EconomicsEnergy SystemsSociety

A Great Green Rip-Off

The feed-in tariffs about to be introduced here are extortionate, useless and deeply regressive.

by George Monbiot: journalist, author, academic and environmental and political activist, United Kingdom

Those who hate environmentalism have spent years looking for the definitive example of a great green rip-off. Finally it arrives and no one notices. The government is about to shift £8.6bn from the poor to the middle classes. It expects a loss on this scheme of £8.2bn, or 95% (1). Yet the media is silent. The opposition urges only that the scam should be expanded.

On April 1st the government introduces its feed-in tariffs. These oblige electricity companies to pay people for the power they produce at home. The money will come from their customers, in the form of higher bills. It would make sense, if we didn’t know that the technologies the scheme will reward are comically inefficient.

The people who sell solar photovoltaic (PV) panels and micro wind turbines in the UK insist that they represent a good investment. The arguments I have had with them have been long and bitter (2,3). But the debate has now been brought to an end with the publication of the government’s table of tariffs: the rewards people will receive for installing different kinds of generators (4). The government wants everyone to get the same rate of return. So while the electricity you might generate from large wind turbines and hydro plants will earn you 4.5p per kilowatt hour, mini wind turbines get 34p, and solar panels get 41p. In other words, the government acknowledges that micro-wind and solar PV in the UK are between seven and nine times less cost-effective than the alternatives.

It expects this scheme to save 7m tonnes of carbon dioxide by 2020 (5). Assuming, generously, that the rate of installation keeps accelerating, this suggests a saving of around 20m tonnes of CO2 by 2030. The estimated price by then is £8.6bn (6). This means it’ll cost around £430 to save one tonne of carbon dioxide.

Last year the consultancy company McKinsey published a table of cost comparisons (7). It found that you could save a tonne of CO2 for £3 by investing in geothermal energy, or for £8 by building a nuclear power plant. Insulating commercial buildings costs nothing; in fact it saves £60 for every tonne of CO2 you reduce; replacing incandescent lightbulbs with LEDs saves £80 per tonne. The government predicts that the tradeable value of the carbon saved by its £8.6bn scheme will be £420m (8). That’s some return on investment.

The reason for these astonishing costs is that the government expects most people who use this scheme to install solar panels. Solar PV is a great technology – if you live in southern California. But the further from the equator you travel, the less sense it makes (9). It’s not just that the amount of power PV panels produce at this latitude is risible, they also produce it at the wrong time. In hot countries, where air conditioning guzzles electricity, peak demand coincides with peak solar radiation. In the UK peak demand takes place between 5 and 7 on winter evenings. Do I need to spell out the implications?

We have plenty of ambient energy, but it’s not to be found on people’s roofs. The only renewables policy that makes sense is to build big installations where the energy is – which means high ground, estuaries or the open sea – and deliver it by wire to where people live. But the government’s scheme sloshes money into places where resources are poor and economies of scale impossible.

We don’t need to guess the results: the German government made the same mistake ten years ago. By 2006 its generous feed-in tariffs had stimulated 230,000 solar roofs, at a cost of E1.2bn. Their total contribution to the country’s electricity supply was 0.4% (10). Their total contribution to carbon savings, as a paper in the journal Energy Policy points out, is zero (11). This is because Germany, like the UK, belongs to the European Emissions Trading Scheme. Any savings made by feed-in tariffs permit other industries to raise their emissions. Either the trading scheme works, in which case the tariffs are pointless, or it doesn’t, in which case it needs to be overhauled. The government can’t have it both ways.

A week ago the German government decided sharply to reduce the tariff it pays for solar PV, on the grounds that it’s a waste of money (12). Just as the Germans have begun to abandon their monumental mistake, we are about to repeat it.

Buying a solar panel is now the best investment a householder can make. The tariffs will deliver a return of between 5-8% a year, which is both index-linked (making a nominal return of 7-10% (13)) and tax free (14). The payback is guaranteed for 25 years (15). If you own a house and can afford the investment, you’d be crazy not to cash in. If you don’t and can’t you must sit and watch your money being used to pay for someone else’s fashion accessory.

Had this money been spent instead on insulation or double glazing, it could have helped relieve fuel poverty at the same time as cutting emissions. But the feed-in tax is both wasteful and regressive. The government has now decided not to oblige people to improve the efficiency of their homes before they can claim a tariff: you’ll be paid to put a solar panel on your roof even if the roof contains no insulation (16).

