and The Economics of written evidence

REF: Page WIND 01 Department of Energy and Climate Change 5 WIND 02 Maureen Beaumont 9 WIND 03 D E Simmons CEng; MIMechE; CMIOSH; RMaPS 11 WIND 04 Landscape And (GLARE) 12 WIND 05 Dr. Ian Woollen 15 WIND 06 Energy Technologies Institute (ETI) 16 WIND 07 Viscount Monckton of Brenchley 18 WIND 08 ABB 21 WIND 09 Roland Heap 24 WIND 10 David Campbell 29 WIND 11 The Renewable Energy Foundation 31 WIND 12 Brian Skittrall 34 WIND 13 Sir Donald Miller 37 WIND 14 Hengistbury Residents' Association (HENRA) 40 WIND 15 Environmentalists for Nuclear Energy ‐ UK 43 WIND 16 REG Windpower Ltd 46 WIND 17 Adrian J Snook 52 WIND 18 Montgomeryshire Local Council Forum; Welshpool Town Council 55 WIND 19 Ian W Murdoch 57 WIND 20 Mrs Brenda Herrick 60 WIND 21 Mr N W Woolmington 62 WIND 22 Professor Jack W Ponton FREng 63 WIND 23 Mrs Anne Rogers 65 WIND 24 Global Warming Policy Foundation (GWPF) 67 WIND 25 Derek Partington 70 WIND 26 Professor Michael Jefferson 76 WIND 27 Robert Beith CEng FIMechE, FIMarE, FEI and Michael Knowles CEng 78 WIND 28 Barry Smith FCCA 81 WIND 29 The Wildlife Trusts (TWT) 83 WIND 30 Wyck Gerson Lohman 87 WIND 31 Brett Kibble 90 WIND 32 W P Rees BSc. CEng MIET 92 WIND 33 Chartered Institution of Water and Environmental Management 95 WIND 34 Councillor Ann Cowan 98 WIND 35 Ian M Thompson 99 WIND 36 E.ON UK plc 102 WIND 37 Brian D Crosby 105 WIND 38 Peter Ashcroft 106 WIND 39 Campaign to Protect Rural (CPRE) 109 WIND 40 Scottish Renewables 110 WIND 41 Greenpeace UK; World Wildlife Fund; Friends of the Earth 114 WIND 42 and Borders Alliance 119 WIND 43 National Opposition to Windfarms 121 WIND 44 David Milborrow 124 WIND 45 SSE 126 WIND 46 Dr Howard Ferguson 129 WIND 47 Grantham Research Institute 132 WIND 48 George F Wood 135 WIND 49 Greenersky. Co.uk and Sustainable Sitlington 137 WIND 50 No NOW group 141 WIND 51 Roger Helmer 143 WIND 52 Montgomeryshire Against Pylons 145 WIND 53 Element Power 148 WIND 54 Jeremy Elgin 153 WIND 55 Brian Catt 155 WIND 56 National Grid 157 WIND 57 Centre for Energy Policy and Technology, Imperial College (ICEPT) 159 WIND 58 Abundance Generation 168 WIND 59 W R B Bowie 170 WIND 60 Kes Heffer 173 WIND 61 Alex Henney 175 WIND 62 Mary Armstrong 189 WIND 63 Rainbow Trails 191 WIND 64 GE Energy 193 WIND 65 Wind Ltd 195 WIND 66 CATS ‐ Communities Against Turbines 197 WIND 67 Renewable UK 200 WIND 68 EDF 202 WIND 69 Prof. P Bullough 205 WIND 70 The Crown Estate 207 WIND 71 RWE 212 WIND 72 Theodor Oostindie 214 WIND 73 & Partnership Renewables 216 WIND 74 Judith Stretton 219 WIND 75 AAWT 220 WIND 76 Mark Blackwell 222 WIND 77 RES 224 WIND 78 Banks Group 229 WIND 79 Energy UK 231 WIND 80 234 WIND 81 Tata Steel 236 WIND 82 John Muir Trust 238 WIND 83 The Royal Academy of Engineering and Engineering the Future 240 WIND 84 Mainstream Renewable Power 245 WIND 85 Bruce McIntosh 247 WIND 86 249 WIND 87 Richard Moore 251

Memorandum submitted by the Department of Energy and Climate Change (WIND 01)

What do cost benefit analyses tell us about onshore and offshore wind compared with other measures to cut carbon?

1. Although DECC does not publish cost-effectiveness estimates for different technologies, annex B of its Carbon Plan1 sets out cost benefit analys is of policies to reduce carbon, including energy efficiency and support for renewables.

What do the latest assessments tell us about the costs of generating electricity from wind power compared to other methods of generating electricity?

2. DECC published its assessment of the levelised cost of new non-renewable technologies in August 20112 and the cost of renewable electricity technologies in October 2011 in Appendix D of the Arup report2. These cost estimates include direct costs such as: capital, operating, carbon, fuel and decommissioning costs. They do not take indirect costs into account, such as balancing costs and visual impact of renewable and non-renewable power stations.

£2010/1 CCGT CCGT Coal Coal Coal Nuclear 1 prices3 with ASC ASC IGCC IGCC NOAK4 CCS with with FOAK NOAK NOAK CCS FOAK CCS FOAK FOAK £/MWh £76.6 £104.8 £95.4 £108.3 £126.2 £134.8 £74.1 Onshore Onshore Dedicated Dedicated Offshore Cofiring Cofiring < 5MW > 5MW biomass wind Conventi Enhance >50MW 5‐50MW Round 2 onal d £/MWh £104.9 £90.2 £144.6 £127.6 £121.6 £96.7 £107.4

How do the costs of onshore wind compare to offshore wind?

3. Based on central estimates for projects starting in 2011, onshore wind sites (larger than 5MW) were estimated to generate electricity at a cost of £90.2/MWh.

1 http://www.decc.gov.uk/en/content/cms/tackling/carbon_plan/carbon_plan.aspx 2 http://www.decc.gov.uk/en/content/cms/about/ec_social_res/analytic_projs/gen_costs/gen_costs.aspx 3The table sets out the central levelised cost estimates for selected technologies for projects starting in 2011, assuming a 10% discount rate. When carrying out the analysis for Renewables Obligation policy, the discount rate is allowed to vary between technologies. 10% is used here to enable a consistent comparison across technologies. 4 Coal ASC stands for Advanced Super Critical Coal, IGCC Coal stands for Integrated gasification combined cycle coal. FOAK refers to ‘First of a Kind’ estimates, while NOAK refers to ‘Nth of a kind’ estimates.

Page 5

The comparable cost for offshore wind plants is £121.6/MWh. On a per MWh basis, offshore wind is estimated to have higher capital and fixed operating costs and lower variable operating costs, than onshore wind. Onshore wind is expected to remain cheaper than offshore in the future. The industry-led Cost Reduction Task Force published is report on 13 June, which demonstrated the industry’s commitment to bring the costs of offshore wind down to £100/MWh by 2020, and set out recommended actions to deliver on th i s ai m.

4. The Table above sets out levelised costs, published in the ARUP report2, assuming a comparable 10% hurdle rate for each technology. To inform support levels offered under the Renewables Obligation (RO), levelised costs use technology specific hurdle rates (also available in ARUP). The level of support required to be economic is based on the difference between the cost of a technology, and the revenue it receives (from the sale of electricity and levy exemption certificates). This gap between cost and revenue is then divided by the ROC price to determine the ROC banding required for each technology, based on a range of costs.

5. The electricity price over time is estimated using a consultancy model of the electricity market, which models non-renewable investment decisions, short run despatch decisions, and how supply meets demand overall. Further detail on the approach was published with the Banding Review consultation in a report by Pöyry consulting5.

What are the costs of building new transmission links to wind farms in remote areas and how are these accounted for in cost assessments of wind power?

6. The estimates above include transmission charges faced by wind developers, and, in the case of offshore wind, the cost of offshore grid connections, and are published in the RO Banding Review consultation document6.

7. Transmission Charges faced by generators are reflective of the both the costs of connecting wind farms and the costs of using the transmission network. Wind developers decide where to locate, considering both the high generation potential of certain locations and the associated transmission c o sts.

What are the costs associated with providing back up capacity for when the wind isn’t blowing, and how are these accounted for in cost assessments of wind power?

8. The full cost of intermittent generation on the electricity system, including system balancing costs, and the full cost of the generation mix (both renewable and non renewable) is estimated in the Renewables Obligation Banding Review Impact

5 http://www.decc.gov.uk/assets/decc/11/consultation/ro‐banding/4081‐poyry‐revised‐ro‐bands‐review.pdf

Page 6

Assessment6, and are reflected in the cost-benefit assessment of the proposals. Balancing costs are also included in the estimate of the impact on bills. These costs are uncertain, and vary according to the level of intermittent generation on the system. Evidence suggests7,8 that the cost of balancing and back up generation could cost up to around £10/MWh of intermittent generation, under scenarios where intermittent generation rises to over 30% of electricity d emand.

9. These are not reflected in the levelised costs estimates above, as they cannot be attributed to a particular technology, and they depend on the proportion of intermittent generation in the electricit y mix.

How much support does wind power receive compared with other forms of renewable energy?

10. The support available to wind power varies by technology and size. Onshore installations in the UK are eligible to receive 1 Renewable Obligation Certificate (ROC)9 for each MWh of electricity they produce. Onshore installations below 5 MW in England, Wales and Scotland are also eligible for a Feed in Tariff, but they are supported under the RO only in Northern Ireland at a higher rate. FIT support levels are published on the DECC website10. Offshore Wind currently receives 2 ROCs under the Renewables Obligation.

11. The Government has consulted on reductions to the RO support levels for onshore wind installations over 2013/14 to 2016/17, and will be publishing final levels of support shortly.

Is it possible to estimate how much consumers pay towards supporting wind power in the UK? (i.e. separating out from other renewables)

12. In 2010/11 and in £2012/13 prices, electricity consumers, paid around £730m to support wind generation, which consists of £440m for onshore wind, and £290m for offshore wind. This is equivalent to around £10 per year on the average household electrici t y b i ll.

What lessons can be learned from other countries?

13. The UK is keen to learn from other countries, while accepting that there will be differences in regulatory and incentive regimes, and different constraints on

6 http://www.decc.gov.uk/en/content/cms/consultations/cons_ro_review/cons_ro_review.aspx 7http://www.redpointenergy.co.uk/images/uploads/Implementation_of_EU2020_target_in_the_UK_electricit y_sector_Renewable_Support_schemes.pdf 8http://www.decc.gov.uk/assets/decc/Consultations/Renewable%20Energy%20Strategy%20Consultation/Rela ted%20documents/1_20090501131535_e_@@_SKMRESBERRFinalReport.pdf 9 In 2010/11, the value of a ROC was £51.34, but the value will vary each year depending on how the level of generation compares to the level of the Renewables Obligation 10 http://www.decc.gov.uk/en/content/cms/meeting_energy/Renewable_ener/feedin_tariff/feedin_tariff.aspx

Page 7

development, such as the availability of suitable sites. Within the UK, Scotland, England and Wales have different local planning policies for onshore wind.

What methods could be used to make onshore wind more acceptable to communities that host them?

14. A recent Ipsos Mori poll11 fou nd 6 6% o f people support wind power in the UK. However, Government believes that greater community involvement in planning for new development and securing meaningful benefits for communities that host renewable energy developments are vital to increasing acceptability. 15. Under the , developers are required to consult local communities before an application for consent is made, to address their concerns and help to identify local benefits. 16. We have brought forward proposals through the Local Government Finance Bill that will allow local authorities in England to retain the full business rates generated by new renewable energy developments from April 201312. 17. We welcome the onshore wind industry’s commitment to providing a minimum level of benefit equal to £1000 per MW installed for new development13. Government is also clear that more needs to be done by industry.A recent report from the Joseph Rowntree Foundation14 is one example of recommendations on improving community acceptability and securing meaningful benefits .

July 2 012

11 http://www.ipsos‐mori.com/researchpublications/researcharchive/2946/RenewableUK‐Wind‐Power‐ Omnibus‐research.aspx 12 http://www.communities.gov.uk/publications/localgovernment/resourcereviewgovtresponse

13 http://www.bwea.com/pdf/publications/CommunityBenefits.pdf 14 http://www.jrf.org.uk/publications/wind‐energy‐disadvantaged‐communities 4

Page 8 WIND 02

Submission from Maureen Beaumont

I wish to respond to your consultation with the following comments:

1. Wind projects do not fulfil 'sustainable' objectives. They cost more fuel than they save and they cause no CO2saving, in the contrary they increase our environmental 'foot print'. There is a very cogent paper proving this conclusion to be found at: http://www.clepair.net/windSchiphol.html

2. uswitch.com have stated that

"Household energy will be unaffordable in less than three years’ time, according to new research from uSwitch.com. If pricing trends continue, the average household energy bill will break the £1,500 a year barrier[1] by 2015. At this point almost six in ten households (59%) will be going without adequate heating and almost four in ten (36%) will be switching their heating off entirely.

And further:

Worryingly, the forecast does not take into account the impact of the Government’s ambitious plans to cut carbon and switch to renewable generation. Suppliers are already indicating that non-commodity costs or costs outside of their control could push bills up further[5]. Two of the Big Six have even hinted at price rises this winter."

3. The 2008 figure of 430 grams of CO2 displaced by every kilowatt hour generated by onshore wind is likely to be no longer accurate as conventional power stations have been up- graded to become more CO2 efficient. We have no way of checking the wind industry's claims of CO2 savings as is required by the Aarhus Convention and no way of knowing how they achieve these figures. This is contrary to EU law.

4. The number of jobs created by this industry is vastly over-estimated - recently reports have highlighted decreases in investment and jobs, even when government grants have been awarded. Turbines are manufactured abroad and this situation is not likely to change.

5. A subsidy system which rewards cash-strapped land-owners and carpet-bagging developers, while pushing consumers into fuel poverty, is neither just nor sustainable.

6. The planning system is being overwhelmed by speculative applications for which the fees are ridiculously inadequate - again the cost is being borne by the taxpayer.

7. The pressures on local communities in terms of time, resources, costs, property values, stress are immeasurable - they have no funding and cannot recoup what they have spent opposing multiple applications.

I represent a local objection group - the Sma' Glen Protection Group 2, opposing a second planning application in a very inappropriate location. We would very much welcome

Page 9 transparency in this argument - the onshore wind industry is now a mature technology and, as such, should no longer merit the subsidies it receives. I respectfully ask that the committee considers the above points.

June 2012

Page 10 WIND 03

Submission from D E Simmons CEng; MIMechE; CMIOSH; RMaPS

Just a few thoughts for your consideration.

As I write (12.50 on 13th June 2012) wind is providing 0.1% of UK electricity demand (44MW out of an installed - ' nameplate' - capacity of 4000MW). On average, wind farms are only 20% efficient (25% offshore) - which, when compared to other forms of generation, is, frankly, laughable.

Writing as a retired mechanical engineer and health & safety consultant to the contruction industry, you might also care to look at both maintenance (increasingly expensive over time and therefore likely to be skimped) and safety (wind turbines over the last ten years have a far worse safety record than nuclear). Both these issues increase dramatically for offshore wind farms.

Regarding the cost of constructing transmission lines from (frequently) remote locations to centres of population; these are likey to be massive and probably not costed into the optimistic projections of developers.

These are nothing more than monuments to the principle of making a few rich people richer (subsidies and unsustainable feed-in tariffs) at the expense of the average electricity consumer. Frequently and seemingly increasingly, local planning decisions against wind farms are overturned at national level, making a mockery of 'Localism'.

For once and for all can we accept that our ancestors were absolutely right to discontinue using wind power (e.g. to grind corn or drain fens) as soon as something vastly more reliable became available. Obviously in those days there was no political pressure to persuade them to continue using an inefficient and unreliable power source.

June 2012

Page 11 WIND 04

Submission from Galloway Landscape and Renewable Energy (GLARE)

The Economics of Wind Power – A Response

Compiled on behalf of the supporters of Galloway Landscape And Renewable Energy (GLARE) by Co-ordinator Alison Chapman BA (Hons), MSc. Mrs Chapman is currently a practising organic farmer and though the idea of offering evidence in person to the Committee is attractive it would pose logistic problems on the farm.

Summary

In focussing on the issue of onshore wind raised in the first part of the question on the notice of meeting, this short paper also raises the important question of the associated externalities: 1. What do cost benefit analyses tell us about onshore and offshore wind compared with other measures to cut carbon?

1.1 Essentially the whole justification for wind power stations, even when they are demonstrated to have severe adverse impacts on human and wild lifei, is the reduction of greenhouse emissions. In decision – making all over the UK this government policy commitment outweighs any other consideration.

1.2 There is an obligation on all UK planning authorities and governments to comply with the terms of the Aarhus Convention which calls for transparency so that the ‘public can clearly follow the path of environmental information, understanding its origin, the criteria that govern its collection, holding and dissemination and how it can be obtained.’ii However, it was not until the Advertising Standards Authority ruling on 23 December 2008 that developers were forced to cut by half their ‘guestimates’ on emissions savings.iii

1.3 At the 2008 PLI into the Blackcraig windfarm, Dr John Constable of the Renewable Energy Foundation conclusively demonstrated that emissions ‘savings’ would be ‘just under 2/10,000ths of UK emissions, some 35% less than that estimated by the developers and even less if the Load Factor were found to be less than 35%’.iv These figures were not refuted in cross-examination or subsequently. In 2011 the Reporter recommended approval of the development, stating as a ‘finding of fact’ i n Chapter 5:

5.13 Dr Constable’s suggested approach of presenting output as a fraction of Scotland’s or the UK’s needs, seems no more than an attempt to belittle the contribution. That is contrary to the spirit of government p olicy advice on smaller [sic ] renewable schemes.v 1.4 In other words the public are required to believe that ‘every little helps’. For most ordinary people it is counter intuitive to industrialise our remaining countryside with wind power stations that require subsidy extorted from the public through electricity price hikes that are leading to even greater numbers of people in fuel poverty and reductions in our manufacturing base because of escalating electricity costs.vi

1.5 The legal requirement under the Aarhus Convention to give clear and transparent environmental information is clearly not being observed by the expression of renewable targets in terms of installed capacity.

Page 12 1.6 There is an obvious need for information about actual emission savings, fuel savings and climate change benefits to be made available independently of the applicant or protestors. It is simply unacceptable in a democratic society for a government official to state in his Report, Chapter 5 Findings of Factvii:

5.10 With regard to Dr Constable’s criticisms, whilst it is reasonable to expect that claims for energy output and carbon emissions savings to be achieved by the project should be realistic, that is by no means an exact science.

5.11 Regarding energy output, SSE’s estimated load factor of 35% is relatively high by comparison with available figures for other sites, although not necessarily unrealistic. Little evidence has been presented with regard to the wind regime at the site, but this may relate to commercial confidentiality [sic].

