Monday, October 26, 2020
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Green power threat to your pension pot

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‘AMAZON, Facebook and Microsoft have all been criticised for expanding their data centres without securing additional supply of clean energy. Investors in these technology companies will therefore need to encourage a faster move to cleaner energy sources in order to avoid adverse environmental impacts.’

The words, surprisingly, are not the work of the fevered mind of some environmental activist but come from a blog post by two senior figures from the investment giant Aberdeen Standard Investments (ASI): Jeremy Lawson, its chief economist, and Amanda Young, its head of ‘responsible investment’. 

To see the problem with what they are saying, you need to understand that ‘cleaner energy sources’, which in this country mostly means offshore wind power, is much more expensive than electricity generated from gas-fired power stations. There has been more than a decade of disinformation from Greens and their supporters about the cost of wind power. First we were assured that wind power costs were falling rapidly, and then that it had achieved ‘grid parity’. Unfortunately for these charlatans, however, you can’t fool all of the people all of the time, and we now have hard data from audited financial accounts for the majority of the UK’s offshore windfarms. A paper in the journal Energy Policy reported that costs remain about 2-3 times those of gas and are falling only slowly, if at all.  Add the cost of dealing with the intermittent supply from windfarms, and the ratio may well be 4 to 1. And before you start trying to tell me about the much lower wind energy prices that are on the horizon – as (allegedly) revealed by recent bids into the government’s Contracts for Difference auctions – please note that these are not what they seem. It is far more likely that they are an attempt to ward off competition and keep the subsidies flowing than a reflection of a fundamental change in costs.

So returning to the blog post with which we began, Mr Lawson and Ms Young appear to be calling on these tech giants to move to sources of electricity that are much more expensive than the alternatives. Assuming that ASI does in fact have investments in the companies it is pressuring, it’s hard to see how this will help their bottom lines. If Microsoft, say, gets power directly from a windfarm, it can only reduce returns. If it buys it from the grid, the direct effect will be less, since it will be a mixture of power from many sources, but the tendency will still be to push electricity prices up for everyone, including all the myriad UK companies in which ASI invests, and ultimately consumers too. It’s fair to say that this is going to be hugely damaging to an economy already on its knees in the aftermath of the coronavirus pandemic.

I am surprised that ASI (and to be fair, dozens of other investment firms too) are able to do this. Millions of ordinary people entrust the firm with their pension funds, and it has a fiduciary duty to maximise returns. One would have thought that pensioners would be less than amused to find that ASI was beavering away trying to reduce the size of their retirement pots.

It’s startling that one of our largest financial institutions should be seeking to damage the economy in this way. Worryingly, though, it seems keen to expand its efforts. In the same blog post, Mr Lawson and Ms Young say that the recession ‘represents an enormous opportunity to accelerate policy change’ and, extraordinarily, worry about the government prioritising ‘short-term growth over long-term sustainability’. They really say that. As businesses go bust all around us, heaven preserve us from short-term growth!

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Andrew Montford
Andrew Montford
Andrew Montford is Deputy Director of the Global Warming Policy Forum GWPF does not accept funding from energy companies or anyone with a significant interest in an energy company.

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