Untitled Document

The Windfarm White Elephant

The Siamese White Elephant

"A burdensome and costly possession, given by the kings of Siam to obnoxious courtiers in order to ruin them". OED

The windfarm developers complain that their two biggest problems are the Planning System and Finance. Recently the finance problem suddenly became headline news, triggered by the DTI’s announcement that it is seeking bids for Round 2 of UK offshore windfarm development. Massive windfarms are to be set up out at sea, hugely subsidised by capital grants, the Climate Change Levy and the Renewables Obligation. Because of their intermittency these windfarms will need to be backed up with conventional generation to the extent of about 70% of their installed (i.e. nominal) capacity. Or some way will have to be found to store the energy, which will itself be extremely expensive, and for which the technology is years away.

On top of this, the finance for all these schemes is not likely to be available unless the Government gives a commitment to ratchet up the Renewables Obligation, or just get the taxpayers to underwrite the whole enterprise. The the cost of the White Elephant will fall on all of us.

Contents

1	UK Government support for wind energy
2	"Future Offshore” and the DTI’s plans for Round 2
3	Financing windfarms
4	Viability. Are windfarms any use?
5	The fall-out – good or bad?

1. UK Government Support for wind energy

Successive British governments have tried to encourage windfarm development with ingenious schemes which have largely failed in their objectives and have had unforeseen damaging consequences. The current favourite is the the Renewables Obligation which is likely to go the same way.

The UK Government’s financial support for wind energy goes back to to the early 1990’s when the Conservative Government of the day decided to mitigate the criticism of its subsidies for nuclear power, by adding a greenwash - subsidised renewable energy. Its solution was to create NFFO – the Non-Fossil Fuel Levy (in Scotland SRO, the Scottish Renewables Orders ). The idea was to encourage developers by auctioning contracts to build various types of renewable energy project, while electricity consumers paid for the difference between this price and the market price, for a period of 15 years following 5 years for planning consents and construction. There were five issues of NFFO and three of SRO, the last being NFFO5 and SRO3 in 1998.

These projects were bitterly contested by local conservationists and in fact well over 100 schemes appear to have been abandoned. Perhaps the only smart feature about NFFO/SRO was that scheme was subsidised by charging a levy on householders’ fuel bills. It was never shown on their bills, they had no right to ask what the amount was, let alone opt out of it, and virtually none of them knew a thing about it. The auction process is generally seen to have been disastrous as it made it necessary to put the turbines on the windiest, highest and most visually sensitive sites, in order to put in a competitive bid.

The New Labour Government, pursuing the “low-carbon economy”, has produced a number of schemes ranging from direct subsidies for ‘research’, to the Climate Change Levy (where companies are rewarded/punished for buying/not buying renewable energy) to the Renewables Obligation. The Climate Change Levy has had to be severely modified because of its damaging effects on manufacturing industry. However it is the Renewables Obligation which is under scrutiny at the moment and has put the current Government on the back foot In the current year (2003) this forces suppliers to buy 3% of their electricity from renewable sources, and as this is in very short supply the price is around £50/MWh, as opposed to £22 for gas-generated supplies. The Government has said that is committed to supporting this until 2010, but after that it 'aspires' to continue to increase the contribution of Renewables to 20% by 2020. There is some suspicion that that the numbers involved (10%/2010 and 20%/2020) are too neat to have been based on any specific research.

The situation is due to be renewed in 2005, presumably to see how the market in Renewable Certificates works out. The lack of any Government guarantees beyond 2010 is having a considerable impact on the availability of finance for windfarm developments (see 3. below). It is also clear that windpower has needed considerable state subsidies to achieve even to the very low level of development so far, and both Labour and Conservative governments have produced very unsatisfactory schemes to deliver the subsidies. The Renewables Obligation is likely to fall into the same category.

2. Future Offshore

Future Offshore was the title of a Government report (published November 2002) on the possibilities of offshore windpower, issued by the then Energy Minister Brian Wilson. It subsequently formed the basis for ROUND 2 of offshore licences, a vast development of windfarms on the UK Continental Shelf. It appears that there is to be an exclusion zone which will prevent the development of near-shore windfarms, although the exact dimensions of the exclusion zone in any one place will no doubt be a matter of dispute.

At the time (2003) Britain's only "offshore" windfarm consisteds of two turbines in Blyth Harbour, Northumberland. Half of this windfarm was out of action for some time when one of the blades wilted.