1.7 Such industrialisation is not only from turbines but their grid connections. For example, the proposed 23 mile Grid Transmission Connection for the Blackcraig project (cited in 1.3), conjoined with another proposed 17x420’ high turbines adjacent, straddles across two counties and follows along the Tourist Route from Gretna to Ayr. The proposal would have adverse impacts on red squirrel and otter habitats as well as necessitating the felling for the life of the windfarm of 217 ha of trees, which seems at the very least counter intuitive in terms of carbon emission. The area is not remote and there is a considerable population along this scenic and historic tourist route which cannot fail to suffer associated noise, visual and ‘nuisance’, losses to the local tourist economy, house and land values In addition, the consented project has attracted more proposals into the area, the total proposed number of wind turbines along the tourist route now being over 500 g iant turbines .

1.8 Less well-documented or understood are the long-term consequences for our communities, which are increasingly polarised by the bribes of so-called ‘community benefits’. Not all residents wish to accept the largesse of developers when they are only too aware that they and their fellow citizens are actually paying for it themselves and that it represents a mere fraction of the profits being made out of the ravage of the countryside and wildlife. Nor do they necessarily place any confidence in their self-appointed fellow residents’ ability to dole out the proceeds, in the Glenkens recently estimated at £3 million a year.viii

1.9 In addition, within the planning process it has now become commonplace for developers to approach those most likely to be impacted on and offer ‘sweeteners’ with accompanying ‘gagging’ clauses to prevent it becoming common knowledge. It is now also the norm for developers to set up so-called ‘community benefit liaison committees’ which offer monies for local projects, eg a donation by E.on to the Moniaive Youth Club in 2012ix alongside publication of their plans for a 50 turbine windfarm around Loch Urr in advance of the submission of applications.

1.10 In conclusion, most worryingly, there must arise apprehensions for the consequences for the future of our society in light of what is increasingly seen as the ‘democratic deficit’ in our energy planning and implementation processes.

June 2012

Page 13

i There are numerous studies and reports. See for example http://www.wind‐ watch.org/news/2009/10/19/rspb‐causing‐harm‐to‐birds‐across‐europe/ and http://www.wind‐ watch.org/news/2010/01/03/scarecrow‐wind‐farms‐put‐rare‐birds‐to‐flight http://www.bbc.co.uk/go/em/fr/‐/news/10413334 http://www.bats.org.uk/pages/wind_turbines.html; http://www.bio3.pt/en/press‐and‐media/news/Bees‐and‐Wind‐Farms‐Is‐there‐any‐relation/78; The Effects of Windfarms on Meditative Retreaters – A Human Impact Assessment,Tharpaland International Retreat Centre, Parkgate, Dumfries DG1 3LY ii Aarhus Convention: An Implementation Guide iii http://www.theregister.co.uk/2008/12/23/wind_spin_overblown/ iv http://www.scotland.gov.uk/Resource/Doc/917/0115664.pdf v Ibid. vi http://www.bbc.co.uk/news/uk‐england‐tyne‐15759425 vii http://www.scotland.gov.uk/Resource/Doc/917/0115664.pdf viii Glenkens Gazette, Issue 70 June July 2012p.15 ix Loch Urr Wind Farm, Second Newsletter, June 2012 , E.on

Page 14 WIND 05

Submission from Dr. Ian Woollen (private individual with background in geology and economics)

• What are the costs associated with providing back up capacity for when the wind isn’t blowing, and how are these accounted for in cost assessments of wind po we r? • What lessons can be learned from other countries?

1) Data from Eirgrid (round-the-clock output provided on a 15-minute basis) show that the from wind energy over complete 6 months periods, e.g. H1 2011, can be seriously over-stated. The capacity factor over this period was 15%. Other time periods need your thorough examination. Intermittency (output versus demand) cannot be predicted, on a day-to-day, month-to-month, or year-to-year basis. It is random. The negative impact of intermittency increases with increasing capacity, since total output still reaches zero at times of demand, requiring 100% back-up.

2) Several European countries have curtailed or plan to reduce consumer subsidies.

• What methods could be used to make onshore wind more acceptable to communities that host the m ?

3) Landowners might own the land, but the public, particularly the residents close to rural wind farms (the 'hosts'), 'own' the landscape. Although landscape is in fact a national asset, it is these residents that should be better compensated for their more acute (actual) loss, of visual amenity, property value and rural amenities. Wind farm mitigation is wholly inadequate, and remuneration and distribution offensive. Mitigation by planting receptor boundary trees can mitigate visual impact, and choice of turbines can mitigate the impact of noise (there are quieter turbines). Unfortunately, it appears to be left entirely up to the discretion of the developer, with little if any influence from the Councils, local or regional. The amount of the local Community Benefit is at a derisory level (3%), especially when divided among several councils or compared to the monies received by landowners and developers. Councils (the public) also have to bear the costs of the whole planning process. Sites could be 'licensed' from the community, as well as the landowners, a fairer 'royalty' applied, Community Benefits significantly increased and planning application fees increased. The wind farm super-profitability should be restrained in favour of the public most directly affected.

4) Wind farms are increasingly encroaching on residences. There is growing evidence from around the world of negative health effects associated with wind turbines. Whether these are from real or imagined causes, the health impact is real and negative to numerous communities and individuals, and consideration should be given to an acceptable formal set- back distance of at least 2 km, either as a precautionary measure, or to protect public physical or mental health. A better, and feasible, setback minimum would be 5 km from villages. This is debated often, but positive action and regulation, not merely guidance that the developers ignore, should be undertaken.

June 2012

Page 15

WIND 06

Submission from the Energy Technologies Institute (ETI)

1. The Energy Technologies Institute (ETI) carries out two key activities – (1 ) modelling and analysis of the UK energy system to allow identification of key challenges and potential solutions to meeting the UK 2020 and 2050 targets at the lowest cost to the UK, and (2) investing in major engineering and technology demonstration projects which address these challenges with the aim of de-risking solutions – both in technology and in supply-chain development – for subsequent commercial investors. This short response covers relevant inputs based on ETI’s activities in these two areas.

2. In assessing the potential costs and benefits to the UK of any individual future energy technology it is critical to consider the position of the specific technology in the context of the whole, integrated UK energy system. The ETI analysis of the UK energy system out to 2050 is focused through our in-house and internationally peer-reviewed Energy System Modelling Environment (ESME). This is a national energy system design tool, integrating power, heat, transport and infrastructure. This work is informed by extensive, ongoing, review of publically available technology cost and performance information, the outputs of ETI projects and proprietary information from our Members and others. Through this analysis ETI can give a sound view on the potential impact of a specific technology – based on underpinning evidence on economics and engineeri n g.

3. From ETI analysis it is clear that the highest value options for the UK to have available to enable delivery of a cost optimised energy system for meeting 2050 energy and climate change targets are improved efficiency in use of energy, UK sourced bioenergy, CCS and nuclear.

4. There are however significant uncertainties around the potential deployment extent and timing of each of these options and, in the event of slow deployment (or non- deployment) of one or more of these capabilities, ETI analysis shows that wind power (and particularly offshore wind) is the marginal cost technology which could be expected to be the most effective solution to f ill the resulting shortfall in UK generation capac i ty.

5. On this basis implementation of offshore wind is a logical strategy for the UK provided aggressive cost reductions are targeted to bring systems to the point where electricity from offshore wind is delivered at a comparable cost to that anticipated from other forms of low carbon electricity (eg; nuclear or fossil+CCS). ETI’s major investments are aligned to delivering these long term cost reductions (see para 9). Onshore and offshore wind deployment is also important to meeting the UK 2020 Renewable Energy Directive target.

6. In terms of shorter term (2020) economics the ETI Chief Executive was a member of Offshore Wind Cost Reduction Task Force and we support the conclusions of the recently published report including the extensive cost analysis contained within it.

7. The ETI would be pleased to present specific evidence on this area to the Energy and Climate Change Committee.

Page 16 Background

8. ETI has contracted over £40m of offshore wind engineering and technology projects and has in development a further £40m+ of projects focused on floating offshore wind demonstration and development and demonstration of technology for very long blades – both of which will reduce levelised cost of electricity from offshore machines. The ‘very long blade’ project will potentially benefit onshore generation applications as we ll.

9. The ETI has gained considerable insight into the potential tracks for cost and performance development for offshore wind based on our data collection and over £10m of industry led system level design and analysis projects. For onshore wind we have relied more on published data combined with project and operating experience from our members. This focus on offshore wind comes from our view that it has greater capacity to make a material contribution to the future UK overall energy system d esi g n.

10. In designing cost-optimised potential UK energy systems ESME inherently accounts for system costs such as transmission and back-up for intermittency etc. However this is done in a holistic way that optimises the design of the whole system rather than penalising any particular technology by using rules to allocate costs.

11. The ETI a lso currently acts as a technical point of contact f or the UK in international collaboration with the USA on floating wind technology. This supports the recently signed Memorandum of Understanding between the two countries on “Collaboration in Energy Related Fields”.

12. In our view there is still potential for further economic onshore wind array development in the UK and see these arrays as an important part of a long term plan to provide diverse low carbon energy generation in the UK. That does not mean that every potential proj e ct is economic. The total potential economic contribution to generation is limited, bearing in mind the relatively low capacity factors of onshore wind farms (typically in the middle of th e rang e 20-30%).

13. Given the location of economic onshore wind resources, there are issues with the most effective use of existing transmission and distribution capacity and with the fault current protection capacity required for connection of onshore wind to distribution systems. These are location specific within a broader policy framework. ETI is supporting the development of more cost effective fault protection technologies and lower cost distribution scale electricity storage, both of which can reduce system c api tal co s ts.

14. Offshore wind resources are comparatively unlimited, certainly much greater than a realistic contribution to a well-designed robust and operable UK energy mix (without significant exports to the rest of Europe, which would depend on future market opportunities and frameworks).

June 2012

Page 17 WIND 07

Submission from Viscount Monckton of Brenchley

Is CO2 mitigation cost-effective? 1. Summary: Cost/benefit case studies demonstrate that UK renewable-energy subsidies intended to mitigate manmade CO2-driven global warming are almost the least cost-effective deployment of taxpayers’ money, in any sector, for any purpose, anywhere, ever. Individual mitigation measures such as wind farms reduce only a minuscule fraction of global CO2 emissions; consequently the cut in CO2 radiative forcing and thus in warming i s negligible . Yet the cost of CO2 mitigation measures (where there is enough government transparency to determine it) is so heavy that the cost of abating warming by such measures would be 10- 4000 times greater than the cost of climate-related damage resulting from doing nothing. CO2 mitigation strategies cheap enough to be affordable will be ineffective: strategies costly enough to be effective will be unaffordable. Therefore, all CO2 mitigation subsidies should cease. The premium mightily exceeds the cost of the risk, so don’t insure. 2. Costs greatly exceed benefits: The following case studies show that on optimistic governmental estimates the cost of CO2 mitigation would exceed the cost of climate-related damage arising from inaction approximately tenfold. As to wind farms, on highly optimistic assumptions (excluding maintenance and downtime cost, CO2 emissions from installation; cost of maintaining spinning reserve; hidden cost of artificial increases in the cost of fossil- fuelled electricity; environmental cost in water-table destruction by neodymium extraction, landscape destruction, lost tourist revenue and killing of birds and bats), subsidy to Thanet will cost 30 times inaction; subsidy to Scotland’s onshore may be similarly cost- ineffective (but there is insufficient transparency as to costs); and the cost of gesture-policies such as installation of individual small turbines is 500 times greater than the cost inaction. 3. Scientific basis: IPCC’s central projections are adopted here ad argumentum. However, it is becoming clear that the official estimates are exaggerated. There has been no statistically- significant warming for close to two decades; sea level over the past eight years has risen at a rate equivalent to just 1.3 inches (3 cm) per century; hurricane activity in the past two years has been at its least in the satellite record; global sea-ice extent has scarcely declined in the 30 years since its 20th-century peak; ocean heat content is rising at less than a quarter of the predicted rate; and, from all natural and manmade causes, global temperature has risen for 60 years at a rate equivalent to just 1.2 C°/century. If the IPCC’s central projections are exaggerated, the cost-ineffectiveness of measures to mitigate global warming, including wind farms, will be worse – and perhaps far worse – than shown here. 4. IPCC projects that CO2 emissions this century will cause 1.5 Celsius warming by 2100. So the world would be only 1.5 C° cooler by 2100 even if all CO2 emissions had ceased in 2001. IPCC also expects 0.6 C° “committed warming” and 0.7 C° from non-CO2 greenhouse gases. CO2 mitigation will have no effect on the former and only a marginal effect on the latter. 5. CASE HISTORIES: Three non-wind and three wind strategies position various wind- power strategies in the spectrum of mitigation policies. Monetary values are in US dollars. 5a. UK Climate Change Act: At an officially-estimated cost of $1.2 tn by 2050, discounted at 5% p,a. to $835 bn, the Climate Change Act aims to cut 80% of UK emissions, which are 1.5% of world emissions. Business-as-usual CO2 concentration of 510 ppmv in 2050 would fall to 508.6 ppmv via the Climate Change Act, abating just 0.006 K warming. If global CO2 mitigation measures were of similar cost-effectiveness, the “global-abatement” cost of

Page 18 forestalling IPCC’s predicted warming to 2020 would be $113 tn, or $16,000/head of global population, or 6.8% of global GDP. On this basis mitigation would cost almost 10 times the projected climate damage arising from inaction. In practice, the outturn is likely to be far worse than this, because Government estimates of the cost of cutting 80% of UK emissions by 2050 are optimistic. 5b. EU climate mitigation: The World Bank says EU carbon trading cost $92 bn/year in 2009. Multiply this by 2.5 to allow for the EU’s non-trading mitigation measures. Then total EU mitigation cost is $2 trillion at present value to 2020, by when the EU optimistically aims to halt 20% of its emissions, which are 13% of global emissions. Business-as-usual CO2 concentration of 410 ppmv in 2020 would fall to 409.5 ppmv via EU mitigation measures. Warming abated would be 0.003 C°, and the global abatement cost would be $117 tn, or $17,000/head, or 21.5% of GDP to 2020. Mitigation would cost almost 20 times inaction. 5c. Offshore wind: Subsidy to Thanet, the world’s largest wind array, is $1.6 bn at p.v. by 2030. Rated output of the 100 turbines is 300 MW, but wind farms yield only 24% of rated capacity, so total output, at 72 MW, is 1/600 of mean 43.2 GW UK electricity demand. Electricity is 33% of UK CO2 emissions, which are 1.5% of global emissions. Business-as- usual CO2 concentration of 440 ppmv in 2030 would fall to 439.9996 ppmv as a result of the subsidy. Warming abated would be 0.000002 C°; and the global abatement cost of close to $300 tn is $42,000/head, or 30% of GDP to 2030. Mitigation costs almost 30 times inaction. 5d. Onshore wind: yields 620 MW power, or 10% of Scotland’s mean 6 GW consumption, compared with at 33$ and coal at 23%. Scotland’s wind farms contribute 1.4% of the UK’s mean consumption of 43.2 GW, which in turn accounts for 33% of total UK CO2 emissions, which represent 1.5% of global CO2 emissions. Accordingly, the fraction of global CO2 emissions forestalled by all of Scotland’s wind farms is 0.014 x 0.33 x 0.015, or less than 1/14,000 of global CO2 emissions. Over their 20-year life, Scotland’s existing wind farms would forestall 0.00002 C° of global warming by 2030, or only 1/2400 of the 0.05 C° threshold below which no instrument or method can detect a change in global temperature. Tripling the current installed capacity would triple the very large cost, and the warming forestalled would remain negligible. 5e. Gesture wind: Sandwell Council spent $9694 on a small wind-turbine like one at a primary school in Oldbury that had generated 209 KWh over a year – enough to power a single 100 W reading-lamp for <3 months. Assuming no maintenance costs, and discounting revenues of $0.18/KWh for 20 years to $623 at p.v., net project cost is $9070. Little more than one four-trillionth of global emissions would be abated. G lobal abatement cost would be $5 quintillion, or $700,000/head, or 500% of global GDP to 2030. Mitigation would cost almost 500 times inaction. 5f. The $26,000 bicycle: In 2010 the Mayor of London set up what he called a “Rolls- Royce” scheme at US$ 130 m for 5000 bicycles (>$26,000 per bicycle). Transport emits 15.2% of UK CO2. Cycling is 3.1 bn of the 316,3 bn vehicle miles on UK roads annually. There are 23 m bicycles in use in the UK. The fraction of global emissions abated over 20 years would be 1.5% of 15.2% of 3.1/316.3 times 5000/23 m, or less than one 200-millionth. The global abatement cost of $40 trillion, or $5.8 m/head, or 4000% of global GDP to 2030, implies that mitigation would cost 4000 times inaction. 6. Conclusions: The high costs of CO2 mitigation policies, and the negligible returns in warming forestalled, undetectable by any instrument or method, imply that focused adaptation to any adverse consequences of such warming as may occur in future will be very much more cost-effective than any attempts at mitigation of that warming today.

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7. CO2 mitigation strategies cheap enough to be affordable will be ineffective: strategies costly enough to be effective will be unaffordable. Therefore, all CO2 mitigation subsidies, including subsidies to wind farms, should cease at once. The question arises whether CO2 mitigation should any longer be attempted at all.

