A Great Green Rip-Off

The feed-in tariffs about to be introduced here are extortionate, useless and deeply regressive.

By George Monbiot, published in the Guardian 2nd March 2010.

Those who hate environmentalism have spent years looking for the definitive example of a great green rip-off. Finally it arrives and no one notices. The government is about to shift £8.6bn from the poor to the middle classes. It expects a loss on this scheme of £8.2bn, or 95%(1). Yet the media is silent. The opposition urges only that the scam should be expanded.

On April 1st the government introduces its feed-in tariffs. These oblige electricity companies to pay people for the power they produce at home. The money will come from their customers, in the form of higher bills. It would make sense, if we didn’t know that the technologies the scheme will reward are comically inefficient.

The people who sell solar photovoltaic (PV) panels and micro wind turbines in the UK insist that they represent a good investment. The arguments I have had with them have been long and bitter(2,3). But the debate has now been brought to an end with the publication of the government’s table of tariffs: the rewards people will receive for installing different kinds of generators(4). The government wants everyone to get the same rate of return. So while the electricity you might generate from large wind turbines and hydro plants will earn you 4.5p per kilowatt hour, mini wind turbines get 34p, and solar panels get 41p. In other words, the government acknowledges that micro-wind and solar PV in the UK are between seven and nine times less cost-effective than the alternatives.

It expects this scheme to save 7m tonnes of carbon dioxide by 2020(5). Assuming, generously, that the rate of installation keeps accelerating, this suggests a saving of around 20m tonnes of CO2 by 2030. The estimated price by then is £8.6bn(6). This means it’ll cost around £430 to save one tonne of carbon dioxide.

Last year the consultancy company McKinsey published a table of cost comparisons(7). It found that you could save a tonne of CO2 for £3 by investing in geothermal energy, or for £8 by building a nuclear power plant. Insulating commercial buildings costs nothing; in fact it saves £60 for every tonne of CO2 you reduce; replacing incandescent lightbulbs with LEDs saves £80 per tonne. The government predicts that the tradeable value of the carbon saved by its £8.6bn scheme will be £420m(8). That’s some return on investment.

The reason for these astonishing costs is that the government expects most people who use this scheme to install solar panels. Solar PV is a great technology – if you live in southern California. But the further from the equator you travel, the less sense it makes(9). It’s not just that the amount of power PV panels produce at this latitude is risible, they also produce it at the wrong time. In hot countries, where air conditioning guzzles electricity, peak demand coincides with peak solar radiation. In the UK peak demand takes place between 5 and 7 on winter evenings. Do I need to spell out the implications?

We have plenty of ambient energy, but it’s not to be found on people’s roofs. The only renewables policy that makes sense is to build big installations where the energy is – which means high ground, estuaries or the open sea – and deliver it by wire to where people live. But the government’s scheme sloshes money into places where resources are poor and economies of scale impossible.

We don’t need to guess the results: the German government made the same mistake ten years ago. By 2006 its generous feed-in tariffs had stimulated 230,000 solar roofs, at a cost of E1.2bn. Their total contribution to the country’s electricity supply was 0.4%(10). Their total contribution to carbon savings, as a paper in the journal Energy Policy points out, is zero(11). This is because Germany, like the UK, belongs to the European Emissions Trading Scheme. Any savings made by feed-in tariffs permit other industries to raise their emissions. Either the trading scheme works, in which case the tariffs are pointless, or it doesn’t, in which case it needs to be overhauled. The government can’t have it both ways.

A week ago the German government decided sharply to reduce the tariff it pays for solar PV, on the grounds that it’s a waste of money(12). Just as the Germans have begun to abandon their monumental mistake, we are about to repeat it.

Buying a solar panel is now the best investment a householder can make. The tariffs will deliver a return of between 5-8% a year, which is both index-linked (making a nominal return of 7-10%(13)) and tax free(14). The payback is guaranteed for 25 years(15). If you own a house and can afford the investment, you’d be crazy not to cash in. If you don’t and can’t you must sit and watch your money being used to pay for someone else’s fashion accessory.

Had this money been spent instead on insulation or double glazing, it could have helped relieve fuel poverty at the same time as cutting emissions. But the feed-in tax is both wasteful and regressive. The government has now decided not to oblige people to improve the efficiency of their homes before they can claim a tariff: you’ll be paid to put a solar panel on your roof even if the roof contains no insulation(16).