Though there’s a system to ensure that functioning devices are installed, it can’t be long before thousands of petty criminals discover the perfect carousel fraud, bypassing their solar panels by connecting the incoming wire to the outgoing wire. By buying electricity for 7p and selling it for 44p (if you sell power to the grid rather than using it yourself, you get an extra 3p(17)), they’ll make a 600% profit. Amazingly the government has decided not to measure how much electricity people are selling, but “to pay export tariffs on the basis of estimated (deemed) exports.”(18) Elsewhere in its report it boasts of “encouraging a risk-based approach to audit and assurance” (19). Come on in you crims, the door is wide open.

So who is opposing this lunacy? Good question. The Conservatives, Liberal Democrats, Friends of the Earth and Greenpeace have lined up to denounce the government for not being generous enough (20,21,22,23). The only body to have called this right is the loathsome TaxPayers’ Alliance, but no one listened because it has cried wolf too often(24).

There appears to be a cross-party agreement to squander the public’s money. Why? It’s partly because many Tory and LibDem voters hate big, efficient windfarms, and this scheme appears to offer an alternative. But it’s mostly because solar panels accord with the aspirations of the middle classes. The solar panel is the ideal modern status symbol, which signifies both wealth and moral superiority, even if it’s perfectly useless.

If people want to waste their money, let them. But you and I shouldn’t be paying for it. Seldom has there been a bigger public rip-off; seldom has less fuss been made about it. Will we try to stop this scheme, or are we a nation of dupes?

References:

  1. DECC, 1st February 2010a. Impact Assessment of Feed-in Tariffs for Small-Scale, Low Carbon, Electricity Generation (URN10D/536). https://www.decc.gov.uk/en/content/cms/consultations/elec_financial/elec_financial.aspx
  2. https://www.newscientist.com/article/mg19125715.200-smallscale-renewable-power–lowwattage-thinking.html
  3. https://www.newscientist.com/article/mg19225740.100-think-small.html
  4. DECC, 1st February 2010b. Table of tariffs up to 2013. https://www.decc.gov.uk/en/content/cms/what_we_do/uk_supply/energy_mix/renewable/policy/feedin_tarriff/feedin_tarriff.aspx
  5. DECC, 1st February 2010c. Feed-in Tariffs: Government’s Response to the
    Summer 2009 Consultation, page 5. https://www.decc.gov.uk/en/content/cms/consultations/elec_financial/elec_financial.aspx
  6. DECC, 1st February 2010a, ibid.
  7. McKinsey & Company, 2009. Pathways to a Low Carbon Economy: Version 2 of the Global Greenhouse Gas Abatement Cost Curve. https://www.mckinsey.com/clientservice/ccsi/pathways_low_carbon_economy.asp
  8. DECC, 1st February 2010a, ibid.
  9. Suleiman Abu-Sharkh et al, March 2005. Microgrids: distributed on-site generation Technical Report 22, page 33. Tyndall Centre for Climate Change Research.
  10. Manuel Frondel, Nolan Ritter, Christoph M. Schmidt, 2008. Germany’s solar cell promotion: Dark clouds on the horizon. Energy Policy 36 (2008) 4198–4204.
  11. ibid.
  12. https://www.renewableenergymagazine.com/paginas/Contenidosecciones.asp?ID=15&Cod=4965&Tipo=&Nombre=PV%20Solar%20News
  13. DECC, 1st February 2010c, p21.
  14. DECC, 1st February 2010c, p22.
  15. DECC, 1st February 2010c, p22.
  16. DECC, 1st February 2010c, p20.
  17. DECC, 1st February 2010c, p5.
  18. DECC, 1st February 2010c, p28.
  19. DECC, 1st February 2010c, p40.
  20. https://www.guardian.co.uk/environment/2010/feb/01/government-renewables-feed-in-tariff
  21. https://www.guardian.co.uk/environment/cif-green/2010/feb/02/feed-in-tariff-renewable-energy
  22. https://news.bbc.co.uk/1/hi/business/8491767.stm
  23. https://www.telegraph.co.uk/earth/earthnews/7129685/Solar-panels-and-other-renewables-will-be-installed-on-one-in-ten-homes.html
  24. ibid.

11 Comments

  1. There are a number of (actually quite unpleasant, but not that unrealistic) scenarios in which having a very small amount of highly distributed power generation (less than one per-cent of total electricity usage under normal conditions), such as in particular from home owner’s roofs, can make a world of a difference. Considering the situation in the UK right now, where small-scale distributed energy generation systems are pretty-much non-existent, such a scheme can only contribute to increasing resilience. Note that during the big blackout in the US in 2003, a number of people used the generators in their SUVs to charge their cell phones, as they did not have any other options.

