UK solar subsidies
I just received the below solar PV advertisement in a mass email. I am certainly glad that I am not a UK resident and taxed to support this kind of generous payments – guaranteed to be a drain on the economy for the next 25 years.
Can anyone please help me to understand what must be a massive hypnosis campaign in order to obtain this kind of support for unreliable solar energy in a cloudy, high latitude country? More importantly, can anyone explain why leaders in that country are so adamant about not providing anything that even resembles assistance to nuclear energy developers. (At least the UK government seems to be making some progress on the most important thing it can do for nuclear energy – giving permission to start building with as little delay as possible.)
Hi Rod,
In my country (Spain) it makes much more sense installing solar panels than in UK. But, the Acts developing this technology were the most stupid ones any policymaker could ever dreamed.
The spaniards have to pay close to 500$/MWh of solar energy when the price in the market of nuclear+hydro+gas+coal combination is close to 60$/MWh.
Not only that, we will have to pay this amount of money during 30 years because they were guaranteed investments. In the middle of a crisis with more than 20% of unemployment rate.
In addition, the same people defending this crazy behavior is pushing to close the Garoña nuclear power plant which provides electricity below 20$/MWh.
And we could also talk about solar thermal power plants or wind mills. We are a “world leader” in renewables, they say. Actually we are the world leader in subsidies…
Greetings.
Manuel – thank you for the detailed perspective of someone who has to pay for those stupid decisions to determine the price of electricity on the popularity of the source instead of based on its value to the customer.
There is no surprise in finding out that the people who want government money to prop up expensive unreliables (aka renewables) want to force nuclear plants to shut down. Those emission free, highly reliable nuclear plants make it really inconvenient when they try to tout the emission free nature of their power systems.
Of course, I strongly suspect that the people who sell natural gas, coal and oil are also working hard to force nuclear plants to shutdown because they are the ones that have a reliable alternative ready to go into operation.
It’s not “crazy behavior” if you’re one of the politicians or political cronies cashing the guaranteed checks for the next 30 years.
It seems like there’s a good Monty Python sketch implied by the title of this post.
Or possibly even a dedicated episode of The Goon Show.
People got really tetchy about the slightest possibility of there being some sort of backhanded nuclear subsidies in the UK:
http://www.bbc.co.uk/news/science-environment-16646405
Apparently for a level playing field our electricity sources aren’t allowed to be subsidised… Oh unless it’s part of the previously formed “Renewables Obligation” which “acts as the central mechanism for support of renewable sources of electricity in the UK, and should provide subsidies approaching one billion pounds sterling per annum by 2010.”
So, no subsidies are allowed.. apart for the ones already in place for renewables.
Oh and the news article above.. the group spearheading launching the complaint are called Energy Fair. And the people preparing the formal complaint to the European Commission on behalf of Energy Fair are Lawyer Dr Fouquet (Director of the European Renewable Energies Federation) and include the supporter Jeremy Leggett (from the company SolarCentury) and Dr Gerry Wolff (is involved in the Desertec solar initiative in North Africa) who is the origin of the press release.. Yeeeeey
http://www.marklynas.org/2012/01/in-defence-of-nuclear-power/
The previous UK government was not very good at costing proposals in all areas including defence. The current one is being forced by the economic problems to be more sensible and are cutting the subsidy (see Reuters article below):
http://uk.reuters.com/article/2012/01/19/uk-ssolar-panel-idUKTRE80I1MC20120119
I’ve looked at solar thermal and solar PV for my house and can’t see how it makes sense without large subsidies. Even then, I’ll need gas and electricity all winter. Improving insulation does make economic sense for me with a payback of less than 5 years (the UK building codes were very weak on insulation in 1969).
The UK claims to be planning to build more nuclear power stations but I see little progress compared with other infrastructure projects such as high speed rail. Looks like we’ll be betting on fracking.
Murray, considering the UK’s population density, fracking would seem (to me) to be a much worse idea there than in America.
Joel, I agree but with little movement on nuclear I can only assume the powers that be believe fracking will produce enough gas to keep the lights on. It’s only advantage is that we already have a good distribution and gas generating capacity (but very poor storage, so relying on Russia or LPG from elsewhere seems risky).
(@Murray – please do not think I am directing this at you – it is meant as a general comment)
Maybe I am just really strange, but I cannot understand why anyone who is prosperous enough to even consider installing a solar system would think that it is okay to take taxpayer money in order to make the economics work. Maybe I am inconsistent, since I accepted taxpayer money to pay for my college and graduate school educations, but I excuse that as a “value for value” transaction where I agreed to serve for several years in exchange for the education.
