
Figure 4: UK offshore wind – opex element of LCOE
Magic beans are probably the only way we are ever going to see costs this low.
Whitehall has just published the latest version of its estimates of the cost of generating electricity from different sources. The last edition, in 2020, was a source of considerable entertainment because of the absurd claims it made about the costs of offshore wind power, a key factor in determining the cost of Net Zero.
Whitehall has just published the latest version of its estimates of the cost of generating electricity from different sources. The last edition, in 2020, was a source of considerable entertainment because of the absurd claims it made about the costs of offshore wind power, a key factor in determining the cost of Net Zero.
Capital costs
Notably, the authors claimed that by 2025 a megawatt of offshore wind capacity would only cost £1.5 million, around half of what recent windfarms have cost. I had a lot of fun pointing out that Dogger Bank A, due to be commissioned in 2025, had already spent £1.1 million per megawatt by the end of last year, and it hadn’t even finished putting in the foundations!
I like to think that my ridicule of the efforts of the DESNZ bureaucrats has had an effect, because in the new edition, the capital cost has mysteriously doubled(!), returning to a more credible figure of £3 million per megawatt.
However, remarkably, the overall offshore wind cost estimates is actually slightly lower than in the previous version. This is shown in Figure 1, alongside the earlier estimates, and (optimistic) estimates based on actual data for operational windfarms. The implausibility of the official figures is undeniable.
Figure 1. BEIS/DESNZ estimates of the levelised cost of offshore wind, and actuals
So, given the doubling of the capital costs between the two most recent estimates, how have our friends in Whitehall managed to achieve an overall cost reduction?
Output
The main way appears to have been to increase the projected output for windfarms, from 51% of capacity last time round, to 61% this year. The authors cite increasing turbine size as an explanation, and indeed the turbine size cited is 14 MW, as compared to 12 GW last time round..
However, it’s hard to be polite about this figure.
It’s important to recognise that 61% is supposed to represent a lifetime average, and windfarms’ output declines steadily as they get older. If we take an absurdly optimistic estimate of that decline, of 1% per year, it would mean that the first year output would need to be 70%.
Figure 2 shows the latter figure against the actual performance of recent windfarms by commission date.
Figure 2: Offshore wind capacity factors by year of commission – actual and DESNZ estimate
Figure 3 shows the same figures by turbine size. There is a strong suggestion that there are declining returns from ever larger turbines, and the DESNZ estimate again looks rather ridiculous.
Figure 3: Offshore wind capacity factors by turbine size – actual and DESNZ estimate
Opex
It’s no different when you look at the operating cost figures. DESNZ’s figure of £56,000 lifetime average for windfarms commissioning in 2025 is completely preposterous. The main driver of operating costs seems to be water depth; larger turbines has, at best, a minimal impact. Recent windfarms in deep water start at well over £100,000/MW/year (Figure 4)
Figure 4: Offshore wind opex by water depth and turbine size
And operating costs rise steadily as the turbines age. I would expect the lifetime average for Dogger Bank A to be closer to £200,000/MW/year than to £50,000.
Conclusion
When it comes to offshore wind costs, Whitehall is lurching from one ludicrous evidence-free claim to another in a desperate attempt to maintain the pretense that it can be delivered at low cost. In reality, they have no choice but to lie, because cheap renewable energy is central to government’s claims that Net Zero is affordable. And as if to confirm that we are dealing with disinformation, the appearance of the new estimates comes against a background of increasingly shrill demands from the wind industry for further subsidy – it’s a tipping point, they say. But how can this be if their costs really are as low as DESNZ claims?
A few days ago, Philip Hammond called for politicians to come clean about the costs of Net Zero. He was right to do so, and the first step along that road will be for ministers and civil servants to come clean about the cost of renewable energy. Nobody believes their fairy tales any longer.
London, 5 July – Net Zero Watch has urged the Government to stand up for consumers and businesses by rejecting the wind industry’s latest demands for more subsidies.
In a move that gives the lie to years of propaganda claiming falling costs, the wind industry’s leading lobbyists have written to the Government, threatening to abandon the UK unless there are hugely increased subsidies for their companies (see RenewableUK press release).
The industry is claiming that unforeseen rising costs now necessitate and justify three actions:
1) A vast increase in the budget for the fifth auction (AR5) of Contracts for Difference subsidies, with an increase of two and half times the current levels for non-floating offshore wind alone;
2) Special new targets and thus market shares for floating offshore wind, one of the most expensive of all forms of generation, and, most importantly of all,
3) a revision to the auction rules so that the winners are not determined by lowest bids but by an administrative decision that weights bids according to their “value” in contributing towards the Net Zero targets.
This would in effect not only increase total subsidy to an industry that was until recently claiming to be so cheap that it no longer needed public support, but also provide it with protected market shares, all but entirely de-risking investors at the expense of consumers. It would also be an open invitation to graft and corruption.
The Government should reject these self-serving demands on three grounds:
1. The UK economy cannot be expected to continue to subsidise a sector that is still uneconomic after nearly twenty years of above-market prices and guaranteed market share. The wind experiment has failed and must be wound down.
