Blowing in the wind: are Boris’s renewable ambitions realistic?

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12 mins. to read
Blowing in the wind: are Boris’s renewable ambitions realistic?

Boris Johnson wants us to set our gaze beyond the coronavirus pandemic (and Brexit) and to contemplate a future when our homes are powered by wind alone. Is he tilting at windmills like Don Quixote? Victor Hill is asking.

The vision thing

Right now, the British prime minister’s in-tray is full – but one of the items requiring his keen attention is the UK’s commitment to transition to a net carbon neutral economy by 2050, as decreed by his predecessor, Mrs May. During his digital address to the virtual reality Conservative Party Conference 2020, beamed through cyberspace on 06 October, one of the key themes was to build back better by harnessing a valuable resource which Britain possesses in abundance: wind.

Boris Johnson announced a target of a fourfold increase in the amount of electricity generated by offshore wind turbines by 2030. He said that in ten years’ time wind power would be supplying every home in the country. In the very recent past many serious analysts opined that wind power would never be economically viable without massive subsidy. Indeed, our prime minister once wrote in his days as a journalist that wind power couldn’t blow the skin off a rice pudding. But ten days ago, the PM made it the centrepiece of his policy-setting conference speech.

The share of wind power in the UK national energy mix has been rising for years just as our reliance on CO2-belching coal has declined. Thirty years ago, Britain generated around 70 percent of its electricity by burning coal. Last year that was down to just over two percent. As I write (Thursday) the National Grid Live Status website informs me that the UK is generating 52.8 percent of its electricity from fossil fuels (coal, oil and gas); 23.4 percent from renewables (wind, solar and hydroelectric); 21 percent from nuclear and biomass; and the other 2.8 percent is coming through an interconnector from the Netherlands.

The share of wind power in the total energy mix right now on a not particularly windy autumn day is 11.4 percent. That equates to 4.7 gigawatts (GW). Mr Johnson mentioned a target in his speech of 40 GW for electricity generated by wind power, which would be enough to power the entire UK demand this Thursday lunchtime. The current maximum capacity of the UK wind turbine network is around 10 GW. So, Mr Johnson envisages increasing wind power capacity fourfold.

What will it cost?

In order to achieve that target the UK would have to invest an estimated £50 billion and build new turbines at a rate of about 240 a year – up from the current rate of 130 a year – over ten years, according to Aurora Energy Research. Building such large new arrays will require the agreement of planning, environmental and aviation authorities. The network of power cables on the sea floor which connect the turbines with the mainland will also need to be upgraded.

But a study by Professor Gordon Hughes of Cardiff University published on the Briefings for Britain website suggests that, contrary to what politicians and industry leaders claim, costs of installation and production of wind power arrays are rising and future projects will require government i.e. taxpayer subsidies. He thinks that government cost estimates are inaccurate and compares them to the cost estimates of other infrastructure projects such as the HS2 rail link which is still burgeoning. The real cost of Boris’s target will be more like £150 billion, paid over 15 years, says Professor Hughes. He thinks that, as a result, it will be necessary to double the cost of electricity for consumers by 2030.

Taking into account rising costs and lower yields as turbines age, Professor Hughes reckons that revenues would eventually dip below operating costs by an estimated £27 billion a year. Ultimately, either the taxpayer or the consumer will have to make up this shortfall. So, there seems to be a significant difference of opinion on the economic viability of wind power.

Pricing

One way that the government has sought to expand the share of wind power in the energy mix has been to offer electricity distribution companies such as Scottish and Southern Energy (LON:SSE) and Equinor (OSE:EQNR/NYSE:EQNR) guaranteed 15-year electricity price contracts. As recently as 2014 the government was signing contracts with developers guaranteeing a price of £140 per megawatt hour (MwH). But in the most recent price auction for wind-generated electricity, bids came in at as low as £39.65 per MwH.

Renewable energy is pushing down the wholesale price of electricity, thus increasing the difference with the guaranteed price which is ultimately underwritten by consumers. But developers are remunerated based on the wholesale price and therefore face falling returns on investment and likely increased finance costs. Investors in wind turbine arrays tend to be big-ticket players including utility companies, infrastructure funds and pension funds. Wind turbine arrays are now considered to be a mature technology with guaranteed demand and therefore a low-risk investment. About 35 to 50 percent of the overall cost of renewable energy is attributed to financing costs, according to the International Energy Agency (IEA).

