Did the PM tell the truth about Net Zero?
Fact-checking Boris Johnson’s answer to my PMQ
It is critical that Britain’s decarbonisation policies are both affordable and technologically feasible. If the adoption of technologies such as wind and solar “farms”, square miles of batteries, hydrogen and widespread adoption of air source heat pumps leaves people colder and poorer, no-one is going to want to copy our example, and it won’t be very popular at home either. But is our example economically compelling? Is it even doable?
In response to my question on this topic at PMQs, the PM said that we were experiencing “vertiginous” falls in the prices of batteries as well as wind and solar power. It is all going to be OK if we adopt a spirit of “promethean technological optimism”. But what’s the truth about the PM’s claims?
As a matter of fact, renewable energy in Britain has not, as the Prime Minister suggests, been getting cheaper. Subsidies to renewable electricity generators cost consumers over £10 billion a year at present, and the average subsidy on top of the wholesale price can be conservatively calculated at about £80/MWh, making it extremely expensive by any standard.
The Prime Minister specifically claims that the cost of offshore wind power has dropped by 70 per cent in the last decade. That is untrue. Actual subsidies paid per MWh generated have not fallen, but as a matter of public record costs have increased sharply since their introduction in 2002, when they stood at just over £40/MWh, right up to the present when they stand at just over £110/MWh.
Perhaps the Prime Minister has been misled by his officials by the low offshore wind bids for non-binding “Contracts for Difference”. Most of these low-price contracts have not yet been taken up, and few if any seem likely to survive since, again as a matter of fact, there is no evidence that the underlying cost of offshore wind has fallen sharply. The real-life experience of offshore wind companies has been of higher maintenance costs and a shorter working life of equipment than the original business models planned for.
The Prime Minister is confidently trying to pick winners on the basis of industry sales talk
Audited accounts show clearly that offshore wind capital costs remain high and that their operation and maintenance costs are rising rapidly.
The PM also believes that the costs of solar have fallen sharply, but once again government estimates of these are inconsistent with data in audited accounts. Research in progress and shortly to be published shows that the total capex of solar “farms” in the UK fell by only 10 per cent in the period 2012 to 2018, and averaged about £1m per megawatt installed. Bizarrely, the government cost estimates are only about 60 per cent of that figure. Similarly, solar industry sources claim operating expenditure at about £20,000/MW per year while audited accounts record that it is 50 per cent higher. So they cost more to build and cost more to operate than the government has been led to believe.
And then on top of all this, we have the network and system costs of connecting and managing uncontrollable renewables, which are high and have already affected consumers. In 2002, before renewables, the cost of National Grid’s “Balancing Services” were about £400m per year. They now stand at about £1.8 billion a year with gas and, just this week, coal powered traditional power stations stepping in to keep the lights on, and the trend is upwards, very largely due to renewables. Batteries have been suggested as a way to manage this problem, and the Prime Minister clearly believes in their promise. But using storage on the scale required will be very expensive, even if batteries themselves are cheap, as the Prime Minister promises. Huge expansion in global demand of the rare metals required with unmatched growth of supply is already escalating the price of these commodities. Medium term pricing of batteries is likely to increase faster than the cost of production savings within new battery “mega-factories”.
Government cost estimates are invariably based on the predictions of the industries concerned, but when we can check those predictions against the reality of audited accounts, as we can with wind and solar, we find that the industry claims appear to be… misleading.
The Prime Minister thinks we should be optimistic, and he called on the example of Prometheus. I too like to live life with a glass half full attitude but we should be realistic and rational. The Prime Minister is confidently trying to pick winners on the basis of industry sales talk. The reality is often very different — the good residents of Lake Havasu, Arizona have a bridge to prove it.
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