June 2012

Page 20 WIND 08

Submission from ABB

Introduction 1. ABB is a global leader in power and automation technologies. Much of our business is focused on the twin challenges of increased energy efficiency and facilitating a more sustainable green . We provide a number of products, systems and solutions that are integral to the development of renewable and sust ainable energy projects. We have also committed to an ongoing programme of investments to support the growing demand for low carbon energy, including onshore and offshore wind. In the UK and Ireland, ABB now employs around 3,000 people and continues to invest in jobs, training and facilities to support the continued growth of the UK green economy. 2. We welcome the opportunity to provide evidence to the inquiry on the cost of wind energy . What do the latest assessments tell us about the costs of generating electricity from wind power compared to other methods of electricity generation? 3. Various pieces of analysis conducted by Mott MacDonald, Arup, EWEA and the Committee on Climate Change reach broadly common conclusion s that wind energy offers one of the most cost effective means of meeting the 2020 renewable energy targets and that onshore wind energy is the least expensive renewable energy technology at scal e . 4. The cost of onshore wind is converging towards parity with conventional generation technologies, such as gas fired generation, and we consider that the estimated levelised costs of £80-100/MWh are representative of the market today. In comparison, offshore wind is currently 40-60% more costly than onshore wind, but has the potential to be deployed at a greater scale where wind farm sizes are approaching 1GW. As scale increases, the cost of offshore wind is expected to fall substantially and the recent offshore wind cost reduction task force report and Crown Estate cost reduction pathways study set out that 30-40% cost reductions are achievable. We believe that there are also costs reduction opportunities through more effective coordination of the offshore transmission infrastructure that are still to be explored. 5. As a major supply chain player, we are committed to support the industry as it s trives to improve efficiency. We are making major investments in our supply chain capability to bring forward leading edge technologies to improve the cost effectiveness of renewable energy sources. We believe that the costs of onshore and offshore wind energy will continue to fall as the next generation of technological innovation is brought to the market, such as the latest turbine components and control systems that improve efficiency. What are the costs of building new transmission links to wind farms in remote areas and how are these accounted for in the cost assessments of wind power? 6. The locational charging framework for the transmission system means that larger scale remote renewable generation technologies face higher charges due to the high cost of infrastructure needed to get their power to consumption centres. As a consequence, grid charges can account for up to 15% of the levelised costs of a typical wind generation project. 7. In total, approximately £25 billion of new investment is anticipated over the next decade although much of this is required to replace ageing assets installed during the 1960s. The ENSG currently estimates that the connection of new generation, much of which is wind, will trigger

Page 21 around £8.8 billion of onshore grid reinforcements up to 2020. Further grid upgrades are expected beyond 2020 as more renewable generation is connected in the UK. 8. Based on data published by Ofgem, the cost of connecting a typical Round 2 offshore wind project is currently around £600-800k/MW. While going further offshore and into deeper water will put upwards pressure on costs, this can be offset by installing higher capacity High Voltage Direct Current (HVDC) cables and equipment. The 900MW+ Dolwin 2 offshore wind connection is expected to cost approximately $1billion (around £650m o r £722k/MW). The project, which is at comparable distances offshore to many of the proposed Round 3 developments, will use leading HVDC technology to link the offshore wind farms back to shore. 9. National Grid estimates that the full development of offshore wind sites in the UK will trigger around £30 billion of investment in the transmission network over the next 15-20 years. They also highlighted that more coordinated development of the onshore and offshore grids can achieve potential costs savings of 8-15%. These savings can be largely achieved by developing a high capacity, meshed transmission system that integrates offshore wind connections, onshore reinforcements and interconnectors in a cost effective manner. More significantly, the approach increases the utilisation of the transmission network and generally reduces transmission charges to offshore wind generators. 10. As a leading technology developer, we consider that there is further scope for transmission cost reductions which will support all forms of generation, but particularly renewables. We are already deploying FACTS devices in Texas t o enable more effective use of existing network capacity and allow connection of further wind generation. This and other technologies could improve the efficiency of existing networks and release capacity to other users. What are the costs associated with providing back up capacity for when the wind isn’t blowing, and how are these accounted for in cost assessments of wind power? 11. Electricity generation and demand must be kept in balance at all times and it is the role of National Grid as system operator to ensure that it has the capabilities to manage fluctuations in the energy system at all time. As the UK becomes more reliant on intermittent or inflexible forms of generation (such as wind or nuclear) the task of balancing the system becomes more challenging as flexibility in energy production is eroded. There are a number of ways the flexibility can be mainta i n e d: • Add new flexible generating plant, usually small scale gas fired generati o n; • Energy s t o r a g e ; • Greater demand-side management; and • Increased interconnection with Eu r o p e. 12. National Grid already uses flexible generating plant and demand side management (short term operating reserve) to balance the electricity system. The amount of short term operating reserves required as a consequence of high wind penetration will depend on the overall flexibility in the generation mix, the degree of flexibility provided by increased interconnection and the amount of connected to the system. 13. We consider that energy storage will have an important role in managing the intermittency of wind energy. ABB has pioneered energy storage devices worldwide and installed the UK’s first battery energy storage device in 2011. In recent years, there have been significant advances across a wide range of energy storage technologies and we are beginning to see devices being developed to provide several MWs of storage capability. Some technologies are capable of providing fast response (e.g. battery storage), while others offer longer duration storage

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capabilities (e.g. hydrogen storage). We predict that over the next decade, storage devices will offer a cost effective means to manage the issue of the intermittency of renewable generation. 14. In the last year, several developers have announced proposals to develop interconnector projects accounting for a potential 10GW of interconnection capacity. During periods of very high or very low wind, interconnection has the potential to facilitate exports surplus power at times of high wind and import power in times of shortage based on price differentials in the wholesale markets. Increased interconnection with Europe can therefore offer flexibility in our energy system and help maintain security of supply, provided that there is sufficient resilience to f a ilure. 15. As a leading technology provider, ABB has extensive experience in the development of interconnector projects. Later this year, we will complete the UK’s first interconnector with Ireland using the leading edge voltage source HVDC converter technology. This technology enables high capacity transfers over long distances and has capabilities to support system balancing by controlling the way that power enters the grid. We expect that this technology will also be adopted for future interconnectors. 16. In 2010/11, National Grid procured on average 2.5GW of short term operating reserve (a mix of standby generation and demand reduction) to ensure that it had the necessary capability to balance the system. This reserve capability cost £94m (£74.8m of which was payments for being available to be called upon), or £9.4/MWh of energy called upon. National Grid estimates that 4- 6GW of additional short term operating reserves will be needed at high levels of wind penetration (approx 30GW). To put this into context, the UK currently has some 6GW of wind energy in s tall e d.

June 2012

Page 23 WIND 09

Submission from Roland Heap

Commons Committee on True Costs

Submission on: The true costs of: Utilisation, Stochastic Generation; Noise Pollution Originator: Roland Heap (CEng MIET - now retired) Affiliation: West Huntspill and Woolavington Wind Farm Action Group

Abstract: Whilst wind turbines set out to provide renewable energy with minimal environmental impact, they fail in this basic assertion on most counts. Three main areas of many potential ones are dealt with herein relating to the hidden costs resulting from: poor utilisation (effectiveness to generate electricity); stochastic generation needing so called ‘static reserve’ and noise pollution that has many facets, ranging from house devaluation, potential medical effects, nuisance and litigation. Costs have been calculated, actual and estimated. To provide a succinct report, learned authorities, researchers and the author are referenced.

The higher electricity charges that the electricity consumer-taxpayer has to pay for wind power is well documented and is the subject of much press debate1. One organisation calculates that the current £1.5 billion bill for renewables (half of which is wind power) will rise to £5 billion p.a. by 20202. This is a direct inflationary component currently around 0.05% relative to GDP3 rising to 0.16%, in current day values. From a taxpayers perspective4 this is around 0.1% rising to 0.32% of income. This report deals with aspects that are part of this cost, some of which are hidden.

Utilisation – Sometimes called load factor, this is part of the above costs and is the percentage amount of electrical power generated relative to the installed, or rated, power for a wind turbine. It is not related to efficiency as some lobbyists assert. Numerous authorities report that in Northern coastal locations (Scottish coast and islands) utilisation is 37% or higher, inland in the South and West this drops to 20 to 24%, over the whole UK it is 29.4%5. This means that to generate one kilowatt of electricity, three point four kilowatts of installed capacity has to be provided; also 5%6 for maintenance and auxiliary usage needs to be allowed for. This compares, when maintenance and unplanned outage is taken in to account, with 87% to 91%6 utilisation for thermal generation, plus an average of 4% for auxiliary usage, giving an average 85% power availability. Thus the comparative over cost for wind power is a massive 23.8 times worse than thermal (3.4x1.05/0.15), If it were not for the generous government subsidies for wind power, no commercial operation would install a single kilowatt of wind power generation, knowing of such a capital cost penalty.

As stated earlier, this leads to an increase in the cost of living and hence contributes to inflation. This of coarse depends on the installed base. For plans of eight gigawatts7 of wind power by 2016 (and a potential 18GW by 2020) costing £74.6 billion pounds8 at today’s prices over a 25 year life time, there is an over cost of £49.4 billion pounds for the 2.71 GW (1.15 x 0.294 x 8) that would otherwise need to be provided conventionally. For the projected long term 2020 18GW figure, this increases to £168 billion with an inflationary cost of £111 billion.

Stochastic Generation – As wind is a natural resource it is variable and to a large degree random. It is difficult to predict, which results in the need to provide back up generation capability either by ‘spinning or by static reserve’. This reserve is made up of a mix of the most efficient nuclear and coal plants and also quicker response gas and oil units. Current installed capacity is 6.58GW (March 2012) and the planned rise to 8 gigawatts, or 2.35 gigawatts actual capacity, will require 1.10 gigawatts9, or an average

Page 24 47 percent backup generation relative to the actual average capacity. The cost of providing this backup plant twenty-four hours a day, its running cost, maintenance and capital replacement due to the additional plant usage, amounts to some £410 million pounds p.a. running costs including capital and 10 maintenance costs . This rises to £922 million in 2020. The cost of 745 kilotons p.a. of extra CO2 produced11 at £30 per ton12, adds another £22.4 million. Again these calculable financial costs are inflationary as the electrical consumer pays it as higher charges. For the potential 18GW of power, the CO2 cost rises to £50.4 million p.a.

Another factor not well understood is that although random, wind power generates over night15 when consumer demand is at its lowest16. Because of the rules requiring the wind energy providers to be paid ‘constraint payments’ even if no power can be taken into the grid, this means that a component of cost is periodically added for this reason. In 2011 these costs added up to an estimated £11 million.17 in 2020 this could be £25 million.

Additionally and inconveniently, during early winter months (e.g. November 2010) high pressure typically sits over Northern Europe for a month and not a single zephyr of wind blows, rendering all the UK (and European) wind plant useless. The needed backup then is 100% for this duration. This generation need normally can be absorbed into the efficient ‘base-load’ (nuclear & coal) spinning reserve. This represents an additional amortised base-load plant capital cost of £25.2 billion pounds18. However, a vigorous assessment of this extra capital plant need for one month is that extra base-load plant needs to be committed, that would not be needed otherwise. If spare base load capacity of 2.56 Gigawatts is available (by say not doing maintenance during the expected doldrum month) then the cost is rendered transparent. If the doldrums shift to a later, colder winter month, or the month is cold, then the demand could hit the generation capacity ‘ceiling’ resulting in load shedding hence costing industry badly. These are very complex calculations but a simplistic financial assessment is a twelfth (one month of the full amortised capital), or £2.1 billion. To allow for rendering, the average is taken at £1.1B. In 2020 this figure could increase to £2.4B. The annualised figure range is thus £44M to £96M.

Thus overall stochastic effects can be said to contribute from £476 million p.a. by 2016 to £1.07 billion by 2020.

Noise Pollution – By industrial standards wind turbines produce low levels of noise. The problem is that this noise is often produced in quiet rural areas and is continuous when the wind blows, often with a particularly annoying amplitude component, whose impact has been suppressed by the industry and regulators19.

A sampling study I undertook of the research on the effect of wind farm noise on people20, shows that typically 40% of people living within one kilometre of wind farms find the noise annoying to extremely annoying. Some research suggests that A.M noise is a nuisance to 2 kilometres21. The cost of this human misery cannot be easily stated in £sd. Currently it could be £48.6 million p.a., or £1.22 billion over 25 year wind turbine life span This is calculated from 333 wind farms currently, rising to around 405 and an average of a hundred households within one kilometres range, or 121,000 people of whom 48,600 are affected, times a distance to centre scaled cost averagely of £1,000* each p.a., as a possible acceptable financial recompense. This is just noise; if environmental impact were included this cost would be higher. *Some sufferers would say that this is not enough even allowing for distance to noise source scaling.

Medical effects’ studies of the noise on susceptible people are also limited; although a recent English court case where this was the prime factor, resulted in an undisclosed settlement, probably of the order of several million pounds including legal costs. This may or may not be a one off event. Medical costs

Page 25 are simply not available anywhere, although some researchers have found that health incident levels are negligible22.

The loss of house values is potentially simply enormous. One study showed 35 to 54% devaluation23. The problem is that this is for the most part transparent to the greater economy. In Somerset where two wind farms have been applied for, a study I conducted showed a potential devaluation cost to householders, over seven affected villages, of approximately £100 million pounds. If this were reflected across the country, this would be £40.5 billion. The association of estate agents reckon that house devaluation could be temporary, with some recovery in the longer term, but this has not been proven. So it must be said that ‘the jury is still out’ on an otherwise hidden £41 billion cost p.a. to householders, which there is no obligation under law, for energy companies to compensate for. Over a 25 year life span this is, evaluating noise at 50%, £0.82 billion p.a., if paid as an annual recompense. For 2020 this rises to £1.85B, on a pro rata basis.

In summary the three topic areas discussed above represent a total cost to the economy of £3.3 billion to £7.4 billion. Of this 74 percent billion is verifiable and directly inflationary to the tune of 0.2% to 0.5% in current GDP economy. To the taxpayer this represents 0.4% to 1.0% inflation. The other estimated component is really absorbed suffering and if paid for by normal compensation means, would add another 26% to the stated figures.

References – for your convenience active metalinks are provided in the electronic copy of this document:

1. Bill to consumers Telegraph May 2012 http://www.telegraph.co.uk/earth/energy/renewableenergy/9276895/Electricity-bills-set-to-rise-to-pay- for-wind-farm-subsidies.html

2. Subsidies - http://www.ref.org.uk/press-releases/221-ref-comments-on-proposed-wind-power-reforms

3. UK GDP since 1948 The Guardian: http://www.guardian.co.uk/news/datablog/2009/nov/25/gdp-uk- 1948-growth-economy

4. UK average earnings 2008: http://en.wikipedia.org/wiki/Income_in_the_United_Kingdom

5. 29.4% uk av util’n...(see also ref. 15) Graham Sinden (1 December 2005). "Characteristics of the UK wind resource: Long-term patterns and relationship to electricity demand"

6. 85-95% thermal avail’: UK Generation Costs Update June 2010 Mott Macdonald section 6.8: http://www.decc.gov.uk/assets/decc/statistics/projections/71-uk-electricity-generation-costs-update-.pdf 7. 8 terawatt plans - section 2 (providing overall figures) of: http://www.bwea.com/offshore/

8. 74.6 billion cost for 8Gw - 8G x £373 x 25/1K = £74.6M (see ref 14 for £373 figure) In conventional plant this would be: 8Gx0.294 x 1.15 x £373 x 25/1K = £25.2B, thus diff is: 74.6-25.2 = £49.4B.

9 1.1GW backup – Renewable Energy in the UK Intermittency and Security Graham Sinden Oxford Uni’: http://www.eci.ox.ac.uk/research/energy/downloads/sinden-supergen.pdf

10. 1.10 Gw backup to 8GW – 0.294x8Gx£0.017x24x365 = £351M min. (see ref 13 for 0.17p figure); 1.1G x £373/1K = £410M max. (see ref 14 for £373 figure)

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11. Tons CO2 for 1.10Gw. – Using LPG (propane) as a representative low CO2 standby source fuel, 44gmoles of propane results in 44gmoles of CO2. 1kg of propane produce 46.55MJ of energy + 1kg CO2. So 1.1Gw pa. is 1.1GWx3,600 x 24 x 365 = 34.7TJ of energy demand. Thus CO2 is 34.7T/(46.55Mx1,000) tons = 745 K Tons.

12 £30 per ton CO2 - http://www.raeng.org.uk/news/publications/list/reports/Cost_of_Generating_Electricity.pdf

13. Standby costs: The Royal Academy of Engineering The Cost of Electricity Generation p26: http://www.raeng.org.uk/news/publications/list/reports/Cost_of_Generating_Electricity.pdf

Cost of generating electricity for selected renewables (pence per kWh) Without standby With standby generation generation Standby cost Poultry litter-fired bubbling fluidized 6.8 6.8 bed (BFB) steam plant Onshore wind farm 3.7 5.4 1.7 Offshore wind farm 5.5 7.2 1.7 Wave and marine technologies 6.6 6.6

14. Cost breakdown of (standby) generation by kW p.a: http://www.raeng.org.uk/news/publications/list/reports/Cost_of_Generating_Electricity.pdf

Cost of standby generation Capital cost (£ per kW) 331 Economic life-expectancy (years) 20 Discount rate (%) 7.5 Annuitized cost (£ per kW p.a.) 32 Fixed costs (£ per kW p.a.) 10 Total (£ per kW p.a.) 373

15. Power at night - Graham Sinden Long term patterns and relationships to Electricity Demand (1 December 2005). "Characteristics of the UK wind resource: Long-term patterns and relationship to electricity demand" Season Daytime Overnigh t Overall Winter 44% 36% 38%...... Summer 31% 13% 20%...... approx’ 29% Av.

16. Low demand at night – National Grid Real Time Data: http://www.nationalgrid.com/uk/Electricity/Data/Realtime/Demand/demand24.htm

17. Constraint payments - James Kirkup (27 Dec 2011), "£10m cost of turning off wind farms", www.telegraph.co.uk. Edward Malnick; Robert Mendick (17 Sep 2011), "Wind farm paid £1.2 million to produce no electricity", www.telegraph.co.uk

18. Cap’ for 2.355GW in conventional plant over 25 years: (8GWx0.294 x1.15) is 2.35G x £373/1K = £25.2B.

Page 27 19. A.M. Denbook Vale 26 May 2011 - http://www.denbrookvalley.co.uk/

20. Noise on people study. Analysis by R G Heap, Sedgemoor District Council 7 Feb 2011 re App’ 52/10/00018 http://www.sedgemoor.gov.uk/index.aspx?articleid=5970

21. AM distance effects - Analysis by R G Heap, Sedgemoor District Council 21 Nov 2011 re App’ 52/10/00018

22. Medical costs negligible – Health Effects and Wind Turbines a Review of the Literature Loren D Knopper and Christopher A Ollson: http://www.ehjournal.net/content/10/1/78

23. Devaluation RICS March 2007: http://www.st- andrews.ac.uk/media/RICS%20Property%20report.pdf

June 2012

Page 28 WIND 10

Submission from David Campbell, School of Law, University of Leeds

1. The economic and environmental costs of the development of wind power in the UK in line with the expectations of the Department of Energy and Climate Change are extrem ely l arge.

2. The only possible justification of the Department’s policy of incurring these costs is that cost benefit analysis shows the policy to yield economic and environmental benefits of g r eater magn i tude.

3. These benefits are traceable to the achievement of the goal established under the 1992 UN Framework Convention on Climate Change of the avoidance of dangerous anthropological interference in the climate system by emission of greenhouse gasses. Achievement of this goal requires a reduction of global greenhouse gas emission s which, on any of the targets set by the European Union or the Intergovernmental Panel for Climate Change, are of an immense magn i tude.

4. Further development of wind power in the UK must be placed in the context of the complete failure of international efforts under the Framework Convention to secure any such reduction. The First Commitment Period under the Kyoto Protocol ends on 31 December 2012. It is predicted that global emissions will, at that time, be 150% of emissions in 1990, the year set as a baseline for action under the Kyoto Protocol. None of the reduction targets that have been set can possibly be met on the current trajectory.

5. Of its technological nature, greenhouse gas emissions are a global problem. All countries emit and all emissions contribute to global greenhouse gas concen t ra t ions.

6. The great bulk of increase in emissions since 1990 has been the product of the economic development of the major developing countries, notably Brazil, China and India. The predicted emissions of China alone will overwhelmingly prevent global emissions reductions in line with any of the targets that have been s et.