2. UK consumers of all kinds, from households to businesses, are already experiencing extreme pressures on budgets, and a further burden on the energy bill simply cannot be tolerated. Government must recognise that households and businesses are unable to afford yet more subsidies to the wind industry.
3. The industry’s current cost difficulties are neither unforeseen nor unpredicted but have been obvious to careful observers for over a decade.
Dr John Constable, NZW’s energy director, said:
It would be both absurd and counterproductive for government to bail out the wind industry in spite of the evident failure to reduce costs. A refusal to learn from mistakes will be disastrous.”
Notes for Editors:
Articles and studies on unrealistic offshore wind bids for Contracts for Difference
The crash in Siemens Energy’s share price on Friday has admirably highlighted an issue with wind costs that colleagues and I have been examining for more than a decade. The painful facts are that (i) wind generation, both onshore and offshore, is more expensive than we are being told and (ii) the performance of wind turbines tends to deteriorate with age, in significant part because of the kind of failures reported by Siemens Energy.
The crash in Siemens Energy’s share price on Friday has admirably highlighted an issue with wind costs that colleagues and I have been examining for more than a decade. The painful facts are that (i) wind generation, both onshore and offshore, is more expensive than we are being told and (ii) the performance of wind turbines tends to deteriorate with age, in significant part because of the kind of failures reported by Siemens Energy. There is strong evidence to support these conclusions, which has been presented in reports published by the Renewable Energy Foundation in 2012 and in 2020 for the UK and Denmark, with updates provided by the Global Warming Policy Foundation and Net Zero Watch.
The news about Siemens Energy brings a strong inclination to say ‘you were warned’. However, their travails are a symptom of a much more widespread disease, which affects all of us, either directly through the costs of electricity or indirectly as the owners of wind farms (via pension funds and other investment vehicles). The plunge in the share price of Siemens Energy is dramatic, but that may be written off as a temporary market response to disappointed expectations. We need to look beneath the immediate story to understand the reasons for the disappointment and their implications for the prospects for wind generation.
The announcement by Siemens Energy focused on higher-than-expected failure rates for their onshore turbines. These were ascribed to problems with key components, but newspaper reports suggest more systematic design faults in recent generations of large turbines. Previous announcements have referred to problems with offshore turbines, and the market reaction suggests few believe that the current problems are confined to onshore turbines. Further, while each of the major turbine manufacturers has its own specific problems, Siemens Energy is not unique in experiencing high warranty costs due to higher than anticipated failure rates.
In increasing order of importance, there are three aspects to note:
(a) Siemens Energy and other manufacturers have given warranties on performance that won’t be met because of higher failure rates. They will incur additional expenses, either to replace components or to compensate wind farm operators for any resulting underperformance. Those costs are the basis for the write-offs that Siemens Energy has had to take. Investors will be painfully aware that the company has been declaring profits when they sell wind turbines, but without making adequate provision for future warranty repair costs.
In accounting terms this is known as recognising future profits for new contracts. When it becomes clear that the contracts will be less profitable, the company must write down the value of previously reported profits and, thus, the value of the assets on its balance sheet. In effect, though perhaps entirely innocently, the company has been misleading investors about its past and current profitability. Senior managers should be feeling very uncomfortable about their positions since the problem was predictable (and predicted).
(b) Warranties have a limited period – often 5 to 8 years – but the higher failure rates will persist and affect performance over the remainder of the life of the wind farms where the turbines have been installed. Their future opex costs will be higher than expected, and their output will be significantly lower. This will reduce their operational lifetimes, which are determined by how the margin between revenues and costs changes as wind farms get older. Lower revenues and higher costs bring forward the date at which replacement or repowering is necessary. These changes will reduce, often quite substantially, the returns earned by the financial investors – pension funds and other – to whom operators sell the majority of the equity in wind farms after a few years of operation.
(c) Siemens Energy and other manufacturers may argue that they can – with time – fix the component and design problems which lead to high failure rates. They may well be correct. The history of power engineering is littered with examples of new generations of equipment which experienced major problems when first introduced but which were eventually sorted out. Many companies have found themselves in severe financial difficulties or even forced into bankruptcy by these “teething” problems. The error in this case has been to pretend that wind turbines were immune to such failures.
The whole justification for the falling costs of wind generation rested on the assumption that much bigger turbines would produce more output at lower capex cost per megawatt, without the large costs of generational change. Now we have confirmation that such optimism is entirely unjustified – the whole development process has been a case of too far, too fast. Again, this was both predictable and predicted. The idea that wind turbines are immune to the factors that affect other types of power engineering was always absurd. The consequence is that both capital and operating costs for wind farms will not fall as rapidly as claimed and may not fall significantly at all. It follows that current energy policies in the UK, Europe and the United States are based on foundations of sand – naïve optimism reinforced by enthusiastic lobbying divorced from engineering reality.
In the longer term it is (b) and (c) that are the big story. With respect to (a), serious analysts have long since recognised that claims made about future wind costs and performance by the wind industry should not be taken seriously. It has been obvious that they were kidding themselves and their investors ever since the last 2010s. Unfortunately, we have now been tied into a high energy-cost future, with all the implications that has for the economy and standards of living.
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