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United Kingdom

Spin and crossed wires

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Politicians blinded by their own spin can be an awful liability for those of us who have to pay for their blunders. Brian Wilson, Britain's former energy minister, no doubt genuinely thought he was doing wind a favour when he announced with great fanfare that it was time to "rewire Britain" for renewables. He was referring to the evolution of a transmission and distribution system to meet the government's aim for renewables to provide 10% of national electricity by 2010. The glossy spin, however, made evolution sound like revolution -- and an expensive one to boot. As if all other new generation needs no wires, the idea has now taken hold that wind power is special and requires massive extra investment in the power system. Not so.

Wilson's spin has spun a series of expert "consultations" (a peculiarly British process of tortured government from the bottom up) into "rewiring Britain," none of which are coming to any agenda-setting conclusions. Meantime, market players are grabbing opportunities where they see them, willy-nilly of economic reason. It would be logical to presume that the job of regulating the electricity market -- whether for least cost or most green -- is that of the office of energy market regulation. Not correct, says Ofgem. Its task, it stresses, is to ensure that generators are connected to the wires where they want to be. Today that happens to be Scotland. Therein lies a festering problem at the heart of sound wind power economics. Wind power's detractors have already coined a scathing term for it: "socialised grid reinforcement."

Government aims are to exploit the cheaper resources first, the more expensive later. That makes good sense for wind generation. Its costs will continue to drop significantly thanks to further technology advances. Putting off more expensive development prevents unnecessary waste of money now. But current market regulations do not support least cost policy for linking wind into the national power system.

Under today's regulations, generation near population centres gets a bonus, while generation miles away from anywhere pays a penalty. These charges (page 48) provide both the signals and cash needed for the upkeep of a robust transmission network. All well and good. What current regulations do not include are market signals to reduce transmission losses. The cost of losses incurred when sending power long distances from north to south is spread over all consumers, rather than being allocated on a "he who wastes, pays" basis. It is a system that shields generators in the north from painful economic reality. Generators further south, such as wind projects in the offshore zones marked by government in the east (The Wash) and south-east (Thames Estuary), are robbed of a financial reward that is rightly theirs.

Energy regulator Ofgem is aware of this anomaly. It has proposed doing something about it. The proposal is even backed by the Renewables Power Association (RPA). The government apparently has another agenda. So far it has shunned the idea of price signals to control transmission losses, bowing to the protests of companies in Scotland. It seems likely that some of these companies are Scottish wind plant developers, which might well be why the British Wind Energy Association is seemingly not of like mind with the RPA. For once, this magazine finds itself forming some sneaking sympathy for Ofgem.

Granted, it could be that the long term environmental benefits of aggressively pursuing wind development in Scotland outweigh the short term benefits of opting for a least-cost route to the government's 10% goal. Even if it was decided to pursue the most expensive scenario yet outlined (page 47), the cost to the consumer is no more than about £10 a year for 20 years. There are those who would argue it is a cheap price to pay for averting a far more costly environmental disaster in the future. If that is what the government believes, it is time to let us in on the secret of its long term strategy for economic exploitation of renewables. More to the point, it should tell Ofgem to give up pursuit of least cost wind and regulate for rapid wind plant deployment. That is certainly not happening now.

Why pay more?

As always this magazine remains pragmatic on economics. Why pay more when less will do? The wind resource south of the Scottish border is more than enough to alone meet the 2010 renewables target. The reasonable tack right now would be to spend £80 million to bring 4000 MW ashore down south, rather than £520 million on wires to accommodate half that in Scotland -- especially when decommissioning of old thermal plant in Scotland will free space on the grid for wind in the years ahead.

Reason is not being given much of a chance in the delicate balance of Scotland-England politics. Scotland is keen to attract the wind industry to boost its local economies. Woe betide government in London if it gets in the way of that social aim in the name of value for taxpayers' money. There are also dodgy ideas roaming about north of the border, masquerading as brave vision, that provide further excuses for massive investment in the wires. These include eyebrow-raising plans for wind plant in very deep waters, and plans for lessening wind's environmental value by siphoning it off the grid to create hydrogen. There are times for political correctness and times for polite treatment of vision. And there are times when governments must lead. Securing clean and affordable energy is far too vital an issue to spin wind off into a tangled mesh of crossed wires.

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