Back in February the government’s energy regulator, Ofgem, warned that Britain was rapidly heading for an energy gap due to the closure of power plants resulting in energy higher prices for consumers and businesses alike. Ofgem Chief Executive Alister Buchanan said that within three years the reserve margin of energy generation will fall from 14 percent to 5 percent, an incredibly tight margin. The concerns were mirrored by the Department of Energy and Climate Change (DECC) which admitted that the country faces significant energy challenges resulting from the closure of around one-fifth of our ageing power stations.
However, according to Mr John Moore, wind expert, entrepreneur and Managing Director of Windcrop Ltd, on-site generation from small-scale wind turbines can help to alleviate the energy gap, helping to reduce the amount of gas imported into the UK and helping farmers and landowners who are already struggling to meet high energy prices. Windcrop offers an accessible route to local, small-scale, wind energy generation by installing generation equipment while recovering costs from the government’s Feed-in Tariff.
REM therefore took the opportunity to talk to Mr Moore, to find out just how serious the situation is and how small-scale renewable energy generation can assist supply.
How realistic is Ofgem’s warning about future energy price hikes or a failure in the system leading to blackouts?
The world of national energy supply is very far from what we do on a daily basis, but from my own involvement in the energy business over the last 4 years, their warning is overdue and very real. I am sure you know the bald statistics about the capacity that is closing over the next few years and the capacity that is being built and the gap that is building. We have no choice but to fill this gap with gas fired capacity and we will be greatly increasing our dependence on gas just as our own reserves are falling. The chancellor continues to pour subsidies in the form of tax breaks into oil and gas exploration, but it is already too late to provide supplies in the 2016-2020 time period when we need the gas.
There is a slow motion car crash that is already underway and is irreversible that means that UK consumers will face significant energy price inflation – both gas and electricity – up to 2020. As a side issue, it also means we cannot meet our carbon reduction targets which means the government will incur a significant cost in fines.
What’s your personal view on energy price rises? Some people have blamed renewable energy installation for rising energy bills, is this realistic or is it more likely to do with other factors, e.g. oil depletion?
There is no need for personal views – it’s just maths. Wind generation is effectively fixed cost- there is no ongoing cost of energy; it is all capital recovery. We know what each MWh of electricity is costing us with a high level of predictability. The move offshore, driven by short term political expediency, probably doubles this cost. Nuclear energy has a somewhat similar set of economics except that the decommissioning costs are a large part of the fixed cost and unlike the build cost, which are explicit by the time the plant is commissioned, are quite difficult to predict reliably. Looking at the level of electricity cost inflation that is predicted, this is dominated by the fossil fuel costs.
Could the large-scale renewable energy sector have done anything more than it is doing already to try and avert such hikes?
The biggest and easiest way to help cut the costs is to unlock on-shore wind capacity. If we accept that there is a short term crisis which will pass as off-shore and other sources grow, we should be permitting wind farms on a fixed 25 year lease with no presumption of renewal of the permit and a requirement to make good on decommissioning. Surely this would make any issues such as views from National Trust properties irrelevant? But of course this is precisely what the planning consent on wind farms does already say and yet we somehow think that we should put them “somewhere else”. We need leadership from parliament to stop this stupidity. This won’t happen while there is such effective anti-wind lobbying continuing to peddle the nonsense that wind doesn’t work. We have the windiest land in Europe but are not exploiting this due to local opposition to what wind turbines look like.
Tell me about Windcrop
We operate at a very small scale and just aim to cut the energy bills for individual homes and farms businesses. We install 5kW wind systems because at this scale we can connect to the property with no electricity network charges and what we generate reduces what they need to buy and so the value of kWh we make is the purchase price of electricity on the site, not the wholesale price.
How can small-scale renewable energy help to avert the energy crunch?
Frankly – it can’t. The Energy Crunch is about the required peak capacity and we can’t gurantee to be generating when peak demand comes. What is can do is make a significant cumulative effect on the overall carbon footprint of the UK. As a secondary contribution, we now have thousands of customers and potential customers who know that wind works and who now realise how wrong the anti-wind stance of so much of the national press is.
So, a 5kW wind turbine could typically generate how much electricity? Around
8,000-14,000kWh – depending on the wind speed of the site
And there are less problems with planning etc?
Yes, but it is not at all easy. Currently the cost to install and commission the system is less than the cost to obtain planning permission. This adds no value and the permitted development process that is stuck in consultation with DCLG would remove almost all of this cost.
How successful has small-scale renewable energy been in the UK so far?
Micro-Wind has barely started to make an impact. The early cutting of the Feed-in Tariff has prevented manufacturers and installers from having the boost in installation numbers that we have seen in solar PV. This in turn has made it very difficult to get to sufficient scale to drive down costs.
Could small-scale benefit particular sections of the community, farmers for instance?
Yes – the majority of our customers are farmers, small-holders and rural businesses. Small wind systems need space for clear wind flow and to keep sensible distances from neighbours – they are not an appropriate technology for sub-urban or urban locations.
What subsidies are available for small scale wind?
We get the Feed-in Tariff at 21p per kWh which is helping support the industry but is barely enough to grow the scale of installation to reduce costs. The current process to progressively cut the feed-in tariff is calculated against installation capacity – the “degression mechanism”. This effectively defines the government’s view on what is an acceptable target installation rate for each technology because if this rate is exceeded the FiT is heavily cut to damp back take-up.
It is striking that this installation rate for small wind is triggered is only 23% of the current installation rate. This compares with 53% of current rate for small PV which is where everyone says the market is overheated. For larger PV, this installation rate is 4.6x the current rate at 10-50kW and 14x the current rate at >50kW.
Looking at it a different way and comparing these installation rates against the government’s own analysis of the potential market size this sets the wind installation rate at 0.7% of market capacity compared with 4.7% of market capacity for small PV.
As a third comparison and looking at how much subsidy will go into each sector, wind vs PV, in comparison with its market potential, wind makes up 14% of the microgeneration potential but will have accounted for less than 5% of the system lifetime committed FiT subsidy by 2016.
Without wishing to appear paranoid, this doesn’t look like a level playing field to me!