As the windfarm is only 1km offshore it is properly described as nearshore

The "offshore" story so far

ROUND 1

In 2001 Tony Blair announced a programme for the development of 18 "offshore" windfarms. Of the seventeen proposals, one has been dropped entirely, eight have received planning consent and construction has begun at one, North Hoyle, off the coast of North Wales.As Country Guardian commented at the time some of these sites are as little as one mile from the shore. This round of "offshore" licences was subsequently labelled ROUND 1.

FUTURE OFFSHORE

On 22 November 2002 the energy minister Brian Wilson produced his comprehensive report Future Offshore, which envisaged a massive expansion of offshore energy and seemed to acknowledge for once that maybe onshore windfarms had some disadvantages. See the DTI's Press Release about Future Offshore. The report envisaged massive expansion of offshore wind in three areas of the Continental Shelf around Britain, The Greater Wash, The Thames Estuary and the Irish Sea.

The Future Offshore report was referred to by DTI secretary Patricia Hewitt in July 2003 when she invited tenders for a new round of offshore windfarms, to be known as ROUND 2. The DTI announcement and "Question and Answer session" are on this site. These documents give a clear indication of the Government's thinking on offshore windfarm development, and contain a good deal of factual information which we should all know about. Referring back to ROUND 1 she said that the 17 sites will amount to more than 500 turbines with a "total output" of 1,500 MW, which assumes that the turbines will be 3MW capacity. [In referring to this as "output" the minister conveniently ignores the fact that this figure is 'nominal capacity' (or ') and that the actual output ("load factor'") likely to be about 30% of this, i.e. about 450MW. When Government sources commit gross errors on this scale, is it because they they are simply ignorant or is this another example of "sexing up" a dossier?“ Before leaving ROUND 1, look at Green comeback for power tycoon - "We have been very successful with Barrow and we would be delighted to get four more licences,” Mr Petterson said. “However, it isn’t easy to get these sites up and running. A number of the original 18 licences have got stuck in the mire and may never come to anything.”

The announcement confirms the three areas identified in Future Offshore (The Thames Estuary, the Greater Wash and the North West) and amplifies the concept of the Strategic Environmental Assessment (SEA). Apparently this has been backed by "organisations with responsibility for environmental protection and conservation". The strategic approach will allow for the proper assessment of cumulative effects and shipping and fishing. Hopefully.

The actual Longitude and Latitude references of the three areas are given.

ROUND 2 - OFFSHORE vs. NEARSHORE. THE EXCLUSION ZONE

So far so good. If the windfarms are to be placed out to sea, there will no doubt be environmental and safety issues to be considered, but in principle they will not impinge on "our finest landscape" which Country Guardian has sought to protect from its beginning in 1992. Certainly, when we come to look at the all-up economic costs and viability of such schemes, (Sections 4 and 3 below ) we may question whether it will ever get off the ground, or whether this is the best way to deal with concerns over climate change or fuel supplies. But if the Government is hell-bent on building them, they will not ruin our fragile landscapes - unless they are actually near-shore developments, and here we come up against an interesting last minute change between the report, Future Offshore, and the ROUND 2 proposals.

In the original report Future Offshore the maps of the three strategic areas came right up against the coastline and were therefore very relevant to our coastal landscape, i.e much of what was supposed to be offshore was really near-shore. However, when we look at the small print in the DTI's Q&A section, there seems to have been a last minute conversion on the part of the DTI. This is what the DTI now says:"The Crown Estate has been requested by DTI to invite developers to tender for sites in all three strategic areas, with the exception of a coastal strip of a minimum width from the shoreline of 8km but extending to 13km in areas of specific sensitivity. In addition certain shallow water areas will be excluded from the North West Strategic Area. The excluded areas will not be offered to developers in Round 2. This is in recognition of the potentially higher sensitivity of shallow coastal waters to windfarm development, in particular the possible disturbance to birds, the visual impact from the shore, the potential impact on inshore fishing and recreational activities, and the much larger scale of development proposals anticipated in Round 2 than Round 1." (ref. the letter from Deltaic, a potential developer, who is complaining about the short notice.)

