UK: next renewable energy market to go?

In a recent blog post, Craig Morris talked about how the Spanish and Italian wind and solar markets have recently collapsed. Today, he turns his attention to the UK, where the future also looks bleak. And he says renewable energy campaigners should demand “fair payment” and reject the term “subsidy.”

Windfarm in Scotland

The UK’s government is destroying the country’s renewable industry. (Photo by David Skinner, CC BY 2.0)


In my last post, I talked about how solar and wind collapsed in Spain and Italy when these two energy sources collectively approached around a quarter of power supply – but I also stated that this level is not an automatic barrier.

For political reasons, the UK seems poised to phase out policy support for wind and solar at a lower level. Based on DECC’s figures (PDF), wind (offshore and onshore) and solar together made up just under 12 percent of power supply in 2014. Solar came in at just above one percent; wind power just above 10. Overall, renewable electricity grew by more than four percentage points from 14.9 percent of supply in 2013 to 19.2 percent in 2014. Some of this growth came from pellets co-fired at the Drax coal plant.

2015 is not over yet, but we do know that wind power production was up by around 60 percent in the second quarter, and solar continues to be built massively across the country. The country started the year with just under five gigawatts of PV, but it added 2.53 GW in the first quarter of 2015 alone. New installations fell in Q2 to 0.25 GW, but the sudden downturn was mainly the result of the fiscal year ending on March 31. Overall, the share of wind and solar will approach 15 percent of total power supply by the end of fiscal year 15/16. And the government wants to slow down that growth as it becomes painful for the conventional sector.

At the end of August, the government proposed a whopping 87 percent cut in feed-in tariffs for small PV, which could take effect as soon as next January. Likewise, the Renewables Obligation for onshore wind farms are to expire on 1 April 2016.

How have the two sectors responded? With charges that the policy changes will destroy these fledgling industries. In the process, the press and renewable energy spokespeople in the UK are making a terrible mistake – by using the word “subsidy.” Defending “subsidies” is a fool’s errand. Point out instead that the word itself is wrong. What we want is fair payment.

The UK has public healthcare: the National Health Service (NHS). The NHS specifies prices for medicine and healthcare services. These fixed prices are designed to allow pharmaceutical companies and healthcare providers to make a reasonable profit without gouging patients (“customers”). The prices paid to companies are not thought of as subsidies, however. In contrast, the price of medication, especially for low-income households, is subsidized.

Transfer this comparison to the energy sector: providers of healthcare products and services are now power providers, including investors in community wind, biomass and small solar. This group receives fair payment. (Subsidized) patients are now (subsidized) power consumers. The prices power providers need for a reasonable return on their investment are not subsidies any more than NHS payments to healthcare providers are. You are simply paying what these products cost. In contrast, if you want to use tax money to lower the power bills of low-income homes, fine – those are actual subsidies (welfare payments).

In the recent elections, the British Conservatives pledged to “halt the spread of subsidised onshore wind farms.” They are now after solar. Renewable energy campaigners who adopt the term “subsidy” for what is actually fair payment have already lost the argument. “I keep hearing that we are subsidy junkies, it’s not true,” UK Solar Trade Association’s (STA) Leonie Greene told the Guardian. But instead of responding as any labor union director would – “We demand fair payment!” – Greene meekly promises, “The industry wants to be off subsidies as soon as possible.”

The need for fair payment will never go away. The right-leaning Policy Exchange think tank likes onshore wind because it could be “subsidy-free” when it becomes as cheap as gas generation around 2020. Don’t believe it: the power sector will then hit you with system integration prices. Gas turbines can respond to spot market signals; wind turbines respond to the weather. Wind and solar will therefore always need fair payment.

We hear the same discussion in the US: the “value of solar” is greater than retail rates. Yeah, because you have less than one percent PV. By 10 percent, that value has plummeted. So reject the term “subsidy” and demand fair payment today. You will thank me tomorrow!

Craig Morris (@PPchef) is the lead author of German Energy Transition. He directs Petite Planète and writes every workday for Renewables International.

by

Craig Morris

Craig Morris (@PPchef) is the lead author of Global Energy Transition. He is co-author of Energy Democracy, the first history of Germany’s Energiewende, and is currently Senior Fellow at the IASS.

2 Comments

  1. henk daalder says

    On land wind farms van do without subsidy, stimulation or a fair price.
    Everyone country should make it a policy that every home van buy a piece of a wind farm for their own use.
    These families will generate their own power, and have it at cost price, 3 cents per kWh.
    But the most important change is that they will become proud wind farm owners.
    This will give the build of wind farms the speed necessary to fight the climate problem. In COP21 terms the Capacity to build renewable power.

    It will work, because consumers have a future, their children.
    Today, windfarms are build by investors, who are only in it for the money, not for a future.

    So call on the COP21 negotiators to make it a policy target to give every country a consumer market for wind power. Please sign this petition

    https://community.sumofus.org/petitions/generate-your-own-power-at-cost-price-for-cop21-goals

  2. heinbloed says

    One come – one go.

    Background:

    Czech threatened to ban German ‘green power’ 2 years ago:

    http://uk.reuters.com/article/2013/04/17/czech-germany-grid-idUKL5N0D43LA20130417

    Entered talks last year to do so:

    http://www.reuters.com/article/2014/01/09/us-czech-germany-grid-idUSBREA080QQ20140109

    Received support from the wealthy for the plans this year:

    http://www.bloomberg.com/news/articles/2015-07-07/german-green-power-forces-neighbors-to-bolster-blackout-d

    And now the Czech grid needs urgently power from exporting nations, well, in this region this is Germany:

    http://www.reuters.com/article/2015/09/17/cez-dukovany-outages-idAFL5N11N1FB20150917

    In autumn wind power is cheap and plenty full, Bavaria won’t get much from it 🙂

    Already last year the cooling water pipes in Dukovany (unit No.3!) did burst:

    http://www.praguepost.com/czech-news/42477-dukovany-to-shut-down-two-reactors-to-repair-water-pipe-leakhttp://www.reuters.com/article/2015/09/17/cez-dukovany-outages-idAFL5N11N1FB20150917

    One wonders how Bavaria will keep power prices low without Northern German wind power, Bavaria doesn’t want the cables and Czech and Poland becoming regular clients.

    The RE-program of Czech is lousy, protectionism similar to Poland hindered progress on a large scale.
    With the international grid extending this realy doesn’t matter.
    The EU plans 10% of national demands to become connected:

    http://www.upi.com/Top_News/World-News/2015/09/16/Ukraine-scraps-nuclear-reactor-deal-with-Russia/9811442413199/

    So if the UK doesn’t build RE-plants then the export from other places will cover the demand.With consequences on the national economy.

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