During a brief interlude (96-99), I had the privilege of working as the GM in a very small company. I was the only college grad at the place so I took on a lot of roles, including producing the weekly payroll. When you spend three years running payroll numbers each week and seeing how much very hard working people have taken from every check in order to support the government, you get a different perspective on subsidies.
Middle class people feel really guilty about taking government money and increasing the cost of electricity for everyone simply so they can put a shiny status symbol on their roof that does little or nothing to reduce the need to burn fossil fuel.
I think I have to disagree with you on this one Rod.
To my view (as a Canadian Middle Class office worker) most of the people in my class, look at their pay cheques every two weeks, curse the amount that goes to taxes, then look for every possible way to get some of it back. They don’t feel guilty about taking Subsidy’s at all, it’s just getting their money back from the government.
If doing something like putting solar panels up gets Joe Middle Class some money back, and the perception of one upping the Prius Driving Green Jones, then that is a feel good win win for them.
And there in lies the core issue in the mind of Joe Middle Class:
Direct Subsidies like this = Direct Effect to Joe Middle Class, and give him a shiny domerhicky on his roof to prove he cares. And as a plus, 2 days a year the electrical meter on his house rolls backwards.. 1 day if there is a Solar Eclipse in his area….
Subsidies to Large Power Plants like Nuke Plants = Direct effects to big corporations that historically do nothing to pass any saving downstream to Joe Middle Class.
So as a Politician, stuff like these solar subsidies keep Joe Middle Class happy and voting for them, keeps the renewable industry happy and voting for them, keeps the Fossil Fuel Industry happy and voting and funding them. And the Nuke industry really is not big or loud enough to worry about.
Never under estimate the ability of the Mob to be distracted by Shiny stuff. Ohhhhhh we should cover the cooling towers with Solar Panels!!! SHINY Green Nuke Power!!!
(@Rod – no offence taken)
My point was that solar in the UK (I’m just NW of London so reasonable amounts of sunshine) doesn’t make much sense, subsidy or not. I may still go ahead with a DIY solar hot water system but only for the fun of it.
Insulation does make sense in my case (and is subsidised by the fossil fuel producers). Most of the UK’s housing stock is poorly insulated so I’m happy that measures are being taken to encourage renovation.
None of this addresses base load provision – I see no alternative to nuclear.
Rod, your post is displaying blatant “latitudism”.
Just because a country is latitudinally disadvantaged, they still have every opportunity to make anti-arithmetic/uneconomic decisions.
Could this policy have been imposed on Britain by the EU, rather than originating from within the British government?
No, we’re quite capable of screwing things up on our own 🙂
A local solar copany here in Southern NM is very straightforward with the advantages in their print advertising:
– 30% Federal Tax Credit
– 10% NM State Income Tax Credit
– Net Metering
– Renewable Energy Credit
– Increases the selling price of your home
– Add’l property value from your system is tax exempt
– No sales tax on solar systems.
In a local “legislative guide”, another local solar company, in bold, capitalized, white-on-colored-background type, calls for legislators to “Preserve the 10% New Mexico Solar Market Development Tax Credit, or Solar Tax Credit (STC)”.
My perspective on subsidies:
This may be me believing sources I shouldn’t, but from what I understand, *every* energy source is subsidized in one form or another. I think when we talk about subsidies, we shouldn’t demonize them in general, because everybody is guilty to one degree of another of receiving subsidies.
I think the rational discussion is on which energy technology, when you include subsidies, comes out the cheapest. I truly believe that is (or at least could be, if we got economies of scale going), nuclear power.
There have been historic subsidies in the form of R&D by Atomic Energy Commission and Department of Energy in the U.S., and I believe most of the nuclear nations had similar govt paid R&D programs. There may be small on-going regulatory subsidies (although, I think in most countries, most of the regulatory cost is paid by the licensees – in the U.S., license applicants and licensees pay quite alot of money to NRC as Rod has documented on more than one occasion).
Again, I don’t think articles which just decry subsidies are helpful, since everybody gets them. We need to show that the *scale* of subsidies would be much greater for other energy sources.
