By Paul Homewood

h/t Doug Brodie

The boss of Centrica, Chris O’Shea, has weighed in on the debate about whether renewables will bring down electricity costs.

He has posted this on LinkedIn:

 

 

There’s a bit of confusion on whether renewables will bring down energy prices from where they are today. People talk about the UK electricity price being set by international gas prices and therefore point to renewables giving us price reductions.

 

However, the truth is a bit more nuanced. Wholesale electricity prices in the UK may well be set by international gas prices, but the wholesale price does NOT set the price that the majority of consumers pay in the UK.

 

Why is that? It’s because of the contract for difference (CFD) that renewable energy producers get. There’s a great video attached which explains how the CFD works. Essentially, no matter the wholesale price, renewable producers with a CFD get the “CFD strike price”.

 

So I thought it may be useful to look at the comparison of current wholesale energy market prices (set by international gas prices) and the (CFD) prices that consumers actually pay:

Current wholesale prices:
-Last 24 hours £68.61
-Last 7 days £77.09
-Last year £82.11

.

Most recent CFD strike prices in 2012 prices:
-Solar £50.07
-Onshore wind £50.90
-Fixed offshore wind £54.23-£58.87
-Floating offshore wind £139.93
-Tidal stream £172.00

.

Now you may look at those strike prices and think they look attractive-and they do. But unfortunately, these are prices expressed as they would have been in 2012. And as they’re index linked (or inflation proof), they need to be restated to today’s prices. Restating them to 2024 prices (when the last CFDs were granted) gives you the following:

.
Most recent CFD strike prices in 2024 prices:
-Solar £69.87
-Onshore wind £71.03
-Fixed offshore wind £75.68-£82.16
-Floating offshore wind £195.28
-Tidal stream £240.03

.

So you can see that the build out of renewables will NOT materially reduce UK electricity prices from current levels. They may give price stability, and avoid future price spikes based on the international gas market, but they will definitely not reduce the price. So the next time you hear someone say the build out of renewables will reduce UK electricity prices, ask them to explain how. Because we need to get the facts out there so we can make the right decisions-we need to stop having a polarised debate populated with unsubstantiated, but convenient, sound bites.

 
I fully support the move to a cleaner energy system. I am simply very frustrated that people peddle misinformation at best, and disinformation at worst. For example, I was talking to someone in a major UK energy retailer recently and asked why they kept telling people that more renewables would reduce energy prices when I didn’t think it would based on my analysis. What they said was quite surprising-they told me they were always careful to say that more renewables would reduce the WHOLESALE energy price, not the RETAIL energy price. Whilst that statement is factually accurate, I think it could mislead consumers.

 

As the CEO of a major UK energy retailer, I am far more interested in what consumers pay. We should all be.

 https://www.linkedin.com/posts/chrisoshea_what-is-the-cfd-on-vimeo-activity-7327285840705957888–R9H/

 

The Telegraph have covered the story here. But shamefully they have grossly misled readers with this fake chart:

It is based on old BEIS levelised cost analysis. Offshore wind ludicrously is said to cost £40/MWh – the latest strike price is £85/MWh. Similarly onshore wind and solar are also massively understated.

Meanwhile CCGT includes a “carbon cost” of about £80/MWh. Carbon of course does not cost anything – this figure merely represents the government carbon tax imposed to make fossil fuels uncompetitive.

I’ve covered this before, but it’s worth looking again at how these carbon costs are estimated. This is what the BEIS report stated:

https://www.gov.uk/government/publications/electricity-generation-costs-2023

So it starts with the ETS prices, the Emissions Trading Scheme. Then it morphs into a “carbon appraisal price”, with the BEIS link taking us to this document:

https://www.gov.uk/government/publications/valuing-greenhouse-gas-emissions-in-policy-appraisal/valuation-of-greenhouse-gas-emissions-for-policy-appraisal-and-evaluation

They then add this little nugget:

 

 

In short, the carbon value is set to match the cost of carbon reduction needed to meet decarbonisation targets. The higher that cost, the higher the carbon value.

As the BEIS admitted at the time, the Paris Agreement and the switch to Net Zero have increased pushed carbon values higher.

 

So when the Telegraph claims that the cost of gas power will increase to £140/MWh, they are lying – what they really mean is that the cost of decarbonisation will be much greater than previously thought.

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May 14, 2025 at 11:15AM

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May 14, 2025 at 10:01AM

Nico Portuondo reports on progress to enact realistic climate laws in his E&E News article Energy and Commerce unveils broad climate law rollbacks.  Excerpts in italics with my bolds and added images.

The House committee’s portion of the Republicans’ big party-line bill
also includes expedited permitting for gas exports and other projects.

The House Energy and Commerce Committee’s section of the Republicans’ party-line megabill includes billions of dollars in clawbacks from a host of Inflation Reduction Act programs.

The legislation — up for markup Tuesday — would affect the Department of Energy’s Loans Program Office, EPA’s Greenhouse Reduction Fund and many other climate law initiatives, according to text released Sunday night.

Chair Brett Guthrie (R-Ky.) said the climate law repeals would add up to $6.5 billion in savings. He said the unobligated balances represented “the most reckless parts of the engorged climate spending in the misnamed Inflation Reduction Act.”

“The 2024 election sent a clear signal that Americans are tired of an extreme left-wing agenda that favors wokeness over sensible policy and spurs price increases,” Guthrie said in a Sunday Wall Street Journal op-ed.

Guthrie said the administration “has already reversed President Biden and Democrats’ electric-vehicle mandates and natural-gas export ban; now it’s Congress’s turn.”

