‘Easy To Be Green?’: Renewables Leaving The World Broke And Powerless

The truth be told, the lead-up to the COP26 climate conference in Glasgow is turning out to be the exact opposite of what British Prime Minister Boris Johnson (pictured) would have wanted.

His boast of Britain becoming the Saudi Arabia of wind energy is looking like a bad joke as an extended wind drought affected the UK and Europe.

This past northern summer, renewable generation in Britain (which is overwhelmingly wind) fell by 16 percent while generation from fossil fuels rose by 15 percent.

Just recently, an old coal-fired power plant had to be switched on to ensure there was sufficient supply to meet demand.

The few remaining coal-fired plants in Britain are being paid to hang around for this precise eventuality, although the government’s plan (possibly to be revised) is that these plants will be shut down in the next year or two.

Regulated energy bills in Britain have just increased by £139, pushing the average household bill to nearly £1300 (about $2400).

About a quarter of electricity bills is made up of environmental and social costs that are designed to fund the government’s decarbonization energy strategy.

A further substantial increase in household energy bills is expected in six months. Nine energy suppliers in Britain collapsed last month and the industry regulator, the Office of Gas and Electricity Markets, is preparing for the possible collapse of a large supplier.

In the meantime, the energy crisis facing Britain is being mirrored around the world – with the exception of Australia at this stage – with the price of fossil fuel energy skyrocketing.

Thermal coal, for instance, is trading at more than $US200 ($275) a tonne, up from a little more than $US50 a tonne this time last year.

Electricity prices are rising rapidly in Spain, where all the coal-fired electricity plants have been closed. Household electricity bills have risen by 35 percent this year, with the wholesale price of electricity soaring by 250 percent.

The government is attempting to tweak the taxes and charges imposed on electricity bills as well as levy a super-profits tax on suppliers. Electricity prices also are skyrocketing in Italy.

Earlier in the year, we saw an energy catastrophe occur in Texas when millions of customers were without power during a particularly cold snap.

The state had gone headlong into renewables without creating a capacity market for dispatchable power and without adequate interconnectors with other states (which were short of power in any case). It was only a matter of time before such a calamity would arise.

More recently, California has encountered energy problems, with households facing a series of rolling blackouts.

The Californian government had to apply to the federal government to operate a gas-fired power plant at full capacity, contrary to federal climate regulations.

There are now plans to build more gas plants. Bizarrely, the one large nuclear plant in California is slated for closure in coming years.

Germany was once the poster child of the transition away from fossil fuels but is facing serious energy problems in relation to supply and price.

Having made the fateful decision to close all its nuclear plants, a process that will be completed in the next few years, Germany is highly reliant on natural gas sourced from Russia. And in the first six months of this year, coal produced more electricity in Germany than wind.

China has been rationing its electricity output with some factories forced to work at less than full capacity and consumers facing potential blackouts.

Just last week, a decision was made by the central government to ramp up the stores of coal and liquefied natural gas to ensure the continuity of electricity for the country in the coming cooler months.

Now there is always a possibility that these worldwide problems are short-lived, although the futures markets indicate otherwise. There will be adjustments to demand and supply.

But when it comes to supply, there are often long lead times between decisions to invest and the supply coming on. In Britain, for instance, no new gas drilling licenses have been granted since 2016.

And while there is a commitment to open a new nuclear installation in Britain – Hinkley Point C – it won’t become operational until 2026. It uses French technology and is funded by Chinese interests.

In the meantime, the net contribution from nuclear power in Britain will drop significantly. During the past decade, nuclear power capacity fell by 27,000 megawatts.

More generally across the world, there has been a relative capital strike when it comes to investment in new fossil fuel supplies as investors have decided to mark down any association with fuel sources that are deemed to be inconsistent with action on climate change.

It has been easier making money chasing government subsidies for renewable energy and profiting from climate-related financial products.

Even in the US where fracking was the principal reason for that country’s record on reducing emissions – emissions were 14 percent lower in 2017 compared with 2005 – there has been relatively little recent spending on new gas wells.

There are political pressures to impose restrictions on US gas suppliers exporting LNG. Several South American countries are importing gas from the US to offset reduced hydro-sourced electricity.

So as the Glasgow climate conference approaches – and all the hype that goes with it – Johnson may already be regretting his recent assertion made to the UN General Assembly that “it is easy to be green”.

It’s clear that it is not easy going green, even though there is generally some low-hanging fruit to pick when the penetration of renewable energy in a grid is relatively small.