Big energy blinded by green light

No wonder the big energy companies are spooked by the green dream. Have you seen their share prices lately?

Npower last week warned that green policies will drive a 20% rise in energy bills by 2020. Npower is owned by the German utility RWE.

In 2008, RWE’s shares traded at a whopping €100 each. Today they are worth less than €20.

EDF Energy and E.ON, which have 5.5-million and 4.8-million customers in the United Kingdom respectively, have seen a similar drop.

It’s a precipitous fall triggered by investors alarmed by the prospect of losing an effective oligopoly of supply and, with it, healthy profits.

These are the companies that want to supply us with natural gas from Norway, liquid petroleum gas from Qatar and electricity from imported coal and oil.

A new generation of nuclear reactors
Some want to build a new generation of nuclear reactors, though, given their share prices, they want massive subsidies and cast-iron guarantees from any government willing to commission them.

Their argument is that big power generation keeps the lights on. Everything else is a bit flaky and more costly. Of course, this is not their official stance.

They are all sponsoring green events like crazy and pushing their green credentials. But the message from the big energy suppliers is that imported gas, piped to households or burned by their latest power stations, should remain a big element of any energy strategy.

Arguments against going green tend to focus on particular technologies. Solar fails to heat our homes on winter evenings. Wind turbines leave us in the dark when the breeze drops.

Tidal has yet to make the kind of breakthrough hydro has managed. Biofuels deny people food. Nuclear is bedevilled by technological hiccups, is frighteningly expensive to build and suffers from even more nimbyism than onshore wind turbines.

Then there is the supposedly high cost of renewables set against the economies of scale that flow from big power stations pumping megawatts of energy across a massive grid.

Taking an extreme view
Npower also assumes that state initiatives promoting energy saving by companies and households will fail.

Sam Fankhauser, co-director of the Grantham research institute at the London School of Economics, says it is hard to believe that consumption will not be limited to some extent by efforts to save energy. “Npower is taking an extreme view in this respect,” he says.

The argument that renewables chain the economy to high-cost energy is ebbing. Solar panel costs have fallen so quickly that many companies that borrowed heavily to enter the market have gone bust.

Research aimed at improving the efficiency of the silicon at the heart of each panel is becoming redundant as the cost of panels plummets.

Combined heat and power units, wind turbines and other renewable energy sources are also being produced in greater numbers at lower unit cost.

In the United States, biofuel plants use only the waste products from maize rather than the whole plant. In the UK, power generators are planting trees to burn.

Carbon-burning sources
Fankhauser, who helped the Committee on Climate Change’s analysis of the government’s energy bill, points out that carbon-burning sources will be forced to charge for cleaning up after themselves using carbon capture and storage, much as water companies pass on the cost of their sewage works.

Under this scenario, traditional sources of energy will soon become more expensive than renewables.

It would be laudable if the share prices of big energy was down 80% because all politicians understood this trend and renewables prospered under a cast-iron guarantee.

Though that is the case in Germany, uncertainty plays a big role elsewhere, such as in the UK, where successive governments have failed to give a clear signal of their intentions.

There are targets and projects, but the green grid is still embryonic. Britain’s public accounts committee recently criticised the treasury’s infrastructure plan as “a list of projects, not a real plan with a strategic vision and clear priorities”.

There, the business community is also confused, with 67% of companies not confident that the energy infrastructure will improve in the next five years.

A mix of renewables and a backstop of gas can supply the UK’s needs without breaking the bank, at least no more than oil and gas will.

The renewables debate is underpinned by the threat of climate change. But it is also about energy security, localism and lower costs over the next 30 years, which are all achievable. — © Guardian News & Media 2013

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