For many years, the Holy Grail of renewables has been to hit “Grid Parity” – in other words, to generate energy so cheaply that it’s directly competitive with conventional generation, and so would require no subsidy. It would stand on its own feet. And let me be clear – UKIP’s rooted objection to renewables is based not on ideology, but on economics. We’d be happy to support genuinely competitive renewables. Indeed we do, in the case of hydro. But of course with the caveat that the renewable technology should not do unacceptable damage to the environment in terms of landscape, visual intrusion, and the decimation of birds and bats.
We believe that solar will indeed achieve grid parity in the next few years – it’s probably there already if you put your panels in the Sahara Desert – but we’d rather they were not put on good agricultural land in our dull Northern climes, where sunlight is rarer. But now – believe it or not – the wind industry is claiming grid parity (see photo above). Do their claims stand up to scrutiny? Sadly, no.
Of course these claims all depend on the definition and calculation of ‘grid parity’. If your definition is incomplete, and your calculation dodgy, then the conclusions are likely to be misleading. What people want to know is whether this or that renewable energy is as cheap to consumers as energy from our sources. Unsurprisingly, it turns out that many claims to ‘grid parity’ are so defined or calculated that they don’t in fact show that the energy is fundamentally economic. One definition may exclude electricity grid operation costs, which are very high for most renewables, another may load the costs of fossil fuels with rather arbitrary assumptions about climate change costs. The devil is in the detail.
Unfortunately, the wind industry is very secretive about the capital costs of its equipment, while the installation costs vary from country to country depending on labour costs, and the system management costs are a complex area and too little studied. Furthermore, performance varies a great deal from location to location and declines over time. So the cost of wind power, and renewables generally, is both opaque, and variable from place to place.
Several points need to be made about the IRENA report.
The IRENA study uses the Levellised Cost of Electricity (LCOE) method that is notoriously inappropriate for uncontrollable generators such as wind power (and solar). The cost of delivering the electricity to consumers is so high that the appearance of competitiveness with fossil fuels evaporates if the extra costs are taken in to account. In fact, in the UK it would seem that even if the LCOE cost were zero, the additional system costs would still make wind energy more expensive than energy from conventional sources.
These studies often go on to add “the costs of climate change” to the price of fossil fuel electricity. This is largely arbitrary, since estimates of the social cost of carbon are almost as contentious as climate change itself. Indeed (separate point) the presumed “social cost” of CO2, sometimes described as “an externality”, is at the heart of specious claims that “subsidies for fossil fuels exceed subsidies for renewables”. The estimates of “externalities” are real finger-in-the-air stuff. Indeed it is arguable that the externalities of atmospheric CO2 are positive. It drives plant growth, bio-mass formation and crop yields. It helps feed a hungry world. It is, quite literally and visibly, greening the planet.
One critical aspect which the wind industry studiously ignores in its claims for grid parity are the costs of conventional back-up and the inefficiency exported by intermittent renewables to the back-up (typically gas). Because wind is variable, the back-up must run intermittently and variably to complement the wind. (Note that you have double the capital costs – you pay for wind capacity and back-up capacity). But a gas plant run intermittently is inefficient. It burns more gas and emits more CO2 per unit of output than it would if it were run properly.
If you want proof of this proposition, it lies in the “Capacity Payments” to operators of back-up plants. They would simply not be viable run intermittently, so they need yet another subsidy (in addition to the existing multi-layered subsidies for landowners and wind operators).
So maybe these claims of grid parity need to be taken with a pinch of salt. And we’ll ask the Killer Question: If they’ve achieved Grid Parity, why is the industry making such a song and dance about the proposed withdrawal of on-shore wind subsidies proposed by the present UK government?
In fact, the GWEC poster is cynical spin, and has little foundation, which raises the further question: Why, after decades of subsidies, are these technologies still not fundamentally competitive? Perhaps it’s time to stop the subsidies. Real world market pressure would concentrate minds, and make them focus on reducing costs, rather spraying consumer funds all over the streets of Brussels in the form of expensive advertising campaigns that don’t stand up to scrutiny.