By Paul Homewood

 

A closer look at that Emma Gatten article the other day:

 

https://notalotofpeopleknowthat.wordpress.com/2022/03/12/clueless-emily-gatten/

You will recall her claim:

Energy giants will be handed more than £1.2 billion from wind and solar farms as gas prices soar in the coming months, despite the cost of living crisis hitting household bills.

When electricity prices are low, wind and solar farms are paid subsidies in the form of green levies taken directly from household bills. Last year, this amounted to around £30 of the total £176 of green levies included in energy bills.

When wholesale electricity prices are high, renewable producers pay money back to the Government. But rather than the money going directly to households, it is passed back to energy suppliers, The Telegraph has learnt.

In the first six months of this year, wind and solar producers are predicted to pay back £1.2 billion as gas prices soar, pushing up the wholesale electricity price – a potential saving of around £40 per household.

The claim comes from the Energy & Climate Intelligence Unit, ECIU, the climate propaganda unit originally set up by Richard Black, the ex BBC Environmental Correspondent. Black was the ECIU’s Director until last November.

The ECIU has only one purpose, and that is to disseminate alarmist propaganda, most of which, as you might expect from an ex BBC reporter, is often grossly misleading.

It is funded by the usual collection of far left foundations, notably the ECF, itself funded by mainly US progressive outfits and which distributes money to the Green Blob in Europe:

https://eciu.net/about/who-we-are

But is that £1.2 billion accurate?

According to the official data from The Low Carbon Company, which manages the CfD system. the amount paid back under the scheme during January and February this year was only £6.7 million.

Biomass plants, such as Drax and Lynemouth have still been receiving subsidies, as they are still selling electricity on forward contracts, based on the lower market prices appertaining last year.

This will be of little consolation moving forward, because Drax will simply maximise output on its two ROC plants, which will benefit both from the high market price and a generous subsidy.

But even excluding biomass, the net repayments for January and February still only add up to £27.4 million. Clearly the ECIU’s claim of £1.2 billion in six months is pie in the sky.

To put some numbers to it, in the last two months CfD generation, excluding biomass, was 3.8 TWh. The weighted average strike price, ie the guaranteed price, was £154.04/MWh, and the average market price was £161.26/MWh.

According to Catalyst, day ahead power prices now stand at £215/MWh. But even at that level, the CfD repayments will still only add up to £116 million a month. I am no oracle (!), but as spring approaches we should expect to see some easing of gas, and therefore, power prices.

Clearly, given the fact that the first two months payback was only £27 million, the £1.2 billion is a gross exaggeration.

It is also worth bearing in mind that carbon pricing is adding £32/MWh to power prices. This has nothing to do with the cost of gas, it is purely a tax which artificially puts up the price of electricity. Without this the potential paybacks would be much smaller. Or in other words, illusory.

Let’s also put that £1.2 billion into perspective, because it is presented as being a “green dividend”. Since the CfD system was introduced in 2016, it has paid out £6.1 billion in subsidies. Getting £1.2 billion of that back hardly seems like a good deal!

Meanwhile subsidies for renewables vis ROCs and FITs, still cost over £7 billion a year.

The Telegraph/ECIU also claim:

Thanks to the falling costs of wind and solar, dividends from cheap renewables could easily hit up to £7 billion if a similar gas price crunch hits in five years and up to £26 billion in 10 years – a saving of around £290–£330 per household, according to analysis by the ECIU

For a start, there is no evidence that the gas crunch will be a long term factor, never mind get worse as they assume. The current gas price does not reflect the cost of producing it. Instead it is a function of the imbalance of supply and demand. Given time, the market will correct this, providing governments do not get in the way.

The claim about falling costs of wind and solar also shows a lack of understanding by Emma Gatten of how power markets work. Leaving aside the question of whether the cost of offshore wind really has dropped to £50/MWh, as she claims, there is no legal obligation whatsoever for wind farm operators to actually sell electricity via CfDs.

The contracts are effectively no more than put options. Under the terms, wind farms can simply decide not to take the option up when they start up. Alternatively, if they have already done so, they can cancel the contracts upon repayment of subsidies already received. In practice, any company with the low prices mentioned won’t have received any subsidy anyway.

If electricity prices really do remain high in the long term, it is a no-brainer that wind farms will decide to sell at market prices, instead of opting for the CfD guaranteed price.

Either way, energy users will be shafted.

via NOT A LOT OF PEOPLE KNOW THAT

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March 14, 2022 at 08:37AM