so the DTI seems to have been listening to the representations about near-shore sites which were made following the publication of Future Offshore, and must have taken some note of the strong opposition in Round 1 from such places as Whitstable, Porthcawl and the Fylde Coast. But when you consider that on a clear day the Cliffs of Dover can be seen very clearly from the seashore at Calais, a distance of over 30km, it still means that whole vistas of open seascape will have disappeared, because developers will try to build just outside the excluded areas because it will be cheaper.There is also a sting in the tail. In answer to the question - Will these coastal areas be ruled out in future rounds?- The DTI replied "Not necessarily. We are adopting a precautionary approach for Round 2, but we will continue to develop the approach for future rounds in the light of evolving knowledge and understanding of offshore windfarm development. We will continue to draw on a wide range of views as part of this process" In answer to the question -Why were Round 1 site leases awarded in these excluded areas? - the DTI replied "Round 1 was a pilot round of development on a strictly limited scale to inform strategy and direction for future rounds". A small crumb of comfort was offered to the victims of Round 1 In answer to the question "can applications be made for extensions to Round 1 sites? - the answer was "Applications for site extensions can only be made for those Round 1 sites which fall within the Strategic Areas made available in Round 2, i.e. not in the excluded coastal strip". For the time being Round 2 only applies to those parts of the Strategic Areas which fall within territorial waters. Further legislation is required to develop in international waters.So, assuming the developers apply for licences, and they manage to to get finance, and the Renewables Obligation creates a massively inflated price for a low-grade intermittent energy source, we shall eventually by living on an island surrounded at some distance or another by a sort of white picket fence.

3. Financing windfarms

Getting finance has always been a problem for windfarm developers. This was less so in the early days of the NFFO system, where developers could offer to sell their energy at prices many times the going price for conventional electricity. If an offer of 12p per kW/h (as against ,say, 3p per kW/h for conventional electricity) was accepted, the site owner was sitting on a licence to print money, and there are still windfarm operators basking in this handout, at the unwitting expense of electricity consumers (see Section 1 above). This type of agreement was known as a Purchase Power Agreement (PPA) and was common in the '90's. There is nothing more copper-bottomed, or cheaper, than a loan that is guaranteed by the government for a fixed period. The future seems much less rosy

The financial climate for wind developers has changed dramatically, for two reasons,

1. The switch from PPAs to more uncertain instruments such as the Climate Change Levy and the Renewables Obligation

The drop in electricity prices has been due to the de-regulation of energy markets, which was particularly marked in the UK, following the introduction of the New Electricity Trading Arrangements. These incidentally took the lid off the unattractiveness of intermittent energy, particularly wind power, but the subsequent collapse of companies such as TXU Europe drastically reduced the credit-worthiness of all energy projects. The Railtrack fiasco has also made financial markets very wary of getting involved in partnerships with the UK Government

2. In the case of wind power the replacement of PPAs with regulatory instruments such the Climate Change Levy and the Renewables Obligation has meant that the assured cash-flow no longer exists.

The Government is relying on the Renewables Obligation as a means of artificially boosting the price of renewable energy. As long as the present scarcity of renewable energy exists, the market for renewable energy will continue to be very thin and the small amount available will be command a high price - at present it works out at about £50 per MW/h as against £22 for conventional power. This figure varies wildly however and there are other factors which emerge, such as:

1. Companies which own renewable assets which are currently mothballed, such as small hydro schemes, are finding they are worth using again, instead of buying wind energy. Hydro schemes operate at about 90% capacity as against 30% for windfarms. The cost of the electricity produced, artificially boosted by RO, make them a much better bet than wind. An example of a company doing this is Scottish & Southern, which is refurbishing its hydro schemes in Scotland

2. Taking this a step further, there is nothing to stop a further rise in "vertical integration" in which electricity suppliers and generator merge, or create jointly owned companies in which effectively the inflated price is merely an internal transfer and the company loses nothing, but fulfils its obligations under RP.

3. Renewables Certificates can be purchased by an electricity supplier as an alternative to buying renewable electricity, with the money being passed over to a company which has used renewable energy. But these companies are increasingly being merged into large groups, so these transactions become merely internal company transfers.

4. The European Union is working on a Carbon Certificates system which will work in a similar way to ROCs, except that they it include all forms of electricity which contribute or not to the generation of CO2, including nuclear. It is likely that these two systems will interact is the free market, in which case the value of the UK carbon credits, originally boosted by the thin market in the UK, will be diminished by a flood of credits generated by nuclear power stations. Or maybe the whole Carbon Credits system will collapse under its own complexity - See The Ofgem press release - Ofgem to sue TXU (UK) and Maverick Energy for £23 million unpaid deficit on ROC certificates

5. This is a quotation from David Leivesley of EcoWind, quoted in Wind Power Monthly, "There is enough comfort for bankers in onshore wind in the UK. For a site with planning consent and a wind speed of eight metres per second , I think you will not have a problem getting finance". In other words, at less than 8 metres/sec there is a problem. These can only be financially viable if highly subsidised, and will only attract finance if that subsidy is guaranteed. But the map of UK average windspeeds shows that the only places which reach windspeeds over 8 metres/sec are the tops of the mountains and the highest fells. The vast majority of current proposals are for schemes in lowland areas with windspeeds between 5 and 7 metres per second.

