'Ere mate. Can you spare a few billion for a wind farm?

Classic example of corporate rent-seeking in the Business section of today's Sunday Times.

In the past week, the Renewables Obligation (RO) Order 2009 has been passed. This converts the previously (roughly) technology-neutral RO into a targeted mechanism to pay more for carbon-savings from some types of renewable electricity than for others. So (amongst many technologies and several bands) support for landfill gas is reduced by 75% (they get quarter of a ROC for each MWh they produce), while support for offshore wind is increased by 50% (1.5 ROCs per MWh), presumably implying that carbon-savings from offshore wind are six times more valuable than carbon-savings from landfill-gas generation.

But this isn't enough for the ever-subsidy-hungry wind lobby. Despite the hundreds of millions of grant-funding that has been provided to offshore wind, the steering of investment in transmission networks to help the wind industry, and now the corruption of the RO to put more money in their greasy little mits, they want more.

The ST's headline is "Energy firms demand £2bn to save wind farms". Any suggestions for what one could do with the billions of pounds that have been thrown at, or are being demanded by the big energy companies to develop a technology that so far has barely registered an impact on our energy supplies?

And so it goes... When the Government ask which technologies can contribute the most, the big companies tell them that wind is plentiful and cheap. The government duly picks this winner, but then "discovers" that wind isn't quite as plentiful and cheap as they had been told. Indeed, wind (they are now told) will need more support than many of the alternative "losers" that they had chosen to support less generously. And once they have discovered what sort of woman the Government is (as George Bernard Shaw would put it), all the big energy companies have to do is haggle over the price. So they keep discovering that their costs are getting higher, and of course, this justifies the Government in throwing more money at the technology.

Shouldn't it mean that wind should get less, not more? After all, the promises have turned out to be false, and we have discovered that wind is one of the least economic ways of achieving our targets. Shouldn't the Government be revisiting how they could better use the money?

By the way, do you like the way that the ST refers to the wind lobby as "the energy industry"? That is, of course, because the lobby is dominated by the vertically-integrated large energy companies (the VILE companies, for short), the BWEA's perpetual rent-seeking is substantially on behalf of these large members, and the ST know who are behind it, and like the Government, and most commentators, assume the big guys are the industry, rather than just a toxic part of it. Disintegrate the bastards.

And as for getting your analysis from the ST (or most other papers, to be fair), try this sentence from the article for a perfect demonstration of a journalist who hasn't got a clue:

"Increasing the subsidy from one ROC per megawatt to two would triple the revenue that power companies collect for wholesale electricity."


  • You get ROCs per megawatt-hour (MWh) not per megawatt (MW). Failure to understand the difference is a classic symptom of someone who doesn't understand the basics of this issue.
  • The legislation has already been put in place for offshore wind to get 1.5 ROCs/MWh from April (apart from existing projects). So they are asking for an increase from 1.5 to 2 ROCs/MWh not from 1 to 2.
  • For a renewable generator, the value of ROCs is separate from the wholesale value of the electricity produced. Increasing the number of ROCs/MWh would have only a marginal impact on the wholesale electricity value, through the impact of higher costs on demand.
  • "the revenue that power companies collect for wholesale electricity"??? What he may mean is: "the revenue that offshore-wind generators collect for their output". That is not remotely the same thing.
  • Anyway, it's not true. Wholesale electricity prices are around £50/MWh. If an offshore developer had to contract a long-term power-purchase agreement (PPA) with a separate supplier, they might have to settle for as little as £35/MWh. But as these offshore developers are major suppliers, the nominal value in any contract with themselves is largely irrelevant - one way or another, the company will capture the full value. But anyway, let's call it somewhere between £35 and £50/MWh. One ROC may be worth £40-45 in the future (unless these offshore wind projects are shelved, in which case ROCs will be worth more, which will make one or more of these projects viable - see how it works?). There are also some other marginal values (CCL-exemption, triads, embedded benefits, etc) that add another £6 or more per MWh to the value. So if offshore wind is entitled to one ROC/MWh (as it is before April), operators can expect to collect around £82-102/MWh. From April, when offshore wind gets 1.5 ROCs/MWh, operators can expect around £102-125/MWh. And if they were granted 2 ROCs/MWh, they could expect £122-147/MWh. So, on the journalist's naive assumption (doubling from one ROC to two), revenue would increase by less than 50%, and in reality (increasing from 1.5 ROCs to 2 per MWh) it would increase by less than 20%. Even if the journalist didn't have the figures, how could doubling one part of a project's revenue ever increase the total revenue by a factor of three (unless one or more of the revenue-streams were negative, which is a cost, not a revenue)? Idiot!
  • The best explanation I can come up with for this stupidity is that he was spoon-fed the figures by "the energy industry", and (along with all the other mistakes) misinterpreted profits as revenue. In which case, do we really feel like throwing more subsidy at the VILE companies so they can triple their profits on an investment?