The Case against Windfarms

The Case Against Windfarms is an authoritive, referenced document written by Dr John Etherington ( © Dr JR Etherington).

The views expressed are those of the author, who is a professional environmental scientist, formerly Reader in Ecology at the University of Wales. It is freely offered for reproduction or other use providing it is acknowledged. Our website contains the complete document, which consists of 18 Sections, 2 Appendices and References/Notes. The full list is shown on the Home Page, and also at Case Sections

The website also contains a web page devoted each separate section, of which this is one. These pages start with a copy of the relevant section of the full report, followed by links to a series of articles, news items, research papers and reports which are relevant to that topic. Note that these items have been compiled by Country Guardian and are not part of Dr Etherington's paper

 

2. Government policy, costs and 'subsidy'

 

"The aim of government policy for renewable energy is that it should make an increasing contribution to UK energy supplies in the years to 2010 and, more importantly, beyond. To this end, the Government took powers through the Utilities Act 2000 to impose an obligation on licensed suppliers in Great Britain to source specified amounts of electricity from renewable sources." (DTI 1999 N&R Energy).

 

The 'Energy White Paper (2003) announced that: -

 

"We have introduced a Renewables Obligation for England and Wales in April 2002. This will incentivise [sic] generators to supply progressively higher levels of renewable energy over time. The cost is met through higher prices to consumers. By 2010, it is estimated that this support and Climate Change Levy exemption will be worth around £1 billion a year to the UK renewables industry."

 

Note – before reading this section it may help to familiarise yourself with the units and terminology of electricity (see References and notes: ‘Units and terminology’ and ‘Prices’).

 

Government’s action has ensured that renewable power generation is now ‘subsidised’ by the mechanisms of the Renewables Obligation (RO), the Climate Change Levy exemption (CCLe) and the marketing of RO Certificates (ROCs).

 

The Renewables Obligation as its name suggests places an obligation on electricity suppliers to purchase a percentage of qualifying renewably generated electricity but it also forces a consumer-sourced 'subsidy' to be paid to the renewable generator. During the year 2004-5 the obligation stood at 4.9% of qualifying electricity, rising to 10% by 2010.

 

The mechanism of payment results in an increase in electricity price to all consumers, whether or not they subscribe to a 'green tariff'. Few consumers are aware of this fact and neither government nor wind power developers apprise them of it. The complexity of this system is deliberately obscure in an attempt to conceal the fact that the RO is effectively a hidden tax on all electricity consumers and a huge hidden 'subsidy' to providers of renewable energy - larger indeed than any subsidy in history.

 

This obscurity and lack of democracy has been acknowledged by the House of Commons Committee of Public Accounts report on the DTI (CPA 2005) which says: -

 

"Requiring users to source supplies from uneconomic providers has the same affect as taxing users to subsidise the providers, but is not as transparent or amenable to parliamentary control... [and the DTI] has not consulted consumers, or their representative groups, about their willingness to contribute to the cost of renewable energy"

 

The net effect of the RO and CCLe mechanism is to pay three premiums on top of the wholesale price of wind generated electricity (and other renewable generation). In summary: - 

 

1. The Renewables Obligation Certificate ‘buyout’ price which is currently £32.33.

 

The ROC was set at £30/MWh in 2002 and increases each year, Retail Price Indexed. The current period 05/06 known as Compliance Period 4, has a price of £32.33). 

 

2. A trading increment from marketing Renewables Obligation Certificates currently worth about £10/MWh.

 

This tradable value grew steadily after 2002 when the RO system replaced the former Non-fossil Fuel Obligation. The price of ROCs reached about £47/MWh in 2004 but very recently the increment has dropped back to c. £10/MWh with total ROC value c. £40-£45/MWh.

 

3. The Climate Change Levy exemption, worth £4.30/MWh.

 

In addition to the consumer-sourced RO, another small advantage is given to the renewable generator. Non-renewable generating fuels pay a tax of £4.30/MWh, but renewables are exempt and so the electricity is effectively given an extra £4.30/MWh.

 

The ROC buy-out price, its market increment and the CCLe thus total a premium of £32.33 + c. £10 + £4.30 = c. £ 46 - £47 per MWh, which is added to the wholesale value of the electricity generated from renewable sources - in our context wind power.

 

Electricity has increased enormously in price since the RO was introduced and is now around £40 - £45/MWh for wholesale base-load generation (DTI 2005) but the trading system of NETA involves short term bidding by National Grid Transco and the price fluctuates wildly, controlled by supply and demand. Thus we have an approximate total, at the moment, of about £90+/MWh paid for wind power compared with c. £40-£45/MWh for conventional generation.