The point is that all these considerations undermine the idea of the Renewables Obligation as a means of providing a guaranteed revenue stream which will allow developers to raise the necessary finance. Of course it's not black and white, but the higher the risk the higher the cost of the loan and the lower return on the investment. However, the Government has shot itself in the foot by stating that, whilst it has an aspirational target for 20% of UK electricity to come from Renewables by 2020, it is not planning to extend the ROC scheme beyond 2010. The aspiration is based on the expectation that wind energy will be self-supporting by then.

Look at the article written by a financial analyst from KPMG and a piece from the Sunday Times. Also some correspondence from The Times about the capital costs of offshore wind

4. Viability - are windfarms any use?

Wind energy suffers from one specific serious technical defect - the wind only blows some of the time, leaving the supply intermittent and therefore unreliable. This leads to a number of weaknesses which add up to a verdict that, unless wind energy can get round the problem, it has no future. It it can, and if the turbines can be located somewhere where the environmental impact is acceptable, then maybe they do have a future, but not onshore.

Why are windfarms not reliable?

Certainly it's not a problem of low availability. Recorded 'reliability', in the sense of percent of time available for work, is quite high, although there have been spectacular breakdowns, some very dangerous (see German windfarm accidents). But it's not surprising that wind turbines have a high availability level, as they are are only required to work for less than 30% of the time!

The fatal flaw is intermittency, arising from the simple fact that the wind only blows some of the time. Wind turbines only start to operate when the windspeed reaches 18km/hour (5 metres/sec, moderate breeze, force 4), and have to be switched off when it reaches about 85 km/hour(23 metres /sec, storm force 10). Between these limits a turbine's output varies according to the windspeed turn Average wind speeds in the UK vary between around 5 and 10 metres/sec. according to location and height above sea level. As we saw above (Sec 5.) the minimum average windspeed considered acceptable by the bankers is 8 metres/sec. The results are low output and low productivity, problems in integrating wind energy into the National Grid, and insecurity of supply

Low Output levels . Wind turbines only operate at a fraction of their nominal capacity, around 20% to 30%, maybe up to 35% in the highest mountains of Scotland, or the north coast of Northern Ireland, in lowland areas probably below 25%. This means that 3 or 4 turbine generators are needed in a windfarm to do the job of one in, say, a hydro-electric scheme. This applies to nearshore as well as onshore windfarms. (Experience genuinely offshore is not enough to make any assumptions yet). This is a waste of resources, land and money.
See Vestas for an analysis of the performance and variability over time of a widely used model of wind turbine.

Intermittency makes it very expensive to feed wind-generated electricity into the distribution system and the National Grid. This became brutally clear when the government's New Electricity Trading Arrangements (NETA) were started up in March 2000. The Energy Regulator summed it up: "There is a problem, particularly about wind power, in that it is unreliable and in energy production, as in other forms of life, people pay less for unreliable production". Electricity companies like Southern and Scottish are desperately looking for sources of electricity, such as hydro, which qualify for the subsidies available for renewable energy but which are also reliable.

Intermittency of wind energy reduces security of supply. Britain cannot afford power cuts. It needs an assured capacity of about 54 Gigawatts to meet the demand experienced, for example, in early December 2002. In a damning report the Royal Academy of Engineering said :
"Perhaps as much as 75 – 85% of this wind capacity,... would have to be available in the form of conventional plant capacity in order to provide back-up power when wind is light or absent. The fixed capital costs of this partly used plant would have to be borne by the consumer – possibly of the order of £1 billion."

Perhaps the most impressive debunking of the viability of wind energy to solve any of Britain's energy problems can be found in the interview given to The Times by Sir Alec Broers, the president of the Royal Academy of Engineering.

“The view of wind power is over-optimistic — that we can get to 20 per cent renewable energy by 2020 and that it will be as straightforward as that. Some forms may be far more expensive than we think they are".. “All of these energy sources should carry the costs of their overheads with them. If you have wind power, you have to have back-up from gas generation, for when there is not enough wind, and the cost of those plants has to be added to the cost of wind power". “We can’t just put up wind turbines and generate a lot of electricity for free. We will need to redesign the grid, set up reserves for when the wind isn’t blowing strongly enough, learn how to store power.”

The actual operating capacity of the 1000 wind turbines currently installed in the UK is 165 megawatts, based on an assumption of 30% out from 550MW installed capacity, which is erring on the generous side. This is only 0.4% of the national electricity demand. The only reason even this pitiful effort has been achieved is Government subsidies detailed in section 1 above.