Huge advances in efficiency have been achieved by advances in turbine design. Developers have competed to build taller, wider turbines that can capture more wind energy per blade rotation. The first wind turbine in the US in the late 19th century supposedly had a capacity of 12 kW with a 17-metre rotor span. Siemens Gamesa earlier this year unveiled a turbine with a 14 MW capacity and rotor blades panning 222 metres. The IEA claims that the average cost of building a 1 GW offshore array, including transmission costs, was $4 billion in 2018. But this figure is set to drop by up to 40 percent over the next decade.

Now developers are planning to build turbines on floating platforms far out in the deep ocean where the wind blows almost constantly. But clearly, the transmission costs from such deep-sea locations will be much higher.

Green shoots

The Committee on Climate Change, which advises the government, believes that the network would then have to be expanded further after 2030 to achieve a capacity of 75 GW by 2050 in order to reduce UK CO2 emissions to net zero. The eco-warriors of XR are probably not aware of it, but the UK has already reduced its greenhouse gas emissions by about 44 percent in the last ten years – that’s more than any other G7 country. Even as the village NIMBYs on land protested against the construction of onshore wind farms, wind turbine arrays continued to be erected in the North Sea and elsewhere.

About 40 percent of a wind turbine’s cost over its lifetime arises from operating and maintenance costs, according to the UK’s Offshore Renewable Energy Catapult. There is a huge demand for maintenance services to minimise the time a turbine remains switched off for repairs. As a result, a host of innovative new British companies have emerged to meet this demand.

BladeBug makes smart semi-autonomous robots which perambulate down turbine blades like giant flies using suckers, making repairs and scanning for cracks as they go. Drone company Cyberhawk specialises in drones which survey wind turbine arrays. And Bristol-based Rovco uses autonomous vehicles to carry out underwater inspections.

Octopus Energy recently announced that it will double its workforce, creating 1,000 new jobs and helping to make the UK the Silicon Valley of energy. Just as Uber doesn’t own its cabs and Airbnb doesn’t own holiday homes, so Octopus doesn’t own any electricity generating capacity. The company uses its cloud-based Kraken platform (originally developed by cryptocurrency miners) to supply its customers with the cheapest electricity available. That means solar energy when the sun is shining and wind power when the wind is blowing; and nuclear when neither of those is in plentiful supply.

Seamach Energy is a company based in Wiltshire which has designed a new breed of floating turbines. It claims that these produce more energy using fewer turbines than fixed structures (i.e. those which stand on the seabed). Yet the company has found it challenging to secure sufficient funding.

Edinburgh-based Gravitricity is developing a system to store green energy in mining shafts given the growing need for technologies which can capture and store energy during periods of low demand and release it rapidly when required. But it was unable to find backing in the UK. Eventually, it teamed up with the Dutch company, Huisman Equipment.

The new green energy giants are all foreign

For all these innovators, Britain lacks a major wind turbine manufacturer of the stature of Denmark’s Vestas (CPH:VWS).

Over in the USA this month, NextEra Energy (NYSE:NEE), a Florida-headquartered solar and wind power electricity generator, briefly surpassed the veteran oil major ExxonMobil (NYSE:XOM) in market capitalisation to become the largest American energy company. Other green energy giants include Denmark’s Ørsted (CPH:ORSTED) and Norway’s Equinor (formerly Statoil). The Spanish-German joint venture Siemens Gamesa (MAD:SGRE) is listed on the Madrid, Barcelona, Valencia, and Bilbao Stock Exchanges and is part of the Ibex 35 index. Currently Siemens Energy AG holds 67 percent of the stock with the remaining 33 percent in public hands. Spain’s Iberdrola (BME:IBE)is not far behind. All these companies have invested in UK wind turbine arrays.

Causes for concern

This week National Grid (LON:NG.) warned that Britain’s electricity will be in short supply over the next few days after a string of power plant outages and unusually low wind speeds this week. The company announced on Twitter that:

“Unusually low wind output coinciding with a number of generator outages means the cushion of spare capacity we operate the system with has been reduced…We’re exploring measures…to increase our buffer capacity.”[i]

The warning is the second from the electricity system operator in recent weeks. In mid-September National Grid issued an official warning to the electricity market that its power buffer had fallen below 500 MW and it may need to call on more power plants to help prevent a blackout. That notice was later withdrawn.

Wind is intermittent, as is sunshine, and therefore needs to be managed carefully in order to balance supply and demand. Non-renewable capacity, principally gas turbine generators, of which there are two kinds, needs to be maintained on standby at all times. The cost of this backup capacity is usually left out of the calculation of the cost of renewable energy.