7. At the moment, the major developing countries are responsible for more than 30% of global emissions. Given the size of the populations of these countries (40% of world total), the continuing poverty of most of their citizens reflected in their still low per capita emissions (20% of US), their success in realising economic growth of up to 10% per annum and their commitment to such rates of growth in future, there is no prospect of reducing global emissions in line with any of the targets that have been s et.

8. This inability to secure global emissions reductions is generally believed to be the result of a failure to agree a legally binding agreement about greenhouse gas emissions. Many official communications under the provenance of the Department of Energy and Climate Change are to this effect.

9. This view is incorrect. There is a legally binding agreement, but it is an agreement to allow the unbounded increase of emissions. Art 4(7) of the Framework Convention provides that: ‘The extent to which developing country Parties will effectively implement their commitments under the Convention … will take fully into account that economic and social development and poverty eradication are the first and overriding priorities of the developing country Parties’. This is a perfectly clear legally binding permission to developing countries to emit as much as they w i sh.

Page 29 10. The Framework Convention and the Kyoto Protocol include the major developing countries, notably Brazil, China and India, in the category of (non-Annex 1) developing countries. The economic growth of these countries since the Framework Convention means that that Convention has allowed an effectively infinite extensive margin for the global growth of emissions. It is this that has doomed the Kyoto Protocol to complete failure.

11. The major developing countries would never have agreed to the Framework Convention if it did not include art 4(7). In all subsequent climate change negotiations, they have given every indication that they will never agree reductions of absolute emissions, or even to their limitation, because art 4(7) accurately states their pr i o r it i es.

12. China’s notification under the Copenhagen Accord, for example, states that: ‘China will endeavour to lower its carbon dioxide emissions per unit of GDP by 40-45% by 2020 compared to the 2005 level … Please note that the above-mentioned autonomous domestic mitigation actions are voluntary in nature and will be implemented in accordance with the principles and provisions of the UNFCCC, in particular Article 4, paragraph 7’.

13. This is a notification of a ‘voluntary’ ‘endeavour’ related to a 2005, not a1990, baseline, which is explicitly stated to convey no legal obligation to do anything about emissions at all. The non-binding statement of intention that is made is expressed in terms of carbon intensity and is entirely within the framework of art 4(7). Reduction in carbon intensity is perfectly reconcilable with, and in China’s case certainly will mean, great growth in absolute emissions.

14. The Kyoto Protocol purports to create a cap and trade emissions reduction scheme. But as the climate change negotiations have never placed any limit on the emissions of developing countries, there is no cap on those countries. Talk of a common but differentiated responsibility is mere verbiage. The developing countries have no responsibility to contribute to emissions reduction a t a l l .

15. The Clean Development Mechanism by which the Kyoto Protocol intended to bring the developing countries into emissions trading is framed within the parameters of art 4(7) and it is logically impossible that it can secure any global emissions reductions whatsoever. Its operation so far has been a mixture of ineffectiveness and outright scandal. It has very likely increased the developing countries’ capital fund for growth in a way which has increased their absolute emis s ions.

16. Given the economic position of the major developing countries and the legal permission of their unlimited emissions, it is irrelevant what the developed countries, even including the USA or the EU as a whole, do. The policy of the UK, responsible for 2% of global emissions, is, viewed unilaterally, insignificant.

17. For the UK to incur the very substantial costs of realising the Department of Energy and Climate Change’s w i nd power policy when there is no possibility of reducing global emission s is completely irrational. There are simply no benefits whatsoever to set against the costs of the policy. This policy m ust be completely abandoned as soon as is possible.

18. The research on which this evidence is based, stated as of 31 December 2010, is published in D Campbell et al, ‘After Cancun: The Impossibility of Carbon Trading’ (2010) 29 University of Queensland Law Journal 163. It is available online via the subscription legal database Hein-on- line: http://home.heinonline.org/ and by email to i.d.campbell@leeds. a c . u k

June 2012

Page 30

WIND 11

Submission from Renewable Energy Foundation

The Economics of Wind Power

Costs of Renewables Obligation Subsidy Support to Wind Power to Date 1. REF publishes generation data based on Ofgem’s Renewables Obligation Certificate (ROC) Register. By taking into account the variable numbers of ROC/MWh, and using the ROC value quoted by Ofgem prior to 31 March 2011 and assuming a cost to the consumer of £50/ROC since that date, we can estimate the subsidy costs (excluding VAT) as f o llows. 2. The total RO subsidy cost from April 2002 to February 2012 amounts to over £8.2 billion, of which wind power received £3.3 billion, with onshore wind power taking £2.4 billion of that sum. 3. The total RO-supported renewable electricity subsidy cost in the calendar year 2011was £1.5 billion, of which wind power received £818 million, with onshore wind taking £509 mil li o n. 4. Domestic households account for about 36% of UK electricity consumption, and it might therefore be assumed that 36% of the RO costs will have a direct effect on household electricity bills. However, industrial and commercial consumers are able to buy closer to the wholesale price, and it is therefore likely that domestic households bear more than their proportional share of the costs of levies such as the RO. The scale of this effect is unknown, but DECC data discussed in our study Shortfall, Rebound, Backfire,1 suggests that households pay for as much as 40% of th e costs. 5. The Committee should be aware that a large part, perhaps all, of the 60% of the RO cost that is recovered directly from the bills of industrial, commercial and public sector consumers is ultimately imposed on households through the increased cost of goods and services (and taxes).

Future Costs of Renewables Obligation (EMR) Subsidy Support to Wind Power 6. Wind’s subsidy share is expected to grow, and on the basis of the plant mix projected in DECC’s 2011 Renewable Energy Roadmap, REF has calculated, in our study Energy Policy & Consumer Hardship (2011), that the total subsidy cost of the RO (or successor mechanisms) in 2020 would amount to approximately £8 billion a year, with onshore wind

1 REF, Shortfall, Rebound, Backfire (2012), 19-20. See http://www.ref.org.uk.

Page 31 accounting for about £1.5 billion, and offshore wind £4.5 billion, with biomass taking most of the remainder.2

The Need for Studies of Total Cost to Consumer 7. However, the Committee cannot afford to neglect the fact that subsidy is not the only cost imposed on the consumer by wind power. This point is poorly accounted for by the conventional levelised cost studies to which the Committee is likely to be directed in other evidence. Such levelised cost studies have certain limitations, namely: • Conventional levelised cost studies generally assume that load factors are limited only by plant availability and access to the prime source of energy, not by the system demand. This is unrealis t ic. • The fuel consumption and emissions of the overall system as a whole are not considered. This is clearly undesirable given decarbonisation goals. • Most studies only calculate the levelised cost as seen by the generator (or an investor in that generator), and other costs imposed by the generator on the system and ultimately passed on to the consumer are not considered. For the purpose of long-term planning in relation to various technology options it is essential to c alculate the total economic costs borne by the consumer, and thus by the wider economy. 8. Total system studies will overcome these limitations. However, it will be necessary to use a time series daily load curve (rather than a load duration curve) to capture all of the costs, and to describe the fuel consumption and emissions resulting from the uncontrolled variability and unpredictability of most renewables, not least wind generati o n. 9. By using daily load curves, the degree to which a station operates will be determined by its running costs (including part-load operation, start-up costs, etc.), its stand-by condition (hot, warm, or cold), and the degree to which it is flexible and thus able to meet variations in intermittent generation. 10. The output of such a study will not only describe the amount of fuel used, including that required during part-load generation and on stand-by, but also the consequent emissions, and the costs carried by the consumer, including the following, which are excluded from current levelised cost studies: • The cost of extra operational generation to control frequency and voltage (i.e. flexible plant to compensate for errors both positive and negative in the wind forecast).

2 REF, Energy Policy & Consumer Hardship (2011), 27. See http://www.ref.org.uk.

Page 32 • The capital costs of new generating plant required to contain the security of supply risk within a specified limit, for example at 17.30 on a windless winter day. • The capital costs of new grid infrastructure required to operate the interconnected system within the specified standard of security. • Costs of constraint payments. • Transmission revenue costs, and costs of losses. 11. Writing for The Institute of Engineers and Shipbuilders in Scotland (IESIS) one of us (Gibson) has recently (01.06.12) submitted a sketch of such a total system cost analysis to Professor David Mackay, Chief Scientific Advisor to the Department of Energy and Climate Change, and we refer the Committee to that document. 12. The Committee should be aware that in the absence of such an analysis the subsidy cost should be regarded as the lower bound of consume r c ost, but also that the additional costs imposed at the system level are difficult to estimate, except to indicate likely order of magnitude. Employing the methodology described in work by one of us (Gibson) REF has estimated that the additional system burden in 2020, assuming the 2011 Roadmap plant mix, would amount to around £5 billion a year.3 13. On this view, even if the capital costs of wind power fall to zero the additional system integration costs caused would result in wind electricity being 50% more expensive than that generated by CCGT or nuclear.

June 2012

3 REF, Energy Policy & Consumer Hardship (2011), 30. See http://www.ref.org.uk.

Page 33 WIND 12

Evidence for the Economics of wind power 1. Introduction It is puzzling that evidence is only being requested about costs of wind and not the return on investment being made by windfarm operators. These returns are so great that it is difficult to justify any subsidies. Some fundamental questions need to be answered about the true contribution that wind can make in a grid which must continually match demand with supply. The wind industry statistics and largely accepted by DECC credit wind as if it was a dispatchable power source and so are wholly unrealistic. A number of reports (including Udoi, CIEPii & CIVITASiii) have taken a holistic view of how wind interacts with other forms of generation in a power grid. These highlight the low net carbon reductions that can be achieved because of high carbon costs of maintaining balance in a grid containing significant proportions of intermittent and highly variable wind generation. 2. What do cost benefit analyses tell us about onshore and offshore wind compared with other measures to cut ca r bon? Because of the low net carbon savings from wind the benefits (net carbon savings) from wind are very low and as a result a realistic cost/benefit analysis would show wind as poor value when compared to many other measures. The most cost effective carbon reduction measures come from reduced waste and more efficient generation. Insulation is extremely cost effective. In addition, if older carbon fuel power stations were to update their generators, this would significantly reduce fuel use and hence carbon emissions. 3. What do the latest assessments tell us about the costs of generating electricity from wind power compared to other methods of generating electricit y ? The reports above highlight costs that are not considered in the official figures. The overall costs arising from wind are thus far higher than is usually suggested. Setting this aside, wind is far more expensive than landfill gas which receives ROC credits at a quarter of the rate of wind. 4. What are the costs associated with providing back up capacity for when the wind isn’t blowing, and how are these accounted for in cost assessments of wind powe r ?

Page 34 In a free market developers will not build backup generation power stations unless they either receive a premium price for the electricity generated or they are given guarantees of income for operating in standby mode regardless of the amount of electricity that they generate. This will necessarily result in backup generators receiving a significantly greater income per kilowatt hour than would be paid if the power station were to supply base load electricity thereby adding costs to the grid. 5. How much support does wind power receive compared with other forms of renewable energy ? The important question is “How much support does wind need to be viable?” Wind farm operators claim that onshore wind is the cheapest for of renewable generation and so clearly the technology needs less support than other technologies. Onshore wind is an established technology and so should be considered in the same bracket as landfill gas. The committee should obtain details of the returns on investment being achieved by modern windfarms in order to assess the level of subsidy necessary. The Milton Keynes windfarm would be a good yardstick because it has been operating just over a year and it is sited in one of the poorest wind resources in Britain. This windfarm achieved a capacity factor of nearly twice that of the older Burton Wold windfarm nearby. 6. Is it possible to estimate how much consumers pay towards supporting wind power in the UK? (i.e. separating out from other renewables) It is possible to calculate the ROC costs based on the OFGEN data. However, this is just a fraction of the overall cost because of the indirect costs incurred supporting this intermittent and unpredictable power source in a grid that must be kept in balance at all times. 7. What lessons can be learned from other countries? The reports above show that other countries find that wind is not an effective way of reducing carbon emissions. Other countries have also learnt that onshore wind in close proximity to homes is publicly unacceptable and some have had to stop onshore wind development entirely. Other countries are reducing or removing support for wind. 8. What methods could be used to make onshore wind more acceptable to communities that host them? First and foremost the Government should commission detailed and credible research into the adverse effects of wind turbines on nearby homes and residents. It is wholly unacceptable to rely on the argument that there is no conclusive proof of issues while determinedly avoiding looking for any evidence. Most existing research was designed to hide problems – often because it was commissioned by the wind industry. Until results are available the Government should take a precautionary approach and halt all windfarms within 2km of homes. The Government should not hide behind the difficulties of assessing the blight caused by windfarms and should adopt a compensation scheme as has been done in Denmark.

Page 35 Financial incentives are unlikely to be great enough for windfarms in close proximity to homes. June 2012

i Wind energy in the Irish power system, Fred Udo ii Wind and Gas – Back up or Back out “That is the question”, Nora Meray, Clingendael International Energy Programme, December 2011 iii Electricity Costs: The folly of wind‐power, Ruth Lea, CIVITAS, January 2012

Page 36 WIND 13

Submission from Sir Donald Miller F.R Eng, FRSE Chairman SSEB/ 1982-92

1. Introduction a. In any discussion about costs we need to be clear about the basis being used. DECC have made a practice of quoting discounted levelised costs but this is at best a rough and ready, and sometimes misleading, approach for costing alternative generation policies. In an electricity supply system the operation of any generating unit has implications for the operational costs incurred by other units and for this reason utilities assess costs of alternative generation investments using a model of the whole system. With their greater resources, there should be no difficulty in DECC, in conjunction with National Grid, using this more rigorous approach, but in what follows I have necessarily employed the levelised cost basis as currently used by DECC.

b. DECC in their report ‘Estimated Impacts’ have provided estimates of costs to consumers b u t they make it clear that not all the costs (e.g. system effects), have been included. As these are very significant they have been included in my costings, a lthough on a conservative basis.

2. Costs of Wind Power to the Consumer a. The history of energy use since man first harnessed draught animals to improve his productivity has been the steady development of increasingly intensive (and consequently lower cost) energy sources. The present emphasis on renewable sources attempts to reverse this trend. Wind energy is essentially a low intensive energy source requiring very large and slow running machines which are and will remain inherently expensive. No amount of development can have more than a marginal effect on this

b To generate electrical energy equivalent to 30% of UK requirements in 2020 in accordance with Government targets would, after allowance for smaller amounts of hydro, biomass and other outputs, require some 36,600 of wind plant .With high levels of wind penetration on the system, because of wind’s unpredictability and short term variability, it is necessary at all times to have fossil fuelled plant running in reserve at part load. This involves capital and running costs which are inseparable from wind power and which must necessarily be included in the equation when comparing the costs of alternative generation such as nuclear or CCGT which do not require this back up.

c. In what follows I have examined cost data on capital and running costs of different types of generation as given in published reports commissioned by DECC from the following firms of Consulting Engineers. Mott MacDonald Consulting Engineers. Parsons B rinkerhoff Consulting Engineers Arup Consulting Engineers Poyry Consulting Engineers For system costs I have referred to a Report by the Institution of Engineers and Shipbuilders in Scotland - (Author Colin Gibson, retired Power Network Director National Grid)

d. Consistent with these sources of data the total costs for energy from onshore wind are typically £187/MWhr. This is the cost of bulk energy at a point on the high voltage transmission system where it is delivered into the lower voltage distribution systems to service consumers. It

Page 37 comprises capital costs, return on capital (including profit) for the developer, operation and maintenance, costs of additional high voltage transmission including losses, the provision of back up generating capacity equivalent to some 92% of the wind capacity (for when the wind does not blow or blows too strongly) as well as the costs of running the back up plant inefficiently at part and varying loads. The £187/MWhr has to be compared with the current cost of bulk energy from conventional generation of some £60/MWhr. The whole of these costs have to born by the electricity consumer whether in the form of costs for bulk energy, direct subsidy (presently one ROC per Mohr), levies by National Grid for additional transmission costs and higher bulk energy prices from t he provision of back up plant and its operation at lower efficiencies.

e. For offshore wind the costs are significantly higher at £265/MWhr with much of the additional costs recovered via a larger subsidy, (two ROC per MWhr).

d. In summary therefore the total additional costs to consumers in year 2020 of meeting the UK target of 36,600MW with a mix of on shore and off shore wind installations can be set out as follows: - On shore Off shore Installed capacity MW 14,400 22,200 Energy output TWhrs per annum 31.5 62.2 Costs (capital and running) as above £/MWhr 187 265 Costs per annum £ Bn 5.89 16.48 Total costs per annum £ Bn 22.37 Cost per annum for CCGTs instead of wind £ Bn 8.64

Extra costs for wind energy instead of CCGTs £Bn 13.73 Share of costs/annum £ Bn-domestic consumers (1/3rd) 4.58 - commercial and industrial (2/3rd) 9.15 Including Vat @ 5% (domestic) £Bn 4.81 20% (commercial and industrial) £ Bn 10.98 Additional direct cost in bills per domestic consumer/annum £192 f. Based on an average household annual bill of £500 this £192 represents an increase of 38%. This is a direct result of current wind energy policies. Moreover if say some 90% of commercial and industrial costs eventually find their way through to consumers the total additional cost of these policies averaged over the 25M households in the UK amounts to some £590 per annum each. g. These costs, large as they are, are further increased as a result of other aspects of energy policies such as the Carbon Trading and Emissions and Energy Consumer Obligations. DECC estimate (they say conservatively) that in total these will result in an increase of some 20% in electricity prices to domestic consumers in year 2020. Added to the above system costs the total increase in electricity price for the domestic consumer would amount i n 2020 to 58%. These are very significant increases in price when one third of domestic consumers are already estimated to be ‘in fuel poverty’ and when even higher wind penetrations are proposed for the years beyond 2020.

3. Effectiveness in Saving CO2 Emissions a. The assumption that each MWhr of electricity generated from wind saves the equivalent in CO2 emissions from fossil fuel power stations would not be supported by any engineer with experience of operating power plant. The considerably lower efficiency of the back up thermal

Page 38 plant running at part loads together with the additional losses from frequent deloading and reloading as the wind strength varies, all consume additional fuel. The jury is still out on the exact implications of this but there is accumulating evidence from analysis of actual system operations both in the USA and more recently for the Irish Grid that high wind penetrations save little or negligible emissions of CO2 and can in some circumstances actually lead to increases.

4. The Need for Thorough Audits a. It may seem surprising that UK governments, before adopting energy policies which have such drastic effects on the UK economy and electricity consumers, have failed to carry out comprehensive audits either of costs to consumers or the effectiveness of wind energy in reducing CO2 emissions. If such audits are to carry the weight they should, they would best be carried out under the auspices of a professional and independent steering agency such as The Royal Academy of Engineering.

June 2012

Page 39 WIND 14

Submission from Hengistbury Residents’ Association (HENRA)

It is requested that this evidence may be presented to the Committee in person by Mr. A. Yates, the Chairman of the Hengistbury Residents’ Association.