How about this, compliments of the NM RPS? El Paso Electic is touting their solar power in print and radio ads: a 20MW (rated) single-axis tracking array in Santa Teresa, NM and a 5MW (rated) dual-axis tracking concentrating solar PV array in Hatch, NM. Both of these arrays are owned by another company and EPE has Purchase Power Agreements (PPAs). Furthermore, while everyone here knows that the rated power of a solar array is something to be divided by 4, the general public does not.
What EPE is not telling the general public is that EPE is paying 12.745 c/kWh for power from the Santa Teresa array, and 11.9 c/kWh for power from the Hatch array. On EPE’s residential bills, the “base fuel” cost is 4.396 c/kWh and the “non-fuel base” is 6.394 c/kWh. In addition, there is a “Fuel & Purchased Power Cost Adjustment” (FPPCA) that allows EPE by regulation to account for changes in fuel costs. This month, the FPPCA is negative 1.0371 c/kWh, probably because NG prices are so low. It’s also winter (people aren’t running their ACs), and Palo Verde is going strong (EPE own 15% of that output), so EPE’s NG use is down anyway.
If it were not for the requirements of the NM RPS, why would EPE contract for wholesale power from solar arrays, when PPA cost is actually higher that what EPE charges retail residential customers?
@Jeff – there are also sources that claim that everyone cheats on their taxes and others that claim that everyone cheats on their spouse.
Commercial nuclear energy has not received any payments from the government for about 20 (or more) years.
There are some nuclear energy research programs, but most of those are jobs programs for national labs or are support for university programs in advanced nuclear energy research.
The Energy Policy Act of 2005 contained some contingent subsidies for nuclear energy – it includes a production tax credit (that is not indexed for inflation like the PTC for other non emitting power sources) that is limited to the first 6,000 MW of new electricity. Plants have to be operational by a certain date (2020??) in order to qualify. If there are more than 6,000 MW built by the deadline, the Secretary of Energy has the right to divvy up the money so each new plant owner would receive less money.
The often mentioned loan guarantees are essentially equivalent to a cosignature – the plant owners are obligated to pay them back with interest that is just barely below normal commercial lending rates. The applicant is also required to pay an upfront credit subsidy cost (CSC) which is not refundable.
There are NO nuclear power subsidies actually flowing from the taxpayers to anyone.
I was an atomic entrepreneur for for quite a while – I looked hard to find any programs that might offer support.
That SMR program that is getting a lot of play, by the way, is only going to give money to the DOE which will then turn around and use it to pay the NRC to do its regulatory tasks – lowering the NRC bill a bit for the two chosen vendors. I hate to say it, but I predict fratricide among SMR vendors as they try to compete for what is a decimal dust program of just $67 million in a DOE budget that is close to $30 billion.
I’m optimistic that the UK nuclear industry will be able to show that it can generate quality electricity at a good price without government subsidy and a reasonable regulatory environment. I strongly believe that government should not play energy favorites, and stick to some basic research and leave the various forms of power generation to battle it out in the market. I just think that it will be nuclear power that wins in the long run, for reasons so well illustrated in Rod’s blog.
Rod,
To know Britain you must understand that none of Britain’s political parties are able to construct rational solutions to any of the national problems. Instead each of the three main groupings spend their time talking back and forth, discussions largely divorced from any reality. Much of major decision making that effects Britain today emanates from the halls of the EU, policies, rules and edicts that are incorporated into national policy with next to no debate by parliament. Indeed the state of deceit that accompanies this practice is integral to day to day political discourse and lives of its supposed leaders.
If you recognise this then you will come to realise that nothing of sense can ever be expected from the British government. Of course you get the occasional instance of the rational, but this generally is accidental, and not the product of deliberate policy.
Regards Barry (English reader)
This has been an interesting discussion on relative cost. But I couldn’t help notice that many, if not all, of the participants think that companies or operators actually pay the bills. The business fact is that only customers and taxpayers bring money to the party. Everyone else is just involved in a transfer exercise. The thing that bugs me is the waste of resources. When time and resources are wasted through idleness or bad actions the natural outcome is increased poverty for the society. The feel good wastrels are killing us.
Then we have the relative energy and environmental issues. The laws of physics are not suggestions, they are really firm laws. If energy is taken from one part of the system it is no longer available to do it’s natural function where it was. Understanding unintended consequences is often neglected because they are hard to predict or would prevent us from doing what we really want to do. Humans have an incredible knack for failing to see the inconvenient and seeing what isn’t there but they wish was. It is fine to disrupt natural order as long as enough value is received. Is it possible that our value systems are skewed?