IN 2017 it was announced that windfarms had agreed to sell power to the grid at just £57 per megawatt hour. It heralded, said the cutters-and-pasters of press releases in the mainstream media, a new era of cheap renewable power. A few stubborn souls pointed out that there was no sign that windfarms were getting any cheaper to build and run, but such naysayers were shunned and insulted, and the establishment carried on as if nothing had happened.
Five years on, and the windfarms concerned are busily selling power into the open market at anything between four and ten times the prices they had agreed. Their agreements have gone unfulfilled. The extra cost to consumers is running into billions of pounds every year.
We were tricked, big time. But we live and learn by our errors. You’d have to be pretty slow on the uptake to fall for a multi-billion-pound trick like that a second time, wouldn’t you?
Unfortunately, this is precisely what Sir John Armitt, the chairman of the National Infrastructure Commission, seems to have done. In fact, rather than being ‘once bitten twice shy’, he seems to be pleading ‘Bite me harder, and this time do it where is really hurts.’ Let me explain.
In an article in the Telegraph, Sir John says we need lots more renewable energy, and adds that the latest auctions ‘secured prices nine times cheaper than current high electricity prices set by gas generation’. Well, yes, but we have already seen that auction price contracts are a trick; the last round of agreements were abandoned the moment operators found they could get more in the open market. Does Sir John not know this? Can the chairman of the National Infrastructure Commission really be so divorced from the realities of the energy system? Moreover, he clearly understands that the price differential between gas-fired and wind prices is mostly temporary – a function of the war in Ukraine driving up gas prices – but still believes it should motivate permanent changes to the electricity system. What can he be thinking?
Sir John’s positions on other aspects of the energy system are equally mystifying. He seems to think there is a global market for gas. But a global market would have a global price, and that is simply not the case: European gas prices are (in dollar terms) currently 70 per cent higher than UK ones and 800 per cent higher than US ones (!) Does Sir John not understand this? How can he possibly think there is a global market? Is there nobody at the National Infrastructure Commission who can put him right?
Nor is the auction price trick the only example of Sir John failing to learn from experience. In one notable flight of fantasy in his article he says that ‘reducing prices, enhancing energy security and reaching net zero carbon emissions by 2050 all point in the same direction’. Huh? Between 2002 and 2020, a period when gas prices were broadly flat, electricity prices for consumers roughly doubled, a function of the inefficiencies that renewables impose on every other generator and on the grid as a whole. How can he think that more renewables will bring lower prices? He understands that the gas price spike is temporary! And as for security, the electricity grid has been severely destabilised by renewables (because they have no ‘inertia’, in the jargon). A million people were left in the dark in 2019, and the grid as whole is now in danger of falling over completely. But Sir John wants more!
In similar fashion, he says we should be furiously insulating our housing stock. Yet we simply cannot get away from the fact that most of the housing stock is old and, in our humid maritime climate, needs to breathe to prevent damp and mould. Has Sir John not learned from the fiasco the last time a crash insulation programme was tried? Two million homes were damaged. Lives were ruined. Is he even aware that this happened?
On and on he goes. We should use hydrogen to store energy, he suggests, without apparently a thought to the cost involved. Can the chairman of the National Infrastructure Commission really not understand that in going from electricity to hydrogen and back, two-thirds of the energy is lost? So when we start emptying the hydrogen store, it will set market prices, which will soar in response, probably to levels similar to what we see today, far, far higher than the economy can bear.
In other words, Sir John’s ideas will deliver a permanent energy crisis and a great depression. It is no more than you would expect from such an epitome of the British establishment: urbane, erudite, a consummate networker. And utterly incompetent.