1. Introduction.

The members of HENRA in Bournemouth recently voted to oppose Navitus Bay, a £3 billion offshore wind farm plan and its expected 673-feet high turbines. The Dutch developers reportedly expect to reap £250 million pa in subsidies1. Since the scheme f aces o ne of the most attractive coastlines in the country, there is great local opposition.

2. Executive Summary.

Major concerns are wind power’s lack of viability due to high costs, very low output, intermittent supply, great inefficiency and the need for duplication with under-utilised back-up stations. Furthermore, wind power can actually increase CO2 emissions whilst creating colossal and unaffordable taxpayer subsidies. In short, it simply does not add up.

3. Cost of Wind Compared to Other Methods of Generation.

A measure of the excessive cost is the system of Renewable Obligation Certificates (ROCs) which are purchased by suppliers from generators. The suppliers then recoup this high cost of “green energy” through higher bills to all their customers – in effect, a hidden tax for the consumer and a massive subsidy to the generator. However, this result, of selling wind farm electricity at about two or three times normal price, is needed to justify the business case for the staggering development costs. A comment by the CEO of E-ON in 20052 still rings true today – “ Without the ROCs nobody would be building wind farms.”

In a one study3, the costs of meeting 2020 targets under the Wind Scenario were calculated to be £120 billion compared to the Gas Scenario at £13 billion. In another4, some £900 million p.a. were found to be the savings achievable by replacing 4 GW of the current 13 GW offshore wind plan by a merely transitional gas-fired s cheme. Indeed, that switch would also allow the UK to double research funding, insulate 360,000 lofts each year and reduce emissions by six times the figure for 4 GW of offshore wind through the carbon trading system.

Again, the enormous cost of wind power was indicated on a levelised cost calculation5, where range averages for coal, CCGT, nuclear and give £75/MWh compared to onshore wind at £185/MWh and offshore wind at £260/MWh. Further confirmation of the subsidies needed by wind power is given by an American report6. Wind received 42% of the subsidies but produced only 2.3% of electricity generated, whilst fossil fuels received 16% of the subsidies and generated the largest share of the electricity at 70%.

4. Accounting for New Transmission Links to Wind Farms.

Expensive links to the National Grid should be i ncluded in costs for offshore wind farms. Ofgem indicated that £20 billion would be needed (double the capital value of National Grid) to cope with

Page 40 wind and other “intermittents”7. The cost issue is that coastal power lines are remote from the wind farm and never adequate.

5. Accounting for Backup Capacity and Environmental Consequences.

Wind has a Capacity Value of 0% -10% as it is unreliable, i.e. it cannot be counted on to deliver. Since UK wind power has been shown to produce around 1% of its rated capacity for several hours every week,8 backup stations are required to minimise instability and risks of blackouts and brownouts. Hence, the duplicated stations must be reliable fossil fuel ones which can rescue the National Grid from the variability of wind by swiftly altering their output as required. Their constant starting and stopping 9 can create greater CO2 emissions than if such stations are run steadily on their own . Yet in the same way that the transmission links may be ignored, the backup costs and the environmental consequences also seem to be wrongly left out of account when comparisons are done b y the wind industry.

6. Lessons from Other Countries.

Spain has now stopped the expansion of wind power on grounds of cost. Denmark found that its large number of wind farms created instability in their grid whilst it had the most expensive electricity in Europe. Germany however has taken the political decision to expand wind power in the wake of the Japanese nuclear reactor disaster. Time will tell if this alone will put their economy at risk as has been suggested. China, which is building coal-fired power stations at the rate of one every five days, has some wind power but is now forging ahead with safely-designed Thorium nuclear reactors.

7. Background and Future.

The world’s has greatly expanded due to the theory of man-made global warming (MMGW). But this is certainly not settled science because m any climate scientists oppose the theory10. Indeed, the High Court found that Al Gore’s film, An Inconvenient Truth, contained nine scientific errors11. Many serious objections to MMGW have never been explained. For instance, since temperature rises in the past have occurred before CO2 increases, it follows that CO2 (which is a major life force and not a pollutant) could not have been the cause of warming – instead it was a consequence. Another problem for alarmists is how do they explain the Little Cooling (1945-1975) whilst CO2 was rising strongly?

We hope that plans for carbon capture can be scrapped, so enabling “clean fossil fuel” and nuclear power for the foreseeable future. Even if one takes the opposite view, the IPCC-inspired EU policy still makes no sense. For instance, if air travel is greatly expanding with EU blessing, how can one claim wind power is justified to reduce CO2? On an annual basis, one Boeing 747 flying the Atlantic emits 12 more CO2 than is “saved ” b y three gian t w ind farms !

Since water is about 800 times as dense as air and much better at turning turbines than wind, we hope that one day, future research will enable to be harnessed at a reasonable cost. Meanwhile, as at 2010, the world’s economic coal reserves of 860 billion tonnes are estimated to last about 118 years13 as against a total resource of 17 times that amount. Coal now produces about 42% of world electricity at affordable prices – we need only to clean up its polluting emissions, i.e. oxides of sulphur and nitrogen. Nuclear power, using the abundant UK deposits of cheap Thorium, has some big advantages over wind – less harmful waste, greater safety, lower cost, greater reliability, and (for the IPCC) no CO2 emissions.

Page 41 The real issue is either to decide a practical energy policy for the UK or face the inevitable economic impoverishment arising from IPCC policies. Urgent realism is required at government level.

8. Conclusion

Economic reality demands that Britain must maintain a reasonably priced energy mix in order to be competitive and maintain living standards. Wind power is not the way to do this. We favour mainly Thorium based nuclear power and clean coal.

June 2012

1 Sunday Telegraph 8 April 2012. 2 Daily Telegraph. 26 March 2005. 3 Why is Wind Power So Expensive? An Economic Analysis. Gordon Hughes. 2012. 4 Fuelling Transition. Simon Less. June 2012. 5 Probablistic Approach to Levelised Cost Calculations for Various Types of Electricity Generation. Colin Gibson. 2011 6 Renewable Energy Subsidies 6.4 Times Greater Than Fossil Fuel Subsidies. Institute for Energy Research. 2012. 7 Sunday Times. 3 August 2008. 8 Analysis of UK Wind Power Generation. Stuart Young Consulting. March 2011. 9 American T radition Institute v. State of Co lorado. (Federal hearing now awaited i n U.S. District Court for Colorado. Expert evidence of Thomas Tanton). 10 Manhattan Declaration 2008, Leipzig Declaration 2005, Oregon Petition 2007 etc. 11 Dimmock v. Secretary of State for Education. October 2007. 12 Guardian 26 April 2006. 13 World Coal Association Factsheet 2.

Page 42 WIND 15 Submission from Environmentalists for Nuclear Energy - U K

1. Wind energy is able to displace an equivalent amount of Gas energy and avoid its CO2 emissions. However, wind energy is too erratic to b e used as a stand-alone supply a t a large scale o n a national grid. Only with an assigned set of gas fired power stations can the net output be levelled rapidly enough for a steady supply. The two systems are so tightly coupled and interdependent that they must be financed and managed as a Wind-Gas Hybrid sys tem. No policies should be formed around the concept that wind energy is a clean system which can be discussed in isolation.

2. The gas partner in the hybrid generates about half the total levelled power, but at 2/3 of the efficiency for continuous operation. The Wind-Gas Hybrid saves no more than about 45% of the emissions of a fully gas powered system of the same output. A Wind-Coal Hybrid would have double these emi s s i o n s.

3. The Scottish claims that they will generate 100% of their electricity from wind by 2020 is a misrepresentation as it omits the emissions from levelling by English gas fired power stations. On days with no wind they will be supported by this gas power.

4. Scotland gets 30% of its electricity from coal and 20% from the nuclear stations at Hunterston and Torness. The 1200MW coal station at Cockenzie breaches EU regulations on other emissions and will close in 2013, but Scotland may replace this with 2400MW of new coal stations. The old Longannet 2400MW coal station now meets EU regulations and has had its life extended to 2025. The emissions from Scotland are set to increase.

5. A recent analysis (Euan Mearns, theOildrum.co m) of German wind and solar output in the sunny month of March this year showed that solar energy on a large scale must also be partnered with gas. The daytime solar feed in of up to 15GW could not be suppressed by the grid operators. The 30GW of wind power did not get above 20GW and was below 3GW for 14 days. The mismatch of solar in the south and wind in the north, and the lack of 8GW of closed nuclear power, came close to crashing the grid. This expos e d t h e ir f ailure to plan an integrated set of Hybrid wind-solar-gas systems with appropriate grid capabilities. German electricity costs are 40% higher than in the UK. Germany has no current CC&S pilot projects and two full scale CC&S power stations have been rejected by local communities.

6. Erratic renewables can often peak together so their sum should never reach the maxim u m load and curtail all other power sources. Thus, the high German solar capacity limits wind energy to a maximum of about 70GW today. Increasing solar capacity to 40GW limits wind

Page 43 capacity to the current level. Excess power could be exported but Denmark does so at a loss. Renewable policies must be integrated and coordinated wi thin these low limi ts.

7. Of all the ideas to reduce the Hybrid emissions the only serious contender is Carbon Capture & Storage. There are now 18 CC&S power projects approved around the world, though none are built (sequestration.m it.edu). Twelve will be b uilt on existing oil fields, gainin g revenue from enhanced oil recovery (EOR). Only 10 of 17 pilot plants are actually running. Only one

pilot is storing CO2 in an offshore gas field. Only Norway is testing capture for gas fired units. It will take several years for the engineering and operating practices to be established. Operating CC&S requires 20% more fuel, and the electricity cost increase is estimat e d at 30%. It is a premature expense for the UK to duplicate existing trials in other countries by building new coal fired power stations with experimental Carbon Capture at Grangemouth (2X400MW) and Hunterston (16 00MW) in Scotland. This seems to be nothing more than a gamble with no consequence for the coal burners if CC&S fails to materialise here.

8. It is clear in the briefings from DECC on C O2 storage in offshore wells or saline deposits, gastight for 500 years, that this represents the highest risk and cost for every UK C C &S system. BP withdrew its own trial of a complete CC&S system at on this basis. It seems essential to design, build and test offshore storage as a project integrated with a proven gas fired unit using Carbon Capture. The gas power station should be capable of rapid response to partner wind energy in Scotland. This one project would be the best candidate for Government support for CC&S.

9. The long term goal is to reduce carbon emissions to 80% of 1990 levels by 2050. We expect that half of allowed emissions would be for transport and heating. Thus Hybrid systems wi thout CC&S can supp ly no mo re than 10% of global needs by 2050 because of the matching gas emission s.

10. The IEA now says that even gas usage should be reduced after 2030 because of its emissions. Certainly, the use of large amounts of shale gas or methyl hydrates should be proscribed by then. With or without CC&S the Hybrid Wind-Gas systems are not on track to be a major energy provider. Having a service life of only 25 years it seems no more than 2 round s w ill be built and Wind will decline with Gas.

11. The complete picture of the economics of the Wind-Gas Hybrid System must include the costs for wind and its grid connections, the costs and carbon price for the rapid response gas fired power station partners, the costs of Carbon Capture, and the costs of

their share of the capital and operating costs of the CO2 storage system in the North

Page 44 Se a. A ll subsidies, grants, payments to landowners and interest to banks should be fully accounted.

12. It is clear that Wind Energy has become a financial and technical ecosystem of its own, surviving on immense subsidies, foreign industry and technology, but failing to deliver energy independence or price control or offering manageable electricity supplies beyond 2050. The pace of the programme is outstripping the development of most of the needed infrastructure and a consistent technology mix has not been properly identified.

13. New nuclear reactors are very flexible in response to load variations. It would be better to replace wind with nuclear. Nuclear energy with fuel recycling, Generation V reactors like the Thorium breeder and Fusion-Fission Hybrids, is good for hundreds of millennia. All existing stocks of spent fuel can be burned by 2100.

June 2012

Page 45 WIND 16

Submission from REG Windpower Ltd

Call for Evidence

• What do cost benefit analyses tell us about onshore and offshore wind compared with other measures to cut carbon? • What do the latest assessments tell us about the costs of generating electricity from wind power compared to other methods of generating electricit y ? • How do the costs of onshore wind compare to offshore wind? • What are the costs of building new transmission links to wind farms in remote areas and how are these accounted for in cost assessments of wind power? • What are the costs associated with providing back up capacity for when the wind isn’t blowing, and how are these accounted for in cost assessments of wind power? • How much support does wind power receive compared with other forms of renewable ene r g y ? • Is it possible to estimate how much consumers pay towards supporting wind power in the UK? (i.e. separating out from other renewables) • What lessons can be learned from other countries? • What methods could be used to make onshore wind more acceptable to communities that host them?

Introduction

This submission sets out the experiences of REG Windpower, one of the top 20 owners of onshore wind farms in the UK by capacity, regarding the costs involved in the full lifecycle of an onshore wind farm, including development, financing, construction and operation. Our evidence helps demonstrate that onshore wind is one of the most cost effective forms of renewable energy generation and that, at a time when there is significant at-risk expenditure incurred in developing projects from greenfield sites through to operation, there is absolutely no justification for any proposal to reduce the level of support for wind power to below 0.9 ROCs. In particular, the key measure the Government must assess when making a decision is not the cost per MW of turbines, but the cost per MWh generated.

More generally, we would like to highlight concerns about the ongoing policy uncertainty in the wind power sector which is deterring investors and hindering the UK’s ability to realise the full potential of wind power which can deliver up to a third of all renewables generation by 2020 as well as the investment in innovation and skills necessary to create the jobs that will be essential in a high-tech and value added green economy.

The cost of onshore wind power

Onshore wind is the UK’s most proven and cost-effective form of renewable energy generation. In response to a Parliamentary written question from Caroline Flint in May 2012, Energy Minister Charles Hendry provided estimates for the cost per megawatt hour of electricity generated from wind power. The data was based on figures taken from two reports by Parson Brinkerhoff from 2011 and 2012, as well as a 2011 report by Arup / Ernst and Young. The data showed that the central levelised cost estimates for selected electricity

Page 46 generation technologies was one of the lowest, at £90MWh for onshore wind 5MW projects starting in 2011, and £88MWh for projects starting in 2017. The additional cost to the consumer from onshore wind in 2010-11 was only £4.68 on the average bill – a pproximately 9p per week.

The equivalent results for offshore wind were more expensive at £123MWh for 2011 and £143MWh for those projects commencing in 2017. However, both forms of wind power were cheaper than dedicated biomass generation, which cost £145MWh for >50MW scale projects in 2011 and is estimated to cost £143MWh in 2017. As the market continues to mature and technology develops further we expect the cost of the energy will continue to fall. However, this will only take place if the necessary regulatory support and policy certainty is provided to encourage investors to enter the market and develop the capacity of this nascent industry. In fact, it is REG’s view that the cost of UK onshore wind is actually likely to increase in real terms over the medium term, as global demand for wind turbines (of which the UK represents only a 3% share) rises and average UK project sizes continue t o fall.

Lifecycle costs for onshore wind

The cost of onshore wind is often underestimated, which we believe is largely due to a tendency for policymakers to focus only on the cost of building and operating consented wind farms, rather than recognising the significant at-risk expenditure incurred in developing projects from greenfield sites through planning. As you may be aware, the Bloomberg New Energy Turbine Price Index published in March suggested that onshore wind turbine prices have recently come down significantly across the globe, which has spurred the Treasury to consider further cutting support for onshore wind.

However, we are concerned that the Bloomberg report is assessed in its proper context and is not used as a guide for assessing the project life-cycle costs of onshore wind in the UK. Turbine prices did reduce slightly following the global recession and credit crunch in 2009, and have remained largely unchanged since then based on actual prices paid. Conversely, however, the cost of other capital items (BOP, grid etc) has increased, resulting in overall project costs which are largely unchanged in the past five years. Indeed, Michael Liebrich, Chief Executive of Bloomberg New Energy Finance, has warned that the findings of the Bloomberg report do not justify such significant cuts to wind farm subsidies in the UK. Whilst the global average cost of onshore wind was falling, Liebrich noted that the cost of wind farm production in the UK is still more expensive in comparison to other countries in the global market such as in the US, where the large scales, fast planning and good grid connections make wind farms projects much cheaper.

Additional capital and financing costs

At present the ability for independent onshore wind developers to raise bank finance is severely constrained, with fewer than five banks’ lending to projects <20MW in size, making financing for new projects both more difficult and more expensive. In addition, the absence of any real competition in the power purchase market has resulted in generators being forced to accept large discounts (typically around 10%) to market prices in order to secure bankable offtake agreements. This means the non-utility wind sector has, in effect, been receiving 0.9 ROCs/MWh for a number of years.

Page 47 This has been coupled with the increasing time and complexity involved in gaining a planning consent. REG would therefore like to see the cost of capital assumed for onshore wind investment differentiate between those investors willing to take development and construction risk, and those investors who will only invest in operating projects.

Our experience of operating and maintenance costs shows that these have increased by some 20-30% (in real terms) over the past five years, owing largely to increased land rents, business rates and community funding costs. This is exacerbated by the fact that since early 2009, the Euro exchange rate has varied between 1.04 and 1.25 €/£, which compares to a historic average of around 1.45 €/£. Given that turbines account for around 70% of project costs, this weakening of Sterling has increased capital costs by around 15% since early 2009 for UK developers. Turbine pricing therefore needs to be considered in the context of other capital and operating costs which have generally risen in recent years in line with or above inflation.

The Arup report1 published in June 2011 as part of the Renewables Obligation Banding Review, and on which the calculations for support at 0.9 ROCs was based, focused on the build costs. In addition to these calculations, REG would also add two key costs to this analysis as follows:

Table 1: Onshore wind capital costs – Arup report for RO Banding review vs REG experience

Cost item Arup report REG Comments £’000/MW experience £’000/MW Development 45 150 At 30% local and 50% appeal expenditure success rates, the true cost of a consented MW is c.£150k. Turbines 920 Average across REG portfolio 1,320 BOP 250 Average across REG portfolio Grid 75 200 Average across REG portfolio Other infrastructure 75 50 Average across REG portfolio Financing costs - 80 Cost of bank financing typically adds 5% to overall project cost Total capital cost 1,500 1,650

In terms of operating costs, REG’s experience in operating wind farms compares to the Arup report as follows:

Table 2: UK onshore wind operating costs - Arup report for RO Banding vs REG experience

Cost item Arup report REG Comments £’000/MW experience

1 Arup, Review of the generation costs and deployment potential of renewable electricity technologies in the UK (June 2011) - Prepared for DECC http://www.decc.gov.uk/assets/decc/11/consultation/ro- banding/3237-cons-ro-banding-arup-report.pdf

Page 48 £’000/MW Operating cost 57 55 Includes O&M, insurance, land (years 1-10) rent, grid costs, labour Operating cost 57 60 Cost increases typically include (years 11-20) O&M and land rent Power purchase - 9 Generators typically receive agreement c.90% of the market value of power, ROCs and LECs – this cost is not included in Arup’s work Financing costs - 8 Includes bank agency fees & asset management charges Total operating cost 57 75

Cost of Back up Supply

Although we do not have direct experience of reserve generation, we would like to draw the Committee’s attention to National Grid’s Seven Year Statement2 which notes the level of capacity needed to manage intermittent generation, including for periods when the wind isn’t blowing. The report notes that only around 10% back-up is needed under the Short Term Operating Reserve regime to take account of all intermittent generation, including wind, wave and solar, and that the cost of reserve capacity can be kept to a minimum as a result of the grid’s interconnected transmission system.

