Nigel Adams is the MP for Selby and Ainsty.
In recent weeks, the Government’s flagship Energy Bill has edged closer to receiving royal assent. This is an important piece of legislation that will finally realise our party’s manifesto commitment last year to put an end to subsidies to onshore wind farms once and for all.
Many of my colleagues would argue that this is long overdue. Indeed, a year ago I introduced the Onshore Wind Turbine Subsidies (Abolition) Bill that sought to achieve the exact same objective, on the basis that one man’s subsidy is another man’s tax. It is crucial to make sure that when we spend money, we do so wisely and minimise the cost to the bill payer.
While I’m pleased to say that the Energy Bill’s impending assent with finally put this particular issue to bed, a new report published by NERA Economics and Imperial College London demonstrates that there is clearly more work to do if we are to ensure we are backing the most affordable renewables available.
Their research shows that the costs of supporting intermittent renewables – such as onshore, offshore wind and solar – are even greater than we have been led to believe. This is because the mechanism the Government currently uses for awarding renewable subsidies, known as Contracts for Difference, only takes into account the costs of building and operating these technologies, and not the additional costs they place on the UK’s energy grid as a whole – which are very substantial.
These so-called ‘system costs’ are not widely known or appreciated by the public but these are costs that we are all ultimately paying for through our household energy bills, in addition to the separate green levy we pay to support renewables.
For example, when the wind stops blowing and the sun stops shining – which as any good resident of these Isles knows is most of the year – the energy generated by wind and solar farms drops significantly. This forces the hand of National Grid, who manages the UK energy’s grid, to pay a back-up generator (usually gas) to switch on and generate power to fill the void. This action comes with an associated cost.
Because these intermittent renewables are unreliable, they also require much larger amounts of back-up than traditional coal or nuclear power stations, which have far greater control over how much electricity they generate and when. Again, this comes with an associated cost.
Now, if you think the generators who create these costs actually pay for them, or that the Government takes these issues into account when deciding what renewable projects to support and whether they represent value-for-money, you would be thinking along sensible lines. But you would be wrong.
Amazingly, none of these costs are factored in.
In a perverse outcome, not only does this benefit intermittent technologies by making them look cheaper on paper than they really are, it also handicaps other technologies which actually are available when needed – most notably biomass and natural gas because their high availability means they pick up more than their fair share of the bill.
The NERA and Imperial report also points to a cost effective solution. Biomass is the most affordable renewable technology available when whole system costs are factored in. If it was allowed to compete on a level playing field with other renewables, it could save the UK around £1.9 – £2.2bn by making the energy grid more reliable and avoiding unnecessary system costs. This would equate to an average saving of £73 – £85 on every household bill in the country.
The reason biomass is that much cheaper is because unlike intermittent renewables like wind and solar, biomass is reliable, flexible and re-uses existing infrastructure by converting existing power stations to use compressed wood pellets instead of coal.
The last point is particularly pertinent and crucial given that we are living through a volatile period when coal power stations are closing across the country. Eggborough, Ferrybridge, Fiddlers Ferry and Rugeley have all in recent months announced their intention to close or at best operate on a very limited basis. This is terrible news both for the communities living in those areas and the UK’s energy security. Since the beginning of this year there been 2.5GW of coal closures announced, on top of the 4.9GW announced during 2015 – a significant amount of power on the grid. These closures are creating real security of supply concerns and in recent months have forced National Grid to rely on expensive emergency measures to manage the energy grid and keep our lights on.
If the Government really is keen to take coal off the grid by 2025 as it has indicated previously, why not do this quickly and cheaply by supporting biomass conversions? They already have a mechanism to do so through the existing auction design for renewables. Because biomass is in a separate auction ‘pot’ to onshore wind, the Government could include funding for biomass in this year’s CfD allocation round without risking further new support for onshore wind.
This Government should act in accordance with the letter and spirit of our manifesto commitments and support the cheapest, most reliable renewable we have available to us and one that will also enable existing power stations to stay on the grid rather than forcing us to build expensive new ones.
The clock is ticking for the Government to take meaningful action on this issue. It has committed to holding three auctions for renewable support between now and 2020, with the first auction due at the end of this year. By allowing biomass to compete in these auctions on a level playing field with other technologies, the Government could save taxpayers billions of pounds and make the UK energy grid more secure in the process. To do nothing and continue on with the status quo would simply be inconsistent with its oft-repeated commitment to securing the country’s renewable future at least cost to consumers.