It's no secret how much I want this planet, my planet, to reduce and eventually shake-off its dependence on fossil fuels. As we develop more and more distributed energy resources (DERs) and modify our electric grids to effectively and efficiently manage DERs it looks like we are getting caught on the horns of a dilemma. Cheap carbon-based fuels exist around the planet. This is an unfortunate obstacle when facing-off against the currently high costs of developing and maintaining renewable energy production.
For example a wind farm in Keadby, in the northeast of England. This windfarm produces enough clean power to look after the electricity needs of over 57,000 customers. Monitored remotely, the plan is to ensure the wind turbines produce electricity for several decades to come.
The owner of the wind farm, the British electricity company SSE, has been putting a tonne of faith in windmills as well as other renewables for years. Multibillion dollar investments have made the utility England's leading provider of clean power. In theory, last December's United Nations climate accord in Paris should have been a validation of the company's business strategy. But the utility is reconsidering plans for large wind farms and even restarting a shuttered fossil-fuel-fired power plant.
The move reflects the existential debate faced by many major power companies. The calculus for fossil fuels can be more favourable at a time when energy prices are low and countries are rethinking subsidies on renewables to keep overall electricity prices down. It might be hard for even the most clean-minded energy companies to help countries meet the goals set in the landmark Paris climate deal. "The profitability of renewables is lower than a few years back," stated Deepa Ventateswaran, a utility analyst at Bernstein Research in London.1
Under the climate deal reached in December, 195 countries committed to reducing global greenhouse gas (GHG) emissions. Utilities will have to carry the bulk of the load by shifting from fossil fuels like coal, oil, and natural gas to renewable sources of energy. Even before the deal, SSE was already at the leading edge of the shift, producing about 43 percent of its power from clean sources. This is where the wrench gets thrown into the works with the sharp declines in energy prices. Energy providers are now forced to think twice before retreating from carbo-based fuels.
In SSE's case, lower natural gas prices have resulted in a 20 percent fall over the last year in the price it charges for wholesale electricity. Adjacent to the Keadby wind farm is a gas-fired power plant that was closed in 2013 when cheap coal and high natural gas prices made it a dead duck. Now gas prices are taking a nose dive and coal is being phased out in Britain under a government mandate. As profit margins outweigh all else, the company is bringing the gas plant back on line. It is even considering doing the same with others.
Real capitalists don't plan, these ideological warriors insist - they unleash the power of the profit motive and let the market, in its infinite wisdom, create the best possible society for all. In the United States, Mr. Obama obviously, doesn't share this wisdom - he believes government should nudge business in the right direction. And yet he is still sufficiently a product of his anti-planning era that when he had the banks, the auto companies, the utilities, and the stimulus in the palm of his hands he couldn't wait to dump them instead of taking a rare chance to build an exciting future.
If we are going to see climate action of the scale and speed required, the left is going to have to quickly learn from the right. Conservatives have managed to stall and roll back climate action amidst economic crisis by making climate simply about economics. This flies directly in the face that the pressing need to protect growth and jobs is by doing nothing through difficult times. Progressives can easily do the same: by showing that the real solutions to the climate crisis are also our best hope of building a much more stable and equitable economic system, one that strengthens and transforms the public sphere, generates plentiful, dignified work, and radically reins in corporate greed.
For years, London has subsidized clean power to wean the country off coal-fired power plants. About eleven percent of Britain's power is now generated by wind compared to one percent in 2006 according to a trade group called Renewable UK. But the conservative government of Prime Minister David Cameron has talked up the benefits of natural gas as a cleaner burning replacement in power generation for the coal-fired plants it wants to close and backed nuclear power as a long-term source of low-carbon energy.
The government is also trimming subsidies for renewables, and onshore wind farms and other clean resources like solar power are taking a big bite on the backside. It instead wants to focus on offshore projects which offer enormous scale by deploying bigger turbines in greater numbers. They are a viable potential for jobs, especially along the northern coast where the oil and gas industry is stumbling.
According to Amber Rudd, the minister for energy and climate change, there is already enough onshore wind capacity built or planned to meet the government's targets. Wind subsidies cost 800 million pounds per year.2
SSE is proceeding with three onshore projects under construction, and it is planning a vast offshore wind farm of northeast Scotland.
Even without subsidies, onshore wind is one of the cheapest of the major renewable technologies to build in Britain, costing some $85 per megawatt-hour (MWh) for the power generated over the life of the project, according to Bloomberg New Energy Finance, a market research firm. By comparison, building a natural gas power plant in Europe costs almost 40 percent more.3
Offshore wind is far more expensive to build, operate, and maintain because of the hostile marine environment. The estimated costs are more than double that of onshore wind. The subsidies can often make or break a project. The government has guaranteed a price above the $175 per MWh offshore costs for a Danish company that is going ahead with a large project off the northeast coast of England. So far, having a large renewable portfolio is working in SSE's favour. For the six months to the end of September 2015, operating profit for the power-generating unit, which includes both renewable and fossil fuel plants, increased to about 142 million from 11.8 million in the comparable period in 2014.
SSE agreed with the government that wind and gas will help Britain transition to a lower-carbon energy mix, but it needed guarantees on pricing. The only thing standing in the way is that that luxury called certainty.
1 Stanley Reed." Cheap Fossil Fuels Undercut Renewables" The New York Times International Weekly (March 12-13, 2016): 8
2 Ibid
3 Ibid