The statements note that analyses of the incidence and variation of wind speed demonstrates that the expected intermittency of the national wind portfolio would “not appear to pose a technical ceiling on the amount of wind generation that may be accommodated and adequately managed”. It also states that the interconnected transmission system means that local fluctuations in output, including from wind power, can be diversified and averaged out across the system, which permits reserves to be carried on the most cost effective generation or demand side service provider at any particular time. National Grid concludes that “these properties of the transmission network permit intermittent/variable generation to be used with lower standby and frequency control costs than would otherwise be the case”.

Lack of policy certainty

Despite the success of the RO in promoting an expansion of wind technology, we would like to raise concerns that the policy environment has in the last six months become highly uncertain for investors. All investments rely on a ‘no surprise’ regulatory regime, however, recent statements by ministers that the Government is not minded to support any further expansion of wind farms and is considering further cutting levels of support through the RO have severely damaged confidence in the sector. This is discouraging investors from putting up the capital needed to get projects off the ground and means that finance has become more expensive or difficult to obtain, with the result that some schemes have now stalled or are on hold. This is particularly short-sighted at a time when the Government is trying to encourage alternative sources of funding, such as pension investments, into the renewables sector.

2 2011 National Electricity Transmission System (NETS) Seven Year Statement (May 2011)

Page 49 We would also like to reiterate concerns raised in its submission to the Committee’s inquiry into the draft Energy Bill as to the serious lack of certainty about the details of the Electricity Market Reform (EMR) Contract-for-a-Difference Feed-in-Tariff, which will replace the RO for new schemes from 2017. The EMR White Paper contained little information about classification, timescales, counterparties for the scheme, and how it is to be rolled out, and the Bill fails to provide much further clarification on these issues. Since investors tend to look over a 15-20 year period for the medium term, and as the appetite for utility equity is limited at present, this means that projects beyond 2017 are currently unattractive prospects compared other sectors which offer a similar rate of return. The EMR proposals are also unappealing for investors due to short 15 year rate of return, compared to the 20-25 years offered in other EU countries.

These difficulties are coupled with the problems developers have in obtaining consent for wind farms, with many local authorities often throwing out applications for reasons which prove undefendable at appeal, and which are then over-ruled by the inspectorate. This not only delays projects from coming on stream and adds to the start-up costs, but ultimately costs the taxpayer more owing to the large number of planning cases overturned at appeal, with the considerable legal costs this entails.

The introduction of previously mooted incentives for local authorities to consent schemes, such as the local retention of business rates, would be strongly welcomed as a means to make onshore wind farms more acceptable to communities that host them. In addition, we welcome recent comments from the Chair of the Select Committee Tim Yeo MP that wind farm developments should be better supported through incentives for local communities.

Conclusion

In summary, we have shown that onshore wind is one of the most cost effective forms of renewable energy generation in comparison to offshore wind and other renewable technologies. However, turbine pricing needs to be considered in the context of other capital and operating costs which have generally risen over the past five years in line with or above inflation. In particular, operation and maintenance costs, land lease costs, business rates and community payments have all risen dramatically over the past few years, as has the time and complexity involved in gaining a planning consent. The key measure the Government must assess when making a decision is not the cost per MW of turbines, but the cost per MWh generated.

We see absolutely no justification for any proposal to reduce the level of support for wind power to below 0.9 ROCs. Indeed, a reduction to 0.85 or 0.75 ROCs would be disastrous for the industry as it would mean the difference between the long term viability of many schemes, and the ability of developers to raise sufficient capital finance to get projects off the ground. It would also create considerable uncertainty by undermining the indications of support projected in the Banding Review, coupled with a lack of information about the forthcoming Electricity Market Reform, threatening jobs and investment in a sector where there is already consternation about the Government’s perceived lack of enthusiasm for the industry.

At a time when the UK us in recession, schemes which have been shown to promote investment in wind farms and other renewables must be maintained and clear signals given that the Government will support wind power over the long-term to reassure developers that

Page 50 their investments will not undermined by unexpected changes in the policy environment. In particular, we would like to see a period of stability after the current RO and Feed-in-Tariff banding reviews through a commitment to maintain the RO concurrently within the EMR, until the CfD Feed-in-Tariffs scheme has demonstrated that it can act as a suitable support mechanism for the industry. Given the long time frames involved in wind farm development, the Government also needs to introduce measures to support longer term investments through the CfD FiT mechanism, to ensure wind power can continue to contribute towards the decarbonisation of the electricity market and create the green jobs necessary for the growth of the low carbon economy.

Annex: Background to REG Windpower

REG Windpower is a subsidiary of the £50m AIM-listed renewable energy company Renewable Energy Generation We have around 25 staff based in Bath and Truro and have more than doubled in size over the past two years. The REG team contains the necessary expertise to develop, build and operate our growing portfolio of sites, which includes 51.5MW of operational capacity, with another 900MW in development.

Through our experience in developing, financing, building and operating wind farms over the past seven years, we have established an in depth knowledge of the true cost of onshore wind across the full project lifecycle, including decommissioning. Our wind farms generate clean, safe, renewable electricity which is used to supply nearby towns and villages through the local distribution network. We use a rigorous site selection process is designed to create the right scheme in the right location – generating much-needed renewable electricity while respecting the local environment that hosts our projects. We are committed to public consultation and always aim to meet local residents to seek their feedback before we submit our proposals.

June 2 012

Page 51 WIND 17

Submission from Adrian J Snook

What methods could be used to make onshore wind developments more acceptable to the communities that host them?

Executive Summary Proposals for new large-scale onshore wind e nergy developments in the UK often e ncounter stubborn resistance from local people that regard the current economics of wind farm planning, development and operation to be inconsistent with the principles of proportionality or fairness. Urgent action is needed to redress the balance of benefit against harm and to restore the faith of the rural population in environmental safeguards. Reasons for UK Resistance to Onshore Wind Development 1. A global list of 242 countries listed by population d e n s ity reveals that the UK ranks at number 52 with 62,041,708 people, crammed into just 94,060 square miles. 2. The British feel they have a special cultural affinity with the remaining open countryside, commo n ly regarded as a precious national asset to be conserved rather than a hostile wilderness to be tamed. This is evidenced by the support for popular organisations like CPRE, CPRW and Rural Scotla n d. 3. This cultural affinity with open countryside has been reflected in long established political priorities and enshrined in planning policies such as PPS7, which stated that the Government’s overall aim was to “protect the countryside for the sake of its intrinsic character and beauty, the diversity of its landscapes, heritage and wildlife, the wealth of its natural resources and so it may be e njoyed by all.” 4. Home ownership has long been an emotive and important political issue in the UK with around 68% of the population owning their home according to 2010 figures. 5. For decades residential properties in rural settings has attracted a premium in the property market for cultural reasons and because the long-standing ‘presumption against development in the open countryside’ acted as a safeguard against adjacent industrial development that might give rise to potential price depreciation. 6. Due to the desirability of rural properties and the associated price premium, older citizens have tended to rely on their investment in their home as a key vehicle for retirement planning. 7. Proposals for the construction of an adjacent ind ustrial wind farm usuall y com e as a huge shock to local people, giving rise to legitimate fears of significant financial loss arising as a result of b light and property price depreciation. 8. The wind energy industry repeatedly asserts that wind turbines wi ll hav e no effect on property values but the research on this issue is far from definitive. Properties that originally attracted a premium pricing for their rural setting are clearly likely to lose that premium when turbines are in close proximity. 9. Unlike the case of HS2 there are no statutory arrangements for compensating local residents that incur significant loss or exceptional hardship as a result of adjacent industrial development by the wind energy industry. However as in t he case of HS2 wind energy infrastructure development is usually justified by a claim that this is in ‘the national interest’. 10. The paper by Breukers, S. and M. Wolsink (2007) “Wind power implementation in changing institutional landscapes: An international comparison”, Energy Policy 35, 2737-2750 points out that the five Non Fossil Fuel Obligation NFFO orders (1990-98) applied a highly competitive tendering system, which awarded contracts to those that offered to develop wind projects at the lowest cost. 11. Serious competition meant that companies with strong financial backing – often subsidiaries from the energy or construction sector – were usually in the best position to obtain contracts (p. 2741). Breukers and Wolsink also imply that UK energy policy continued to favour large developers, especially those

Page 52 related to the large utility companies, after the introduction of the Renewables Obligation in 2002 (p. 2743) 12. This apparently had two unfortunate consequences. Firs t ly t h i s d iscouraged community-led wind because local people lacked the resources needed to develop wind energy under the rules of the UK energy system. Communities could not exercise power directly over the siting and design of wind energy developments as they might have done had the community itself been the developer or a partner in the development. 13. Secon dly, t he financial pressure on developers to deliver wind energy at lowest cost may have contributed to their failure to appreciate local planning, environmental and landscape issues (McKenzie Hedger, M., 1995. Wind power: challenges to planning policy in the UK. Land Use Policy 12, 17–28). 14. It seems that UK wind energy policy has consistently favoured major energy businesses, resulting in the power of people in local communities (who have the most obvious stake in onshore wind energy siting and design) being limited in a way they often feel is inconsistent with the principles of proportionality or fairness. 15. Local people are usually excluded from the site selection and initial design stages of the development process. 16. Developers have generally minimised the benefits they offe r to loca l peo p le pre cisely because they en j oy 'carte blanche' backing from central government. In some cases this backing led them to believe that central government policy alone would ultimately force their developments through, making significant financial concessions to the local population unnecessary. 17. The income that would otherwise have been shared with local people is either earmarked as potential profit or contributes to inflation in a spiralling market for an ever-shrinking number of suitable wind farm sites. The result was an even greater cash 'wind fall' for wealthy (often absentee) landowners and investors. 18. The resulting community hostility has been aggravated by the sale of all of our domestic energy providers to foreign parents and the gradual collapse in consumer trust in major energy businesses following incidents like doorstep mis-selling. A recent Reputation Survey on Energy providers shows a worrying trust deficit towards the ‘Big Six’. 19. The extraordinary rhetorical support and practical assistance offered to the Wind Energy industry by successive ministers at the Department for Energy and Climate Change (DECC) has contributed to a growing breakdown in trust between the department and wind farm neighbours. Unfortunately ministers are increasingly perceived to be too close to the onshore wind energy industry to be trusted to look after the interests of ordinary people. 20. As a result, repeated assurances from the DECC regarding the efficacy of environmental safeguards relating to noise , shadow flicker or the environmental utility of wind energy are increasingly ignored by a rural population who are turning to other independent sources of information on the web for ‘a lternative ’ information. 21. Thanks to energy-switching websites, yesterday's compliant power consumers are today's empowered customers. They have become accustomed to rejecting f inancially unattractive business propositions from the energy sector and they do not understand why any power provider should be able to force a wind farm on unwilling local people. 22. Rather than promoting community-led renewable energy schemes that offer local people worthwhile personal benefits proportional to the negative impacts, successive administrations have incrementally tilted the planning balance so that the construction of onshore wind turbines by big business has became ‘an offer you can’t refuse’. 23. People living close to proposed developments feel obliged to resist because neither community benefit funds nor the retention of business rates will proportionately compensate them for the personal negative impacts that will arise.

Page 53 24. Planning law makes it impossible to lodge a planning objection on the grounds of the identity or status of the applicant, their past behaviour, or commercial matters such as the one-sided deal they are offering local people. 25. The planning system forces local people to deploy other technically recognised arguments as proxies for their genuine principled objections about unfairness. In most cases the planning arguments are valid and could apply equally to other developments including superstore developments, infrastructure projects or the building of logistics centres. However all of the latter bring local jobs or facilities that local people can use and personally benefit from. Only in the case of wind farms do the feelings of oppression and the resulting resentment create the motivation to make the planning system ‘work to rule’. 26. Repeated intervention by the Planning Inspectorate to enforce wind industry development has increased popular feelings of oppression and unfairness, thereby accelerating local, regional and increasingly national p olitica l r esistance to wind energy development.

RECOMMENDATIONS 27. Implement a residential property compensation scheme similar to the Danish Promotion of Renewable Energy Act as soon as possible.

28. Focus future state effort s on promoting community ownership of wind energy developments, but prevent such schemes being used as a planning precedent for adjacent development that is not community owned. There will be very little take-up without this additional safeguard, given the climate of fear now prevailing in many rural a r e a s.

29. Devise benefit systems that are proportional to the distance people live from the wind turbines, directly benefiting household economies. e.g. through mechanisms like a fixed percentage discount tariff for electricity during the life of the wind farm.

30. Remove the stewardship of the e nvironmental protection standards relating to noise and shadow flicker from the Department for Energy & Climate Change. Transfer this key responsibility to another department or agency that does not have conflicting responsibility for maximising the rate and scale of deployment f o r o n shor e w ind t u r bines.

June 2012

Page 54

WIND 18 Submission from Montgomeryshire Local Council Forum (Local Councils in Welshpool, Llanfair Caerinion, Llandrino, Llandisillo, Llanfyllin, Kerry and Sarn)

This submission is also supported by the North Wales Association of Town and Larger Community Councils and Welshpool Town Council

1.00 Introduction 1.01 This short submission is in response to Parliament’s request for evidence on the above by 5pm on 27 June 2012. 1.02 The Councillors discussed the request for evidence and this presentation at their meeting held on Wednesday 22ND June 2012.

2.00 Cost of producing energy 2.01 The cost of producing energy shows that Gas and Nuclear are cheaper than On shore or Off shore wind farms. (see chart below) 2.02 The cost of On shore wind farms shown belo w do n ot count th e c o s t of infrastructure to enable the transport to get to sites in remote areas such as Montgomeryshire. This is extensive in capital cost terms and also in environmental terms.

3.00 Cost of effects of Onshore Wind Farms 3.01 The cost to the communities in Montgomeryshire is:

The sheer scale of development proposed. The size of the electricity hub (20 football pitches). The 400kv pylon line needed to carry power to the grid. The scale of transport to deliver components to the sites.

3.02 The cost to tourism and local business is an issue which need s to b e assessed and support given to ensure that the effects of the Wind Farms does not leave a lasting legacy of creating poorer communities.

4.00 Transport issues 4.01 The Montgomeryshire Wind Farms proposed total some 630 on 23

Page 55 sites. 4.02 This generates 630,000 more vehicles on the rural roads and 7 , 5 0 0 abnormal load vehicles in 2,500 convoys over 3-4 years. 4.03 This is approx 14 convoys per week through the Mid Wales. 4.04 The industry and Welsh Assembly have accepted these figures are a good estimate. 4.05 A full schedule showing how these figures are made up is available.

5.00 Survey 5.01 To gauge the feeling of residents in Welshpool a door to door survey was carried out with a leaflet dropped off one day (explaining it all and with some questions) and these were collected the following day. 5.02 There was a 45% return rate (5,579 forms issued with 2,484 returned) with the following key results:

Against Onshore Wind Farms in Montgomeryshire 76.33% Concerned about the Hub 78.90% Concerned about the Pylon Line (400kv) 81.56% Concerned about the Transport 78.82% Seeking a public inquiry 68.68%

5.03 It is the sheer scale of what is an inefficient form of generati n g electricity that concerns the residents.

5.04 Without the enormous subsidy Wind Farm Companies would not be seeking to construct such sites.

6.00 How could Onshore Wind Farms be more acceptable? 6.01 Onshore Wind Farms in themselves are not an issue to everyone, indeed there is some support from the younger generation in Welshpool. 6.02 It is the environment effects with the substantial infrastructure w h i c h is causing the unrest. 6.03 Onshore Wind Farms would be more acceptable if the scale was reduced and the infrastructure reduced to a far more acceptable level.

6.04 The way forward for Montgomeryshire, and we suggest other areas, is for the Community and Town Councils be involved in a special conference/forum to find a solution. 6.04 Such an idea should be lead by the Town and Community Counc i ls with advisors not lead by principle authorities.

7.00 Additional Comments 7.01 The Council feels much more action should be taken to substantially reduce energy thus reducing the need for such proposals as wind farms.

8.00 Oral Evidence 8.01 Welshpool Town Council confirms that it is prepared to give oral evidence with more details of the above if requested. June 2012

Page 56 WIND 19

Submission from Ian W Murdoch

THE ECONOMICS OF WIND GENERATED ELECTRICITY - MEASURING ITS EFFECTIVENESS IN SAVING CARBON.

1) INTRODUCTION. 1.1. A primary objective in the drive to increase the U.K. production of energy from renewable sources is to reduce carbon dioxide emissions, and hence arrest climate change. To meet this objective and encourage generation of electricity from renewable sources, subsidies (by Renewable Obligation Certificates) are available to developers, which are paid by electricity consumers through increased electricity prices. 1.2. It is incumbent on the government to put in place adequate provisions to measure the progress being achieved with its renewable energy policies, relative to the costs borne by the consumer. In the case of wind energy, the U.K. Government has no measures in place to measure the actual reductions in carbon dioxide emissions being achieved by its costly (in both economic and environmental terms) support of wind generation installations. It relies on an out of date (2005) theoretical paper which attempts to model wind output rather than using readily available current output data. 1.3. The natural variability of wind results in very short term intermittency in the output of wind installations, In order to properly understand the effects of this on electricity transmission systems, the requirements the variability places on other generation systems and to properly assess the net carbon savings and true cost of wind generated electricity, it is vital that the actual variations are properly recorded, rather than relying on the inaccurate modelling currently used..

2) EXECUTIVE SUMMARY. 2.1. The output from wind turbines is highly variable in the short term, and this intermittency of wind output is accurately metered and recorded by the National Grid for 4,686MW of the total 6,633MW wind capacity currently claimed by renewableUK. 2.2. The UK Government, (D.E.C.C.) only record the electricity output produced by wind in a once monthly average figure. This completely ignores the major issue of intermittency, which produces the requirement for back up generation or storage, to effectively utilise the wind energy. 2.3. D.E.C.C. have no mechanisms in place to measure the actual carbon dioxide savings being achieved from generation by wind turbines, although there is growing evidence that the inefficient cycling of back up generators causes additional emissions of carbon dioxide, which may regularly exceed the savings achieved by wind generation 2.4. As short term output is not recorded, and onshore and offshore outputs are not separated in the National Grid data, it is not possible to determine whether offshore wind output is less intermittent and will produce more carbon savings than onshore. There is no evidence that offshore wind output is any less variable than offshore, and will require any less back up capacity 2.5. In the absence of economical and practical large scale methods of energy storage, fossil fuel generators are required to cycle inefficiently to balance the variable wind load. and ensure a steady supply of electricity. A fall in efficiency of 5%, which will often result, produces additional carbon dioxide emissions, which will more than offset any reduction from wind generation. 2.6 Wind output in the U.K. frequently falls below 10% of installed capacity, requiring back up capacity of at least 90% of wind capacity to be readily available. 2.7. Spreading wind turbines over wide areas does not reduce variability. Experience over long periods from Germany, Western U.S.A. and U.K. indicate that wind and weather systems do not vary significantly over very large geographic areas. 2.8. A detailed study of data in Ireland of wind contribution, electricity demand and carbon dioxide emission figures shows that if no energy storage is available, carbon dioxide savings decrease with increasing wind contribution. This is confirmed by a major study in the U.S.A. 2.9. Major onshore wind developments have a major effect on the environment. To install 8GW of onshore wind capacity in Holland (to provide 10% of the required electricity ) would require 3 to 4,000 turbines and make 2,000 square km. or 6% of the Dutch land surface unfit for habitation.