 

The net outcome of the ‘subsidy’ system is that wind electricity receives about twice the price of wholesale base-load thermal generation per MWh. An 'effective subsidy' which doubles unit-value is gigantic, historically unprecedented and I believe unsustainable. Coal currently receives less than one twenty-fifth of this subsidy per MWh whilst gas and nuclear get none (personal communication DTI).

 

The RO and CCLe provide the huge financial incentive which has brought multinational power companies flocking to our shores and has been responsible for the distortion of our planning system which the Committee of Public Accounts virtually branded as undemocratic (CPA 2005).

 

A single 2 MW wind turbine operating at 30% load factor would, on the basis of the above figures, receive an annual subsidy of over £235,000

 

It is a salutary thought that it is only this cleverly sourced covert ‘subsidy’ which allows wind turbines to be built at all. Paul Golby, the chief executive of Eon UK (formerly Powergen), said: "Without the renewable obligation certificates nobody would be building wind farms." (Daily Telegraph 26/03/2005).

 

Capital subsidies

 

In addition to the huge ‘for-life’ subsidy on electricity income, substantial capital subsidy is available for some wind power projects.

A recent question in the Commons revealed that the public pocket supported a total capital subsidy to offshore wind farms of £34.7 million pounds in 2004-2005 (Hansard 23 Jan 2006 : Column 1770W http://www.publications.parliament.uk/pa/cm200506/cmhansrd/cm060123/text/60123w19.htm ). It is sometimes difficult to establish the scale of subsidy, for example the two offshore turbines at Blyth cost £4 million and received unspecified financial support from the European Commission Thermie Programme.

The Moel Maelogan onshore windfarm in the Conwy Valley, North Wales, was awarded a £0.36m Objective 1 ERDF grant against a total project cost of £2.5m in 2002. The normal maximum European Regional Development Fund (ERDF) grant rate is 35%. However, in some circumstances... the grant rate can be potentially up to 50% (pers. comm. 2005 Welsh European Funding Office, which also pointed out that Objective 1 money is now exhausted).

 

Capital subsidy has also been made available for small scale renewable projects through the Clear Skies scheme, funded by the DTI. This gave householders and communities a chance to install renewable energy systems by providing grants and advice. Domestic grants were from £400 to £5000 whilst ‘not-for-profit’ community organisations could receive up to £100,000 (£50,000 from April 2005). Funding for this project is now exhausted and it will be replaced by DTI’s ‘Low Carbon Buildings Programme’ scheme in c. April 2006 (http://www.clear-skies.org/).

 

As if this was not enough public money being funnelled into the pockets of wind developers, the Lottery fund has also been raided to provide yet more. The Burbo Bank 90 MW offshore station due to be completed in 2010 has been awarded a ‘Big Lottery’ grant of £10.4 million – not yet paid-out as of March 2005 – with a completion date of 2010 (http://www.biglotteryfund.org.uk/).

 

Impact of subsidy

 

So much money is being channelled covertly into onshore windpower development that development companies can offer irresistible sums in rental to landowners or as ‘sweeteners’ to local communities. Struggling farmers on poor hill land are offered rental sums far exceeding any possible agricultural income from the land. “If it wasn’t for the windmills I’d have thrown in the towel a long time ago” (farmer, Guto Jones, landowner at Blaen Bowi, Carmarthenshire – reported in the Tivyside Advertiser (2002).

 

A current proposal (2006) by Dutch firm, Nuon, typifies the use of larger scale community 'sweetening' even before a planning submission is made. The publicity material for the 26 MW Nant Bach (Mwdal Eithin) wind ‘farm’ in Conwy, N. Wales, states that the project "will make available £60,000 a year as a community funding" A most tempting offer even though the sum is but 2% of the likely subsidy payment to Nuon! It is interesting to note that the Welsh renewable energy planning document TAN 8 comments on such community benefits that "It must be clear that the provision of benefits is on a purely voluntary basis with no connection to the planning application process" (Annex B. 2.4),

 

Relevant articles, news items, papers, reports

DHI Paper.htm. Tilting at Windmills: The economics of wind power’
Professor David Simpson (The David Hume Institute) April 2004

Generation Costs. The Costs of Generating Electricity
The Royal Academy of Engineering March 2004

Row over renewable energy scheme. A renewable energy scheme is being funded by cuts from other projects designed to promote household energy efficiency, the BBC has learned.
 BBC News Fraiday 13 October 2006