Though there’s a system to ensure that functioning devices are installed, it can’t be long before thousands of petty criminals discover the perfect carousel fraud, bypassing their solar panels by connecting the incoming wire to the outgoing wire. By buying electricity for 7p and selling it for 44p (if you sell power to the grid rather than using it yourself, you get an extra 3p(17)), they’ll make a 600% profit. Amazingly the government has decided not to measure how much electricity people are selling, but “to pay export tariffs on the basis of estimated (deemed) exports.”(18) Elsewhere in its report it boasts of “encouraging a risk-based approach to audit and assurance”(19). Come on in you crims, the door is wide open.

So who is opposing this lunacy? Good question. The Conservatives, Liberal Democrats, Friends of the Earth and Greenpeace have lined up to denounce the government for not being generous enough(20,21,22,23). The only body to have called this right is the loathsome TaxPayers’ Alliance, but no one listened because it has cried wolf too often(24).

There appears to be a cross-party agreement to squander the public’s money. Why? It’s partly because many Tory and LibDem voters hate big, efficient windfarms, and this scheme appears to offer an alternative. But it’s mostly because solar panels accord with the aspirations of the middle classes. The solar panel is the ideal modern status symbol, which signifies both wealth and moral superiority, even if it’s perfectly useless.

If people want to waste their money, let them. But you and I shouldn’t be paying for it. Seldom has there been a bigger public rip-off; seldom has less fuss been made about it. Will we try to stop this scheme, or are we a nation of dupes?

www.monbiot.com

References:

1. DECC, 1st February 2010a. Impact Assessment of Feed-in Tariffs for Small-Scale, Low Carbon, Electricity Generation (URN10D/536). http://www.decc.gov.uk/en/content/cms/consultations/elec_financial/elec_financial.aspx

2. http://www.newscientist.com/article/mg19125715.200-smallscale-renewable-power–lowwattage-thinking.html

3. http://www.newscientist.com/article/mg19225740.100-think-small.html

4. DECC, 1st February 2010b. Table of tariffs up to 2013. http://www.decc.gov.uk/en/content/cms/what_we_do/uk_supply/energy_mix/renewable/policy/feedin_tarriff/feedin_tarriff.aspx

5. DECC, 1st February 2010c. Feed-in Tariffs: Government’s Response to the
Summer 2009 Consultation, page 5. http://www.decc.gov.uk/en/content/cms/consultations/elec_financial/elec_financial.aspx

6. DECC, 1st February 2010a, ibid.

7. McKinsey & Company, 2009. Pathways to a Low Carbon Economy: Version 2 of the Global Greenhouse Gas Abatement Cost Curve. http://www.mckinsey.com/clientservice/ccsi/pathways_low_carbon_economy.asp

8. DECC, 1st February 2010a, ibid.

9. Suleiman Abu-Sharkh et al, March 2005. Microgrids: distributed on-site generation Technical Report 22, page 33. Tyndall Centre for Climate Change Research.

10. Manuel Frondel, Nolan Ritter, Christoph M. Schmidt, 2008. Germany’s solar cell promotion: Dark clouds on the horizon. Energy Policy 36 (2008) 4198–4204.

11. ibid.

12. http://www.renewableenergymagazine.com/paginas/Contenidosecciones.asp?ID=15&Cod=4965&Tipo=&Nombre=PV%20Solar%20News

13. DECC, 1st February 2010c, p21.

14. DECC, 1st February 2010c, p22.

15. DECC, 1st February 2010c, p22.

16. DECC, 1st February 2010c, p20.

17. DECC, 1st February 2010c, p5.

18. DECC, 1st February 2010c, p28.

19. DECC, 1st February 2010c, p40.

20. http://www.guardian.co.uk/environment/2010/feb/01/government-renewables-feed-in-tariff

21. http://www.guardian.co.uk/environment/cif-green/2010/feb/02/feed-in-tariff-renewable-energy

22. http://news.bbc.co.uk/1/hi/business/8491767.stm

23. http://www.telegraph.co.uk/earth/earthnews/7129685/Solar-panels-and-other-renewables-will-be-installed-on-one-in-ten-homes.html

24. ibid.

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