Between the Lines: More than one way to meet lower carbon targets

Published on Monday 22 December 2008 20:18

LET me turn my back for a while on the banking disasters of this past year and, just for a change, be a bit controversial. My argument this week is this: the rush to wind power will drive up electricity bills, push about 800,000 people into fuel poverty, and is not the best way to reduce the amount of carbon pollution that Scotland produces.

It pains me a little to say this, because I am generally in favour of renewable power and am even more in favour of cutting carbon output levels. But having come across some pretty compelling evidence in two recent reports, I feel obliged to report them to you. I have long felt that the debate about electricity generation is poorly informed, especially about the economics of it. There are some pretty important decisions to be taken now which will affect the long-term future of Scotland, and it is much better than they should be taken in the light of full rather than partial information.

Buried deep within the reports is the implication that the Scottish Government's energy strategy may be misguided and that, long after it has departed office, Scotland may pay a price for that error in the shape of overly expensive electricity.

First, can we get 50 per cent of our electricity resources from renewables by 2020, the target that the Scottish Government has set? A report compiled by Wood Mackenzie, a highly reputable energy consultancy firm, says that we can. This conclusion, however, is highly qualified.

Currently, Scotland has about 3,000 megawatts (MW) of installed capacity of renewable power generation supplying about 16 per cent of Scottish demand. Allowing for an increase in demand by 2020, that means that perhaps another 6,500MW needs to be installed, the equivalent of about three Longannet power stations.

Though there is much ministerial enthusiasm for more hydro, wave, tidal and offshore wind power, Wood Mackenzie think that little extra will actually come from these sources in the next 12 years. They agree that there is huge potential, but the practical difficulties of turning that potential into a reality are also big.

Technical problems with tapping the power of the sea have yet to be resolved, ways of connecting offshore power plant into the land-based grid have to be found, and the small-scale sporadic nature of untapped hydro power makes it unattractive to developers.

Thus they think that to meet the target, almost 90 per cent of the increased renewables capacity has to come from onshore wind. It means the current wind farm capacity of 1,400MW increasing to 6,600MW, a near five-fold growth. And there are enough wind farm plans at various stages to meet that target.

But will public opinion, which likes wind farms until one is proposed on the doorstep, tolerate that proliferation of turbines, and the power lines needed to bring the electricity to our homes and offices?

Secondly, how much will this cost? The investment cost, says the report, would be 9.5 billion. In today's financial climate, it is questionable whether developers will be able to find that money. True, electricity generation is one of the safer investments just now, but the rush of money to safe options is another reason why the riskier, more speculative, technologies are likely to make slow progress.

An additional cost is the upgrading of the grid needed to transmit the power. The upgrade of the Beauly-Denny transmission line is only one of many upgrades required which are likely to cost well over 1bn. This will have to be paid by us through our bills, and we also have to subsidise the renewable power producers through the renewable obligations system.

A recent report by a House of Lords committee on the implications of meeting the British government target of 15 per cent of electricity from renewables by 2020 reckoned that the subsidy element would add about 50-60 to the average annual household bill by 2020 and the cost of altering the transmission system would add another 30 a year. The 80 cost, the committee said, represented a 20 per cent increase on the average bill of 400.

This is an aspect of the renewables controversy which is not well known and, if it were, it might change the nature of the debate. It is estimated by Ofgem, for example, that every 1 per cent increase in electricity bills adds about 40,000 people in Britain to the fuel poverty lists. So the rush to renewables could add 800,000 to those already suffering fuel poverty.

Is this the best way to cut carbon emissions which, after all, is the object of the whole exercise? Wood Mackenzie produced an alternative scenario for changes in electricity generation which assumed that onshore wind did not expand as fast as in its base scenario. Given the delays caused by the planning system and the degree of public objection to wind farms, this seems entirely reasonable.

The alternative route they envisaged was that carbon capture and storage technology develops faster than is generally supposed, that development of other renewables is the same as in their base case, and that coal-fired Cockenzie power station shuts in 2011 rather than 2016. They also propose three new 400MW gas-fired stations are built. They admit this is "ambitious".

Wood Mackenzie calculate the reduction in carbon output from electricity generation in their base case to be 6 million tonnes of from the 2008 total of 18 million tonnes, a 33 per cent cut. But in the alternative scenario, the reduction is 9 million tonnes of , a 50 per cent fall.

I have no information about the likely effect on bills of heading down this route. But on the basis that the capital costs will be higher, the transmission system costs about the same, and the subsidy cost lower, it seems reasonable to think that about the same will be added to household bills.

What this means is that "sustainable" is not synonymous with "low-carbon". The alternative route means burning more rather than less fossil fuel, yet it produces a lower carbon electricity system.

The Wood Mackenzie report generated headlines because of its advice that, in order to be sure of producing enough base load power, Scotland ought to be thinking about building a nuclear power station. But its other implications – that renewables are expensive and not necessarily the fastest way to cut carbon pollution – are just as important.

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