Page 57 2.10. In most weeks, wind output as metered by the National Grid regularly rises and falls between 500MW and 3,000MW within 12hours. This variation is equivalent to the total output of . 2.11. In 2020, with 5 times the installed wind capacity, the levels of wind output will vary between, say 2,500MW and 15,000MW, producing a different scale of back up (equivalent to 5 Draxes !) to match this variability. 2.12. D.E.C.C. continue to quote a 2005 Report from Oxford University Environmental Change Institute in its assumptions on wind output and variability. This study simulated wind output from meteorological data and its main findings have been shown to be inaccurate, even false, by the readily available data on actual wind output and its short term variability.

3) VARIATIONS IN WIND OUTPUT. The extent to which the U.K. total wind output varies in the short term is well illustrated by the graph below, which shows the half hourly wind output throughout 2011 as metered by the National Grid and recorded on the web site www.bmreports.com

3500 OUTPUT GRAPH (MW) FOR YEAR 2011 AS METERED HALF HOURLY BY NATIONAL GRID. Av.Reading 1,112MW (33.2%Metered Capacity) 3000

2500

2000

1500

1000

500

0 01/01/2011 15/01/2011 29/01/2011 12/02/2011 26/02/2011 12/03/2011 26/03/2011 09/04/2011 23/04/2011 07/05/2011 21/05/2011 04/06/2011 18/06/2011 02/07/2011 16/07/2011 30/07/2011 13/08/2011 27/08/2011 10/09/2011 24/09/2011 08/10/2011 22/10/2011 05/11/2011 19/11/2011 03/12/2011 17/12/2011 31/12/2011

Further details on metered wind output from November 2010 are available from the author of this note

4) WORK TO ASCERTAIN ACTUAL CARBON SAVINGS. 4.1. Examination of the graphs of wind output as metered half hourly by the National Grid (as summarised in 3) above ) clearly indicate that fossil fuel back up capacity will be required to run intermittently to balance out the wind output variations and ensure a steady supply of electricity. The random, wide variations in wind output in no way match the well recorded and largely predictable variations in total demand for electricity. The back up fossil fuel generators will thus produce significantly more carbon dioxide than they would, if allowed to operate in the steady state mode for which they are designed. 4.2. Work has been carried out recently by three Dutch Scientists, Ir.Kees de Groot, Dr.Kees le Pair and Dr. Fred Udo, who have published five papers, in which they demonstrate that carbon savings from wind generation have been grossly exaggerated. They argue for a much more realistic approach to evaluating the real carbon savings from the production of electricity by wind turbines. a) The Hidden Costs of Wind Generated Electricity. http://www.clepair.net/windsecret.html b) The Impact of Wind Generated Energy on Fossil Fuel Consumption http://www.clepair.net/windefficiency.html c) Wind Turbines as a Source of Electricity http://www.clepair.net/windstroom%20e.html d) Wind Energy in the Irish Power System http://www.clepair.net/IerlandUdo.htm e) Electricity in the Netherlands http:/www.clepair.net/windSchipol.html 4.3.Further to these papers, the well respected Bentek Energy Consultancy of U.S.A. has (July 2011) produced a paper “The Wind Power Paradox” whose findings show that claims of carbon dioxide savings from the use of wind power are significantly overstated.

Page 58

June 2012

Page 59 WIND 20

Submission from Mrs Brenda Herrick

While I appreciate membership of this committee should be familiar with its remit, to choose the President of the Renewable Energy Association as Chair does not inspire confidence in its impartiality.

I am shocked, but not surprised given the lack of scientists and engineers in Government and Parliament, to see that those responsible for formulating the country’s energy policy should know so little about it. Having taken us so far down a route which will lead to increased bills, insecurity of supply, destruction of the countryside and surrounding seas, and misery for those affected by windfarms, it seems a bit late to be asking questions of the public which should have been asked of specialists in the first place. I appreciate that Ministers are not qualified for the posts they are given but have often wondered why, in that case, they do not consult those who are qualified (which does not include those with a financial interest) before making important decisions. Without a secure electricity supply nothing works.

The Committee is particularly interested in the following, although written submissions need not address all, or be confined to, these questions:

1. What do cost benefit analyses tell us about onshore and offshore wind compared with other measures to cut carbon? Why are you asking the public? You should know this. How can you have an energy policy without knowing these basic f a c t s?

2. What do the latest assessments tell us about the costs of generating electricity from wind power compared to other methods of generating elec t ri c i t y? Same reply as a b ove

3. How do the costs of onshore wind compare to offshore wind? Same reply as a b ove

4. What are the costs of building new transmission links to wind farms in remote areas and how are these accounted for in cost assessments of wind p ow e r ? Same reply as a b ove

5. What are the costs associated with providing back up capacity for when the wind isn’t blowing, and how are these accounted for in cost assessments of wind p ow e r ? Same reply as a b ove

6. How much support does wind power receive compared with other forms of renewable energy? Same reply as a b ove

7. Is it possible to estimate how much consumers pay towards supporting wind power in the UK? (i.e. separating out from other renewa b l e s ) Same reply as a b ove

Page 60 8. What lessons can be learned from other countri e s ? It’s all in the public domain and, again, you should kn o w

9. What methods could be used to make onshore wind more acceptable to communities that host them? Have an immediate moratorium on all onshore windfarms, including those already proposed, until you: 9.1. answer all the questions above and arrive at a science and engineering backed policy not influenced by the wind ind u stry 9.2. legislate for a minimum 2km separation distance from all occupied buildings not hosting t u r b ine s 9.3. carry out an independent assessment of healt h effe c t s 9.4. ensure that financial compensation is made to anyone not benefiting from, but affected by, a windfarm to include offering to purchase their house and land at the market price without the windfarm (since DECC repeatedly states that residential values are not affected, this would involve no loss to Govt. ) 9.5. provide free double glazing, screening etc. to homes affected by noise whose owners do not wish to move 9.6. ensure that Community Benefit is paid to those affected and not, as so often happens, to communities some distance away 9.7. improve reaction time to noise complaints by closing down turbines responsible pending an independent noise assessment and removing those found non-compli a nt 9.8. require the industry body (RUK) to release details of every accident/incident recorded and improve safety regulations to avoid potential danger from turbine fire, collapse, blade throw etc.; almost no consideration is given to this aspect by any organisation involved 9.9. ensure that the Government and all councils comply with the requirements of the Aarhus Conven t ion. http://www.unece.org/env/pp/introduction.html

June 2012

Page 61 WIND 21 Submission from Mr N W Woolmington

I would refer you to the following OFGEM statistics in regard to the costs of onshore wind farms a nd other renewable energy sources. https://www.renewablesandchp.ofgem.gov.uk/Public/ReportManager.aspx?ReportVis ibility=1&ReportCategory=0

The tables show that ON /OFF shore wind in 2011/2012 received 19,000,000 ROC's

Each ROC is worth appr. £55 to the wind farm operator and to this can be added appr. £5 Carbon Exemption Levy and £5 more per Mw for electricity produced in comparison with gas (probably more for offshore). We find that wind farm operators received £1,234m (19m x £65) in the last accounting year through these subsidies.

By my reckoning this amounts to £22.4 (£1,234m / 55m population) for every man,woman and child in the UK. All this is an addition to each household's electricity bill per year.

This amounts to £112 per year for a household of 5. Almost certainly about 15% - 20% of the electricity element of their fuel bill.

Note these costs do not include the inevitable "administration" charges that would be added by the main electricity generating supplier in processing the ROCs,etc (possibly anything between 5 - 15%) nor do they include the extra costs added to the household bills by manufacturers, retailers, haulage, etc since these in their turn are paying the renewable extortion oncosts and will pass these on to the public. It would be no surprise to learn that this doubles the £22.4 so that every individual in the UK has a bill of £45 per head extra for electricity than would be the case without wind generated electricity.

In addition these sums do not include the National Grid costs for new lines to remote areas which we are now led to understand will be a further sum of some £8 billion – again to be added to household bills. Neither do they include the large sums payable to wind farm operators in the event that turbines have to be shut down because of oversupply nor the stand-by gas generator costs as a result of continuous “backing up” of wind farms due to nil or little supply in times of low wind.

For the whole of the 2011/2012 ROCs of 33,200.000 for all renewable sources were issued. The figures previously quoted increase by approx 74% so each individual is paying out £39 per year or £195 per household of 5 together with the additional costs previously mentioned. The cost of providing vast profits to a few operators through these subsidies is as disgraceful as it is incontrovertible.

June 2012

Page 62 WIND 22

Submission from Professor Jack Ponton, FREng

Personal Statement I am an emeritus professor of engineering and a Fellow of the Royal Academy of Engineering. My research work has covered a variety of multidisciplinary topics including marine energy, the hydrogen economy, carbon capture and bioenergy. Recently I have observed at first hand the impact of many wind power developments and proposals in the .

This submission is made on my own behalf.

Summary • Economic evaluation of onshore wind power should account for the loss of land, a non- renewable and scarce resource, and the cost of damage to the fabric of society due to the imposition of wind turbines on rural communities against their wishes and interests.

• Subsidies for small scale generation cannot be justified as they represent a cost per tonne of carbon amelioration more than 100 times the current EU carbon pri c e.

• The entire UK renewables programme is meaningless gesture politics as China and India’s increasing emissions will undo any possible global impact within a few months.

1. Economics of Onshore Wind Power

1.1. Any evaluation s hould take into account nonfinancial costs. Onshore wind power incurs two hard to quantify costs.

1.1.1 Land A 1.5GW nuclear power station occupies a few hectares. Allowing for fuel and waste processing and storage would expand this to a few tens of hectares. However, to obtain an effective 1.5GW of wind power requires covering about 60,000 hectares with turbines.

The UK is a relatively densely populated country and land is a non-renewable resource. It may be argued that the presence of wind turbines does not preclude its use for other purposes. However it does preclude many important uses. In particular, the UK’s diminishing stock of wild country, of importance for recreation and tourism, is under increasing pressure for wind power development. More seriously, it is increasingly clear that wind turbines are incompatible with residential amenity. The pressure for development around rural communities incurs a cost in damage to society.

1.1.2 Social and Human Costs I have seen at first hand how the mere proposal of a wind power development can destroy a once harmonious rural community. There is an immediate division between those who expect to benefit financially and those who see only the destruction of their amenity and the probable loss of savings tied up in their homes. The damage to civil society is exacerbated by the perceived bias of the planning system in favour of developers and against ordinary residents.

People threatened by wind farms see the government and authorities taking the side of multinational companies and large landowners. This damages the credibility of national institutions and threatens belief in democracy and the rule of law.

Page 63 1.2 The unjustifiable economics of ‘small’ t urbines Both sides in the debate will no doubt produce figures showing either that nuclear is cheaper than onshore wind or vice versa. I do not wish to enter this argument as uncertainties in data probably make the question unanswerable. However, no one can claim that so-called small scale generation can justify their exorbitant cost to the consumer. A 225kW turbine will produce annually about £13k of electricity at wholesale prices. This is its sole public benefit. However, the consumer will pay the turbine owners about £80k through Feed in Tariff (FIT) payments. This is a private benefit and represents no actual added value. Most of these developments are in the 15-100kW and 100-500kW range, currently attracting FIT payments of around 25p and 20p per kWh respectively.

Even if one accepts the BWA carbon remission figure of 0.430kg CO2/kWh (which is now being seriously challenged as it omits the carbon cost of maintaining backup capacity) then these correspond to a carbon price of £580 and £465 per tonne of CO2. Given a EU carbon price which has never exceeded about £20/tonne and is currently around £5/tonne this represents a quite unjustifiable burden on consumers and the economy. Furthermore, the contribution of all these small installations to either national energy security or CO2 remission is negligible. Subsidies for them should be withdrawn immediately.

2. The Global Irrelevance of U K Emissions Reduction Targets

Although at first sight outside your remit, any proper consideration of renewable energy economics should evaluate the actual benefit which these might achieve in terms of potential climate change amelioration. In the context of rising world CO2 emissions, one way of evaluating benefit is by estimating how long it would take for the rest of the world to add new emissions to negate a given reduction by the UK. This is the time by which we would be delaying whatever effect emissions are having on climate change, and can be compared with the costs of achieving the reduction.

For example, it has been estimated that Germany’s subsidised solar energy program, to which their government has made long term subsidy commitments of €100 billion, would delay climate change by a just 2 3 hours .

World CO2 emissions are rising mainly due to new emissions from China and India. Between 2010 and 2012 these increased by around 100 m illion tonnes p er month .

In 2011 the UK emitted about 500 million tonnes o f C O2. Thus if we were to eliminate all our emissions today, in less than six months these two countries alone would have added new emissions to completely negate any effect our efforts could have on global climate change.

Since no other European countries seem likely to meet their supposedly legally binding targets (as legally binding as Eurozone government spending limits?) there is no logic in the UK subsidising, directly or indirectly, any generation technology other than on the grounds of national energy security.

June 2012

Page 64 WIND 23

Submission from Mrs Anne Rogers

Farming and Its Future Economy

1. Living in the Northamptonshire countryside for many years I consider myself well placed to comment on the ever changing face of farming, Sometimes these changes appear to benefit the Country its people and its wildlife but equally t hey c an also b e t o the Country’s disadvantage.

2. Here is a clear example, of just how Governments and landowners, despite their best intensions, can appear to have little or no understanding of the long term effects their decision making can have on the country. A few years ago Government grants were available to rip out our hedgerows for “bigger and better” farming a move that led to the destruction of some of our local historic banks and ditches, bringing alarm to the inhabitants of its villages, generating an error of judgement that was to have a far reaching effect on our British wildlife in particular our birds.

Thankfully this h as now been rectified with grants available to replant hedgerows and trees. Here at Haycock Hill a settlement in the heart of the Northamptonshire countryside with its ironstone hills, its d eeply rural q uiet and tranquil setting and affording a panoramic aspect, we are in a privileged position to see the results on the wildlife that this change in land management was to bring about. Evidence of this can be seen with the increase in numbers of buzzards (the RSPB consider a conservation success) and occasional sightings of red kite and kestrel for instance, birds of prey that help us control the countryside’s rabbit and vermin population in the most natural way.

3. The talk of wind turbines becoming a feature of our landscape, prompted me to read many articles on the subject, not one addressed the long term effect these turbines could have on the farming community and its economy.

4. I have been present at local Parish Council meetings where farmers have explained that they regard wind turbines as their future and that of their children’s. The Coventry airport have responded to the many enquires they have received regarding wind turbines by producing a map showing just where interested parties are sited, Coventry airport appears surrounded, their map literally peppered with sites, most of them farms. A clear indication just how widespread this way of thinking has become among the farming community.

5. It is well known that landowner’s are keen to benefit from the potential monetary windfall that could be theirs with very little effort on their part, resulting in an outcome that could threaten to change the face of farming for generations to come, literally turning farming on its head! The economics of which could be a disaster for this country. Farming can, we know be riddled with setbacks, bad weather, failed or reduced crops, foot and mouth TB, the list is endless. Contrasting that to wind turbines no one could blame farmers for taking the opportunity in taking the easy way out

Page 65 6. With farmer’s new found wealth where will the incentive be for them to plough our fields grow our crops and feed us? Food fro m abroad will increase our carbon footprints and comes only as a surety while we are at peace with our neighbour in an ever changing world?

June 2012

Page 66

WIND 24

Submission from the Global Warming Policy Foundation (GWPF) written by Professor Gordon Hughes

1. The economics of wind (and solar) power depend upon two critical features which determine the contribution which they make to meeting overall demand for electricity. The first feature is that wind power has very high capital costs and low operating costs per MWh of electricity generated. As such, it competes with electricity generated by nuclear or coal-fired generating plants (with or without carbon capture). The second feature is that the availability of wind power is both intermittent and random, so only a small portion of total wind capacity can be treated as being reliably available to meet peaks in electricity dema n d.

2. Neither of these features has a large impact on the operation of an electricity system when the level of installed wind capacity is less than 10% of peak demand, but they begin to impose increasingly heavy costs on system operation as the share of wind power in total system capacity approaches or exceeds the minimum level of demand during the year (base load). This threshold is due to be passed in the UK shortly after 2015 .

3. When wind power is available, its low operating cost and market arrangements mean that it displaces other forms of generation. Market prices are lower, so that other generators require higher prices during periods of low wind availability to cover their operating and capital costs. It is expensive and inefficient to run large nuclear or coal plants to match fluctuations in demand or wind availability, so that their operating and maintenance costs will be h i g h er.

4. At the same time, the risks of investing in new generating capacity will be increased by the impact of wind power on market prices, so that the cost of capital will be higher. Even if wind power was no more expensive per MWh than power from other sources its impact on other generators would still increase the aggregate cost of meeting the UK’s electricity demand, probably by a substantial mar g i n .

5. One way of minimising the impact of wind power on other generators would be to impose a constraint on the amount of wind capacity that can be despatched at any time, so that, for example, no more than 20 GW out of 36 GW of installed capacity can be fed into the grid. Of course, that would be resisted by wind operators as it would reduce the already low load factor for wind farms. The guaranteed price per MWh would have to increase to attract the investment required to meet the Government’s targets for renewable generation in 2020, so that customers would have to foot even larger bills for wind power.

6. There is no escape from the consequences of the impact of wind power on other parts of the electricity system. In other areas of environmental policy this would be treated as a negative externality because the costs fall on electricity consumers as well non- wind generators. It follows that there is a prima facie case for taxing the source of the externality. Just as for fossil fuels, there would be strong arguments against the provision of subsidies designed to stimulate investment and output in wind generati o n.