5. The fall-out – good or bad?

What is the net effect of all this on Country Guardian's Campaign to Oppose Windfarms in Britain's Finest Coasts and Hills and promote Energy Conservation. It should mean that the Government is going to put its hand in its pocket to fund the building of a vast array of windfarms on the continental shelf where they can will not wreck our countryside. . Unfortunately, it's quite likely that the government will slide out of this and encourage the developers to continue invading the onshore/nearshore sites.

The proposal for Round 2 of of "offshore wind" is a key stage in the development of UK wind energy.

The Government seems to have realised that it will continue to meet fierce and costly opposition to onshore wind, and that the situation will not change whatever the form of subsidy the Government uses. If it believes in this project, it is unacceptable that any further onshore development should be contemplated.

In the case of nearshore development the Government seems to have recognised that there is a big problem with windfarms at sea which are within sight of land. This is accepted implicitly by the DTI's imposition of an exclusion zone for Round 2, and the comments made about the "experimental" nature of Round 1. The fierce opposition at Porthcawl, Whitstable and elsewhere has also had an effect. However, the Exclusion Zone is probably only a concession to specific nature conservation and shipping interests rather than wider issues of landscape. The width of the exclusion zone will be controversial, and there is no doubt at all that the developers will try to narrow it as much as possible.

In the case of true offshore sites, whilst there will undoubtedly be environmental problems, they do not come into the category which Country Guardian has been concerned with - its mission has always been to "oppose windfarms in Britain's precious hills and coasts and promote energy conservation".

So do the massive schemes in the North Sea and off the North West coast of England mean that the battle for our "precious hills and coasts" has been won? Unfortunately not, for the following reasons.

1. The offshore sites might never get off the ground; it might be impossible to get finance for them, and the resources might not be available, or have other calls on their time. The sober evaluation of Uillean Cameron, head of PFI in Scotland within KPMG Corporate Finance makes it clear that the financial sector is very wary of offshore wind.

2. This is tied up inextricably with issues of state subsidies and the uncertainties of the impact of the Renewables Obligation. I seems likely that government spending targets are going to be tight over the foreseeable future and in these situations governments turn to messy compromises, to go for the cheapest option which gives them a fig-leaf. This could mean an even more aggressive attack on the onshore/nearshore sites, which are more profitable for the developers when the subsidies, particularly the Renewables Obligation, are taken into account.

What can be done?

Use this information in The Windfarm White Elephant and the associated web pages and links. The viability of wind energy (section 4) is particularly important. Whatever the degree of climate change due to carbon dioxide might eventually turn out to be, there is no doubt that we need to reduce our reliance on conventional fossil fuel sources. But the intermittency of wind power makes it the least suitable.
Fight every onshore / nearshore windfarm, from Regional strategy on renewable energy to the last day of a Public Inquiry. Country Guardian will monitor the implementation of the government's new planning policy. Please contact us with any information you have about its implementation, particularly cases where the local officials or councillors have been unduly influenced by regional or government officials, or where developers have been offering inducements.
Be aware that renewable energy in general is now taking a hammering in the media, increasingly in publications which have in the past been favourable to them, for example, The Independent - How Lakeland wind farm plan has environmentalists in a spin Note particularly the comments of Sir Martin Holdgate. Note also the article from The Engineer which shows that wind power can only be a very marginal player in the move to contain CO2 emissions

In an article in the journal The Engineer headed "Renewed disinterest: Government spokesman sidelines renewables in UK drive to cut carbon emissions", the writer Rob Coppinger reports on a speech by Nick Otter at a DTI conference. Nick Otter, who is Chair of the government's Advanced Generation Forum, referred to the government's ambition to reduce CO2 emissions by 60% by 2050. He said that "in contributing to the UK's carbon target, efficiency improvements in existing and future power plants would provide a 30% reduction,. CO2 sequestration could create the other 30%. (carbon sequestration is the technology which takes CO2 out of the atmosphere and stores it deep underground, which is where it would eventually end up anyway). According to Coppinger "Though public perception of UK energy policy is that renewable resources, in combination with the rise of the hydrogen economy, will end greenhouse gas emissions in the long term, conference speakers painted a very different picture. None of the delegates, including US and UK industry consultants to government and the DTI's director of energy strategy, proposed that either a hydrogen economy or nuclear power would be the key to reduced or zero greenhouse gas emissions".

Until all this sinks in at a political level, the wind turbine manufacturers and their 'green' supporters will continue to push their discredited windfarms onto our precious landscapes. The fight will go on to minimise the damage.