    In that sense, having a bit of small-scale PV around can be quite beneficial. If it does not seem to make sense economically at first, the question is: have the resilience benefits been considered in the equation? Yes, if this were considered the way forward to get 20% of PV solar in the UK, I would worry. But as long as distributed generation actually increases our options to deal with some catastrophe situations, I would call this a good thing.

  2. Government meddles in economy, introduces completely irrational incentives, horrible unintended consequences ensue. Sadly, this is not news.

  3. ha ha ha, are we a nation of dupes ah ha ha. That was riveting but the last line ha ha ha. Have you looked around lately? OMG Ha ha ha. Let me think. GMO food that is subsidized. Nafta. The bailout. The torture. THe lying and using taxpayer money to spread it as news. The spying on us and the retroactive immunity via the patriot act. The institutionalization of everything and the criminalization of everybody. The increased spending on ha ha ‘defense’ while cutting everything else. Requiring soon that we get x-rayed at the airport (and no one says anything about the effect on our health) , the proliferation of dangerous and useless pharmaceuticals and procedures, the pretense at giving us health care (I wasn’t fooled for a second) while using it as another cash cow for corporate buddies while running the dregs of this country into the ground, the LBAM spray in California about to commence despite the people the doctors and the bees, poor bees, ha ha ha and i haven’t even gotten to Afghanistan, losing ground with rent control, Katrina and Haiti. Pleease. Are we a nation of dupes? When hadn’t you noticed?

  4. terribly sorry, just noticed you were uk again. sorry got carried away and don’t see how to erase comment. well, that’s funny on me then, ha ha.

  5. Well, I am an idiot, I do freely admit, but I dearly wish there were a way to erase. Well, hope it gives some of you a laugh, then, good for something. Cheers.

  6. I’m glad you cant erase. I enjoyed your comment immensely. I’m suprised you didnt notice all the pence sprinkled through it all though, and the bit about how the UK isnt really an approprate place for solar panels unlike California. I’m Australian but as far as I can see most of what you wrote aplies to the UK and to some extent Aus as well. In defence of our (please dont tell me you dont get duped)actions I’d just like to point out the armies of psychology PHDs plotting, analysing our actions and replotting their tactics while we just shit fight our way through each day trying to make it all mean something. I enjoyed your comment because it was a great summary of some of the frustrating forces and it was refreshing to see it all there. The article is also a good take on the problems we face with democracy and the politicians (we deserve) who pander to whatever will make them win the popularity contest, even if it means squandering billions to make people feel smug with one hand while plundering the planet with the other. I’m feeling pretty negative about the west these days, and it doesnt help that the Chinese are brutally efficient at everything and I just cant see how we can ever maintain our control for much longer. Every time I read something like this I see us slipping further and further behind..

  7. Spot on with the comment “The solar panel is the ideal modern status symbol, which signifies both wealth and moral superiority, even if it’s perfectly useless.” Compared to other renewable sources of electricity, PV is just not economically viable in most situations. Many would argue that all the rebate systems around the world are helping speed up the technological advancement of PV cells but we just aren’t seeing much improvement in the economics of them even with the rebates.

  8. Glen,

    a friend of mine who works in the Electric power sector (mostly dealing with wind power) in Germany tells me they expect Grid Parity sometime around 2015. And actually, prices did come down quite impressively during the last years.

  9. The UK is at about the same latitude north as Tasmania is south, so having solar installed in the UK might well be very inefficient due to the very high latitude – but in Australia, and especially in my part, Queensland, it makes perfect sense. It costs lots of money to build a new power station, let alone the environmental issues. We use most of our power during the day, and having a decent fraction of produced on peoples roofs also means less land that has to be tied up building power stations, that no-one wants in their back yard anyway.
    The biggest waste is how subsidies tend to just allow contractors to push their prices up. Solar panels are way too expensive in Aaustralia, (typically $7 / watt) compared to the US where they can be as little as $2 or $3 / watt – thats where the real rip off is.

  10. Vivian,

    London is about the same latitude as Berlin, so the UK actually isn’t as far north as many would think. What is a problem, however, is that the sky is overcast quite often.

    Take Nigel Lowthrop as an example (Hill Holt Wood). He showed that having a battery-backed 0.7 kWp amorphous Silicon PV system for domestic use is quite feasible for a family. He’s not connected to the grid.

    I don’t think an approach focusing mostly on PV would make much sense for the UK, but if we at least could see to get enough PV up to separate vital radio communication services from the electic grid, that would be a good thing – and could be achieved in fairly short time.

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