Andrew Montford: On Legal and General

By Paul Homewood



You would think a large financial house would be able to employ someone willing and able to understand a set of accounts. Unfortunately, it seems not.
Legal and General Investment Management (LGIM) recently published a
paper that sets out the company’s position on decarbonisation. Written by Nick Stansbury and Justine Schafer of their “Climate Solutions” department, makes the remarkable claim that ‘the cost of transitioning [to Net Zero] is no longer an especially relevant factor’.
Is the magic money tree going to provide, you might wonder? But it’s not that. In fact, according to the authors, we have solved most of the technological problems already:
"A low carbon energy system is now so cheap, that further improvements in costs and efficiencies are no longer likely to have as large an impact on the pace of change as they have had historically…Science and engineering have already delivered much of the cost reduction that we need."
I think I may have a bridge to sell Mr Stansbury.
In support of this extraordinary claim, the authors cite figures from the International Renewable Energy Agency (IRENA), showing long-term reductions in the cost of wind and solar. The naïvety is breathtaking. The energy sector is notorious for being full of wild claims about cost revolutions. Those working in the field usually learn to check and double check what they are told, and to view every claim with a critical eye. LGIM rather give the impression of having stepped into this den of thieves in good faith but without thinking too hard.
If they had decided to dig a little bit deeper, they might have noticed the interesting detail that IRENA translates all its cost figures into US dollars. With most renewables deployed outside America, performing that currency conversion introduces a spurious downwards trend into the cost figures, simply because there has been a long-term appreciation of the dollar against other countries.
They might also have attempted to verify IRENA’s numbers in some way. After all, a tiny think tank like the GWPF
can manage to do it; why not a huge financial house? Their army of analysts, lawyers and accountants could surely have found their way to Companies House, where financial accounts of windfarms are readily available, and to Ofgem’s data portal, where generation data can be downloaded.
I know this is a bit radical, but they could actually have recalculated the cost numbers themselves! Had they done so, they would have found little or no sign of reducing costs for offshore wind, and indeed of increasing costs onshore. And don’t get me started on the eye-watering system costs associated with renewables.
Instead we get what is essentially a public relations document, regurgitating renewables marketing fluff.


May 16, 2023 at 12:40PM

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s