Guthrie told committee Republicans on a call Sunday that the overall legislation — including changes to Medicaid — would create more than $900 billion in savings, according to POLITICO.

A committee spokesperson said “the bill specifically rescinds funding leftover from nine of the Biden Administration’s IRA renewable energy and electrification subsidy programs at the Department of Energy — saving taxpayers money and allowing for deficit reduction.”

Department of Energy

The legislation would scrap “the unobligated balance” of IRA funding for the Loans Program Office and money dedicated to transmission projects.

The LPO received over $35 billion from the climate law, while DOE’s Grid Deployment Office got around $3 billion as part from the IRA’s “Transmission Facility Financing” section.

Republicans will also try to rescind IRA funds boosting a number of other DOE programs, including initiatives on advanced vehicle manufacturing, energy infrastructure reinvestment financing, tribal energy loan guarantees and state-based efficiency grants. Those programs, in total, received around $8.3 billion from the climate law.

The committee, however, did not make clear just how much leftover funding is available to repeal after the Biden administration pushed to get as much as possible out the door.

Outside of IRA programs, the legislation would accelerate permitting for infrastructure projects through new fees, something similar to the Natural Resources Committee text and what Democrats have called a pay-to-play scheme.

One Energy and Commerce provision, for example, would allow DOE to automatically deem a potential liquefied natural gas export facility to be in the “public interest” — normally a key regulatory hurdle — if the applicant pays a one-time fee of $1 million.

Another provision would allow other natural gas infrastructure developers to receive an “expedited permitting process” from the Federal Energy Regulatory Commission under the Natural Gas Act if the applicants pays $10 million or 1 percent of the project’s projected cost.

The proposal eyes permitting being completed within a year and would exempt projects from certain litigation. A similar timeline and fee would apply to carbon dioxide, oil and hydrogen pipeline permitting.

The legislation would also rescind congressionally appropriated funding outside of the IRA for key DOE programs, including around $401 million from the Office of Energy Efficiency and Renewable Energy and around $260 million from DOE’s State and Community Energy Programs.

It would grant $2 billion for the department to refill the Strategic Petroleum Reserve, a longtime objective of Republicans to shore up the nation’s energy security.

EPA

The bill text confirmed a longtime promise from Energy and Commerce leaders that they would target unobligated balances from the EPA’s Greenhouse Gas Reduction Fund, a $27 billion IRA program designed to support clean energy projects particularly in low-income and disadvantaged communities.

Outside of the Greenhouse Gas Reduction Fund, the plan would repeal a variety of IRA programs designed to reduce air pollution at schools and ports, reduce emissions from diesel engines and construction materials, and promote carbon monitoring initiatives.

And, as expected, the legislation takes aim at the Inflation Reduction Act’s methane fee. That program is designed to reduce methane leaks from natural gas infrastructure. Congress, through the Congressional Review Act, already repealed EPA regulations implementing the fee.

The legislation would also roll back two regulations on emissions from passenger vehicles. Gone would be the latest corporate average fuel economy, or CAFE, standards issued by the National Highway Traffic Safety Administration and EPA’s newest multipollutant emissions standards for model years 2027 and later, requiring significant reductions in greenhouse gas and pollutant emissions from light-duty and medium-duty vehicles.

Republicans went further in their targeting of Biden-era vehicle policies with a proposed repeal of $600 million in grants and rebates to states, municipalities tribes and nonprofits to expand the use of zero-emission vehicles.

See also: 

How To Fix US Energy After Biden Broke It

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May 14, 2025 at 08:39AM

By Paul Homewood

 

h/t Doug Brodie

The United Kingdom will need approximately 175 TWh of storage capacity when domestic space heating is fully decarbonized, according to new research from the University of Nottingham in England. The claim is based on an analysis of future storage requirements for the electricity grid at different stages of heat pump deployment.

Bruno Cardenas, lead author of the paper “Heat pumps’ impact on the requirement for grid-scale energy storage in the UK,” for publication in Renewable Energy in July, told pv magazine that deploying sufficient storage capacity to meet future demand represents a massive challenge.

“Currently we don’t feel the storage challenge that much because the gas network is there and it has a huge amount of storage. You can store more gas in the pipes simply by increasing the pressure,” said Cardenas.

The scientists found that when domestic heat demand is 100% electrified, average annual electricity demand and peak load in the grid are 26% and 70% higher than current levels, respectively. The total cost of energy also increases by around 4% under the scenario modelled, due to the storage capacity needed. This means that a fully decarbonizing UK heating system will require significant investment in long-duration energy storage, according to Cardenas.

The researchers modelled a scenario in which underground hydrogen caverns and compressed-air energy storage (CAES) provide a combined 175 TWh of storage capacity. Hydrogen storage with 160 TWh capacity would cover around 220 days of UK demand plus 15 TWh of CAES to cover around 10 days, according to the scientists.

Full story here.

At average efficiency of 80%, we would need 200 TWh of electricity to produce that hydrogen via electrolysis. That would mean an extra 50 GW of offshore wind power.

The researchers also estimate an increase in peak demand of 70%, raising it to over 100 GW. This clearly has massive implications for national and local grids, as well as household wiring.

https://www.sciencedirect.com/science/article/pii/S0960148125006822

The paper is specifically about how much storage we would need if heat pumps are rolled out in scale. What it does not mention is the amount of hydrogen burning power stations tat would be needed, to produce the energy needed for those heat pumps.

But their calculations suggest we would need at least 40 GW, on top of the 30 GW we will need to replace existing CCGT fleet.

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May 14, 2025 at 08:18AM