The UK has all the right resources to create green energy champions – coastline, wind, technology and engineering talent. But wind power alone will never be enough. What Mr Johnson did not mention in his speech was our need to increase our nuclear capacity, possibly using a new generation of small reactors. And then there is hydrogen power which is advancing apace. Hydrogen cars – and even hydrogen airplanes – are now viable. I’ll explore that soon.

***

Boris Johnson is the prime minister of the United Kingdom. But, since the coronavirus pandemic was unleashed upon us, he increasingly acts as the prime minister of England only, with the first ministers of Scotland, Wales and Northern Ireland officiating in their newly acquired unofficial status of national leaders. In fact, there is a general usage now, I think first initiated by the BBC, to refer to the four nations: when there is actually only one nation state (at present), namely the UK. England, Scotland, Wales and Northern Ireland are not nation states and therefore they are not nations – they are countries which are (for now) in union.

As the pandemic has progressed, so the first ministers of the three devolved countries have increasingly arrogated powers to themselves that were never prefigured by the legislation enacted to enable devolution. I would love to know by what legislation they are entitled to determine their own lockdown rules. (Not that I am a fan of lockdowns – as I explained in the webinar I did with James Faulkner on Wednesday this week).

Now, the first ministers of Wales and Scotland are proposing to limit the entry of UK nationals into their countries from other parts of the UK. That is not entirely unreasonable. I can understand why Mark Drakeford is not keen on coach loads of spluttering Liverpudlians turning up in Llandudno for a knees-up. But any restrictions on internal movement within a given nation state should be determined by the government of that nation state – which resides in our case in Westminster. The isolation of Hubei Province in January was determined in Beijing; and the isolation of Lombardy in February (which did not work) was decided in Rome. I think (correct me if I am wrong) the closure of the Victoria-New South Wales border was sanctioned by Canberra.

There is a perception – not just in England – that devolved powers have been hijacked by those who devoutly wish for the break-up of the UK. Ms Sturgeon in Scotland has consistently sought to differentiate Edinburgh from London; though, in reality, the rules in Scotland have not differed materially from elsewhere in the UK. She has consistently adopted a more cautious stance – but then she does not have to pay the costs of further lockdowns as in the fall in the tax-take and the inexorable rise in the national debt. Those are Westminster’s problems.

And yet, and yet…The Johnson government has floundered and vacillated, over-promised and under-delivered; while Ms Sturgeon has captained her tartan craft the assured aplomb of  Virgil Tracy landing Thunderbird II. The latest polls taken north of the border make for depressing reading. An Ipsos Mori poll this week reported that 58 percent of Scots now favour separation. 72 percent said they were satisfied with the job Ms Sturgeon was doing, while 76 percent were dissatisfied with Mr Johnson’s performance. There is obviously a connection between the first poll and the second.

The problem is not about who pays the bills – though it is clear that an independent Scotland in the EU would be entirely dependent on the grace and favour of the Germans. It’s about British identity; which, for people like me who still consider themselves British, appears to be in retreat. That is partly, I suspect, because our national broadcaster, the British Broadcasting Corporation, seems not to like us very much.

If Scotland were to sue for divorce the process of disentangling British and Scottish assets would make Brexit look like a stroll in the park. It would be ghastly. There must be a way to keep this extraordinarily successful union of like-minded peoples who share the same language, heritage, great sense of humour and interests together.

It’s tragic that the Westminster government’s attentions currently lie elsewhere.


[i] See: https://www.theguardian.com/business/2020/oct/14/national-grid-warns-of-short-supply-of-electricity-over-next-few-days?fbclid=IwAR3vuDsksK-Ylgmab2BKhrOTnQX7Tjj5gcG_puwDQ4NBJDs_SzL-8OFsDd4


Comments (3)

  • Lawman says:

    Use of wind power in the UK is understandable given its geographic location. However, the wind is intermittent – it does not blow consistently. Likewise solar power.

    The solution is storage of the power generated, which needs suitable batteries. I have read that battery capacity and cost is improving.

    As such, what ‘battery’ company would you buy? GRID?

  • Paul Carless says:

    True about Scotland England………various mafias involved in some power grab
    Nothing new
    As for wind I am conceptually all for offshore wind farms.
    I have been invested in Greencoat wind…..at a nice 5% dividend…….but they decided to dilute the shares and sell more at 131p (it was 146p)……….saying that it would increace share holder value……….I don’t get their logic…….I feel ripped off……..it is now 135p …….all they are doing with the extra money is buying some old farm from SSE ……and paying off debts when interest rates are so low…….so what ……….feels like some gravy train to me.

  • Victor Hill says:

    Hi Lawman – Good point. I’m goping to do a piece on battery technology shortly. Watch this space. Best regards, Victor

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