Page 67

7. A number of electricity markets outside Europe have developed arrangements to deal with intermittent or unreliable sources of generation, particularly hydro power. The most transparent approach is to require that there are long term contracts for the supply of reliable energy which in aggregate cover the predicted level of demand looking five or more years ahead. Hence, wind farms would have to either contract for storage and/or backup generation or absorb the cost of intermittency in some other way. Variants of this mechanism operate successfully in the US and Latin America (notably Brazil). They are more transparent and less likely to impose large costs on electricity customers than the hodge-podge of proposals for guaranteed prices (feed-in tariffs) and a capacity mechanism drafted by DECC. In addition, a proper market for long term reliable energy need not interfere with existing market arrangements designed to optimize generation and despatch on a half-hourly or daily basis, whereas it is inevitable that DECC’s proposals will compromise the efficient operation of such markets in the medium t e rm.

8. Enthusiasts for wind power often suggest that the costs of intermittency can be reduced by (a) complementary investments in storage (pumped storage, compressed air, hydrogen, etc), and/or (b) long distance transmission to smooth out wind availability, and/or (c) transferring electricity demand from peak to off-peak periods by time of day pricing and related policies. However, if the economics of such options were genuinely attractive, they would already be adopted on a much larger scale today because similar incentives apply in any system with large amounts of either nuclear or run-of-river hydro power.

9. With sufficient commitment to research and development, some of these technologies may become economic within 20 or 30 years. However, up to 2030 and beyond it will remain much cheaper to transport and store , relying upon open cycle gas turbines to match supply and demand. As a consequence, any large scale investment in wind power up to 2020 will have to be backed up by investment in gas- fired open cycle plants. These are quite cheap to build but they operate at relatively low levels of thermal efficiency, so they emit considerably more CO2 per MWh of electricity than combined cycle gas plants.

10. The amount of investment in backup generation that will be required depends upon the minimum level of availability from wind farms spread over the UK. This is the amount of “reliable energy” offered by wind power. Calculations based on the geographical distribution of wind speeds have suggested that this might be as high as 25-30% of total wind capacity. Reality turns out to be rather different. In 2011-12 the minimum output from wind plants was less than 1% of actual installed capacity. This may rise as the share of offshore wind increases, but it would be unwise for any planner to rely upon this. For practical purposes, wind power in the UK must be discounted when considering the system requirement for reliable sources of generation. This means that all retirements of nuclear, coal or gas-fired plants plus any growth in peak electricity demand must be matched exactly by investment in new non-wind plants, most of which will be gas-fired capacity.

11. Meeting the UK Government’s target for renewable generation in 2020 will require total wind capacity of 36 GW backed up by 21 GW of open cycle gas plants plus large complementary investments in transmission capacity. Allowing for the shorter

Page 68

life of wind turbines, the investment outlay for this Wind scenario will be about £124 billion. The same electricity demand could be met from 21.5 GW of combined cycle gas plants with a capital cost of £13 billion – th is i s t he Gas scenario.

12. Wind farms have relatively high operating and maintenance costs but they require no fuel. Overall, the net saving in fuel, operating and maintenance costs for the Wind scenario relative to the Gas scenario is less than £200 million per year, a very poor return on an additional investment of over £110 billion.

13. Further, there is a significant risk that annual CO2 emissions could be greater under the Wind scenario than the Gas scenario. The actual outcome will depend on how far wind power displaces gas generation used for either (a) base load demand, or (b) the middle of the daily demand curve, or (c) demand during peak hours of the day. Because of its intermittency, wind power combined with gas backup will certainly increase CO2 emissions when it displaces gas for base load demand, but it will reduce CO2 emissions when it displaces gas for peak load demand. The results can go either way for the middle of the demand curve according to the operating assumptions that are ma d e.

14. Under the most favourable assumptions for wind power, the Wind scenario will reduce emissions of CO2 relative to the Gas scenario by 21 million metric tons in 20 20 - 2 .6% of the 1990 baseline at an average cost of about £415 per metric ton at 2009 prices. The average cost is far higher than the average price under the EU’s Emissions Trading Scheme or the floor carbon prices that have been proposed by the Department of Energy and Climate Change. If this is typical of the cost of reducing carbon emissions to meet the UK’s 2020 target, then the total cost of meeting the target would be £120 billion in 2020, or about 6.8% of projected GDP, far higher than the estimates that are usually given.

15. Wind power is an extraordinarily expensive and inefficient way of reducing CO2 emissions when compared with the option of investing in efficient and flexible gas combined cycle plants. Of course, this is not the way in which the case is usually presented. Instead, comparisons are made between wind power and old coal or gas- fired plants. Whatever happens, much of the coal capacity must be scrapped, while older gas plants will operate for fewer hours per year. It is not a matter of old vs new capacity. The correct comparison is between alternative ways of meeting the UK’s future demand for electricity for both base and peak load, allowing for the backup necessary to deal with the intermittency of wind power.

16. In summary, wind generation imposes heavy costs on other parts of the electricity system which are not borne by wind operators. This gives rise to hidden subsidies that must be passed on to electricity consumers. In the interest of both transparency and efficiency, wind operators should be required to bear the costs of transmission, storage and backup capacity needed to meet electricity demand. Only then will it be possible to get a true picture of the costs and benefits of relying on wind power rather than alternative ways of reducing CO2 emissions.

June 2012

Page 69

WIND 25

Submission from Derek Partington

Intermittency of UK Wind Power Generation 2011

Executive Summary

1. This summary covers the principal findings of an analysis of electricity generation from all the UK wind turbines that are metered by National Grid, from January 2011 to December 2011. The National Grid publishes electricity generation by fuel type data on its NETA (New Electricity Trading Arrangements) website www.bmreports.com. This covers generation from all conventional industrial generators by fuel type, and from a large proportion of the industrial wind generation installations in UK.

2. The analysis shows: • Monitored wind turbine output (as measured by the National Grid) increased from 2430MW to 4006M W over t h e y e a r • The average output from all monitored wind turbines, onshore and offshore, across the whole of the UK wind was 33.2% over the whole y e a r • The average output in any given month varied from 16.2% (July) to 50.8% (December) with 5 months having an average output of <30% of monitored capacity and 7 months > 3 0%. • The time during which the wind turbines produced <10% of their rated capacity totalled 1370 hours or 57.1 days or 15.6% of the time • The time during which the wind turbines produced <5% of their rated capacity totalled 486 hours or 20.2 days or 5.5% of the time • The output from wind turbines is extremely intermittent with variations in output of a factor of 10 occurring over very short periods.

3. Looking at three assertions which are commonly used to support industrial wind turbine installations: • Wind turbines generate on average 30% of their rated capacity over a y e a r • The wind is always blowing somewhere in the UK • Periods of low wind across the UK are infrequent.

4. The conclusions t o be drawn are: • In a high wind year such as 2011 turbines will, on average, produce over 30% of their rated c a pacity • Although the wind may be blowing somewhere in the UK at any given time, it will be only just blowing on many occasions, so that the output from wind turbines cannot be relied upon as a steady source of power, even at a low percentage of installed c a pacity • Periods of low wind are so frequent that wind turbines must be backed up by the equivalent capacity of conventional fossil-fired power stations, thus negating any fuel savings or reductions in CO2 emissio n s.

Note on the Author Derek Partington has a degree in Physics. He was formerly a Chartered Engineer and a member of both the Institute of Physics and the Institute of Measurement and Control. He

Page 70 worked for British Steel for 30 years and Local Government for 10 years, in both cases as a Project Manager and Business Analyst.

Extract from the report

6. The graph for April 2011 is given below - a full set of charts for each month in 2011 is given in the Appendix. Analysis of these charts shows that not only does the wind blow very intermittently but that there are significant periods when the total output from wind turbines across the whole of the UK drops to less than 10% or even 5% of their monitored capacity as indicted on the graph.

Analysis of Wind Power Output April 2011

3500 Monitored Capacity 3226MW

3000

2500

2000 MW

1500

1000 Average Output 28.4%

Brown line <10% 500 installed power

Blue line <5% installed power 0 01/04/2011 08/04/2011 15/04/2011 22/04/2011 29/04/2011 Date

7. The bar chart below shows the periods in every month of 2011 when output has fallen below the 5% and 10% levels.

Page 71 Periods of very low wind turbine output - 2011

400 Total period when turbines produced < 5% monitored capacity = 486 hours (20.2 days) Total period when turbines produced < 10% monitored capacity = 1370 hours (57.1 days) 350

300

250

<5% output 200 <10% output Hours

150

100

50

0 January February March April May June July August September October November December Month

June 2012

Page 72 WIND 25A

Submission from Derek Partington

Reports from other countries on the economics of Wind Power

Denmark

The Danish Center for Politiske Studier (CEPOS) published a report on the economics of wind energy in September 2009. The following is a summary and a web link to the report is given at the end:

• Denmark has roughly 5500 wind turbines with an installed capacity of 3160 MW (end 2008 figures). • Capacity factor (what is actually generated) varies from 20% in a low wind year (e.g. 2006) to 25% in a high wind year (e.g. 2 0 07). • Despite this, the electricity supply system remains overwhelming dependent on centralised conventional power plants for system stabi lisat i o n • Although Denmark generates about 19% of its energy from wind, the contribution to energy demand is somewhat different. Over the last 5 years the average has been 9.7%, with 5% as a minimum. • There is no way of storing energy generated by wind. Denmark can only balance supply and demand through exporting energy at times of high production. Over the past 7 years, 57% of the wind power generated in West Denmark has been exported and 42% from East Denmar k • Power can only be exported because Denmark has large inter-connectors with neighbouring countries and they have ways of using this power (Sweden use it to pump water up to lakes for hydro st o r a ge). • Spot prices for exported power are often very low, sometimes zero, as the generators have no option as to what they do with this power. (In 2007 there were almost 100 hours when the spot price was zero.) Conversely, when Denmark has to import power (e.g. at times of low wind) the spot prices are very h i g h. • Wind power that is exported saves neither fossil fuels nor CO2 emissions. Exported wind power also carries away with it the subsidies that went into its generation. • Once the capital costs of manufacture, installation and grid connection have been made, operating costs are marginal. However, useful life of wind turbines is only 10 – 15 years compared with 40-60 years for conventional power plants. Also note that nuclear power generation costs are marginal once the capital has been p a id off. • A significant percentage of the charges paid by consumers goes to making it attractive for companies to invest in wind power. “The main subsidy process is transfer from mainly private consumers to the wind turbine owners and then on to the wind industr y . ”

On further expansion of wind turbines: • “Unless there is a revolution in the way energy is supplied and used within Denmark, it seems certain that the electrici ty s upply industry will be forced to re-engineer the whole system or export even more powe r .”

Page 73 • “Denmark needs a proper debate and a thorough reappraisal of the technologies that need to be invented, developed and costed before forcing the country into a venture that shows a high risk of turning into an economic black h o l e .”

On employment: • There would be no Danish wind industry if it had to compete on market terms. • The industry only exists because of massive subsidies to wind turbine companies. • In terms of value added per employee, the sector underperformed the industrial sector average by up to 13% between 1999 and 20 0 6. • Recently manufacturers of wind turbines have been forced to concentrate on export markets as subsidies outside Denmark are becoming hi g her.

Other • Although Danes accepted the first generation of wind turbines, they are now resistant to the giant turbines which have recently been devel o ped

Reference: http://www.cepos.dk/fileadmin/user_upload/Arkiv/PDF/Wind_energy_- _the_case_of_Denmark.pdf

Germany

The Rheinisch-Westfälisches Institut für Wirtschaftsforschung (rwi) published a report on the economic impact of renewable in October 2009. The following is a summary and a web link to the report is given at the end:

• Germany’s installed wind power capacity at the end of 2008 was almost 24000MW, about 17% of its t o t al. • Installed capacity is not the same as energy production - by 2008 the estimated share of ’s electricity production was 6.3%. • Wind power does not improve energy security, as back up systems that use fossil fuels must be in place. In Germany this is principally gas that must be imported to meet domestic dema nd. • Utilities are required to accept the delivery of power from independent producers of renewable electricity into their own grid, paying technology-specific feed-in tariffs far above their production cost of 2 to 7 Euro-cents per kilowatt hour (kWh). • Feed-in tariffs grew nearly 6-fold between 2001 and 20 0 8. • On-shore wind, widely regarded as a mature technology, requires feed-in tariffs that exceed the per-kWh cost of conventional electricity by up to 300% to remain competitive. • Estimates of the wind power subsidies may total 20.5 Bn € for wind turbines installed between 2000 and 20 1 0. • Subsidy accounts for about 7.5% of average household electricity prices. • Renewable energies are among the most expensive Greenhouse Gas reduction measures and wind energy is by no means a cost-effective way of CO2 abat eme n t. • The cost from emission reductions as determined by the market is about 4 times cheaper than using wind power.

On employment:

Page 74 • It is most likely that whatever jobs are created by renewable energy promotion would vanish as soon as government support is terminat e d. • There is a negative economic impact through job losses from: o the drain on economic activity precipitated by higher electricity pri c e s o private consumers’ overall loss of purchasing power due to higher electricity prices, and o diverting funds from other, possibly more beneficial inve s tment.

On Renewable Obligation Certificates: • As a result of the establishment of the European Trading Scheme (ETS) in 2005, the true effect of Germany’s Renewable Energy Sources Act (EEG) is merely a shift, rather than a reduction, in the volume of emissions. Germany’s electricity production from renewable technologies mitigates the need for emission reductions in other countries that participate in the ETS regime.

Other • The commonly advanced argument that renewables confer a double dividend or “win-win solution” in the form of environmental stewardship and economic prosperity is disingenuo u s. • Germany’s experience is a cautionary tale of massively expensive environmental and energy policy that is devoid of economic and environmental benef its. • Germany’s principal mechanism of s upporting renewable technologies through feed-in tariffs imposes high costs without any of the alleged positive impacts on emissions reductions, employment, energy security, or technological innovation. Policymakers (in other countries) should thus scrutinize the logic of supporting energy sources that cannot compete on the market in the absence of government assistance.

Reference: http://www.instituteforenergyresearch.org/germany/Germany_Study_- _FINAL.pdf

Summarised by Derek Partington – 21 January 2010

June 2012

Page 75 WIND 26

Submission from Prof. Michael Jefferson

The views contained here are the result of the writer’s personal research.

In the Spring 2012 Bulletin of the International Association of Energy Economics the paper: “Capacity Concepts and Perceptions – Evidence from the UK Wind Energy Sector” was published. In contrast to the claims made in PPS 22 (Companion Guide, page 165, para. 34) that wind turbine developments in the UK “generally fall anywhere between 20% and 50%, with 30% being typical in the UK.” Although mean wind speeds are higher in Scotland than in England, even in Scotland these claims are exaggerated. For onshore developments in England they are grossly exaggerated by reference to the evidence provided by the wind energy development operators themselves. One implication of this is that claims of the UK being the windiest country in Europe should be modified to the statement that Scotland is the windiest country in Europe, although its relatively low electricity demand and need for grid connection to England pose problems and costs.

Performance of wind energy developments in terms of capacity factor (sometimes termed load factor) is an important indicator of their efficacy. They reflect mean wind speeds and siting. Low capacity factor achievement is likely to reflect poor location (e.g. in most of what climatologists would describe as ‘Central England’) or age and quality of turbines, other machinery, and blades. In a few cases (e.g. North Pickenham, Milton Keynes – located at Petsoe End), machines may be selected that perform relatively well in low mean wind conditions in terms of capacity factors achieved. However, the relatively small turbines combined with lengthy blades result in more energy being collected than can be absorbed by the generator. Thus in the case of at least two wind energy developments achieving capacity factors just over 30% in 2011 the costly blades are used inefficiently. This is why the industry in general has not taken up this configuration. As a result, it can be claimed that capacity factor achievement lies at the root of any discussion of the costs and benefits of wind energy.

The actual performance of the larger onshore wind energy developments in England in recent years can be summarised as follows:

Simple average:

2007: 22.7%; 2008: 26.2%; 2009: 21.2; 2010: 18.7%; 2011: 22.9%.

This suggests the claim that achievement of a 30% capacity factor is “typical” is a gross exaggeration.

In 2007 24 out of 81 onshore developments in England achieved a capacity factor of less than 20% (six were below 10%).

This general pattern has continued. Thus in 2008 24% of developments achieved a capacity factor below 20%, although this was a relatively windy year. In 2009 35 developments

Page 76 achieved a capacity factor below 20% out of a total of 105 (one‐third of the total, and 10 were below 10%). In 2010 81 developments out of 142 achieved below 20% – nearly 60% of the total. In 2011 33 developments achieved a capacity factor below 20% out of 118 (28% of the total).

These figures demonstrate that the claim that performance generally falls anywhere between 20% and 50% is a gross exaggeration.

Although the industry has traditionally used the concept of capacity (or load) factors when it seems to suit them, when others use them – although the data are provided by the wind development operators themselves – they can be referred to as: “bizarre pseudo‐science”, “ill‐informed and disingenuous”, and “absolute nonsense”. It is not surprising that there is some sensitivity about these numbers given what they reveal about the exaggerated claims from the industry.

The data suggest that wind energy development proposals should be looked at more closely in relation to the mean wind speeds of areas, and subsidies should be geared to supporting developments where mean wind speeds are relatively high, at whatever level of subsidy is deemed appropriate. Presumably, a rational subsidy policy would greatly limit the areas and sites where proposals were considered, never mind approved.

There is a further consideration. The Planning Inspectorate has within it those who believe that wind energy developments can achieve a capacity factor of 100% (e.g. the Appeal Decisions of Mr. Paul Griffiths Nos. APP/Y2810/A/11/2154375 and APP/G2815/A/11/2156757, for Kelmarsh and Sudborough, respectively). This idea seems to guide at least some elements within the Planning Inspectorate in weighing the benefits and costs of a planning proposal on Appeal, despite their far removal from reality. The phrase used to wrap up this idea is that they “fail to see why a developer would be prepared to make the significant investment ... if it was not going to operate in an efficient or cost‐ effective manner”. [APP/G2815/A/11/2156757 at page 2, para. 11.]

The above suggests that a root‐and‐branch examination is required of the claims made by the industry, by official Planning Guidance, and by some in the Planning Inspectorate. However, the above should not be interpreted as indicating root‐and‐branch opposition to wind energy: simply a plea that wind turbines are placed where mean wind speeds are relatively high as a first requirement when assessing development proposals and ongoing performance, and appropriate subsidies.

The writer has been involved with the energy industry and in energy policy for many years. He was, also for many years, Chairman of the Policies Committee of the World Renewable Energy Network/Congresses. He has been a Lead Author, Contributing Author, Editorial Reviewer, and Expert Reviewer for the Intergovernmental Panel on Climate Change in its earlier Assessments, and has been appointed an Expert Reviewer for the forthcoming Fifth Assessment. He has written and lectured on energy and environmental matters extensively. He is also a Visiting Professor at the University of Buckingham.

June 2012

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Submission from Robert Beith CEng FIMechE FIMarE FEI and Michael Knowles CEng MIMechE

1. What do cost benefit analyses tell us about onshore and offshore wind compared with other measures to cut carbon? (EXECUTIVE SUMMARY) They indicate that Onshore Wind has developed relatively well over the last 25 years in providing electricity at a reasonably acceptable cost, however it is still 2X the costs of current unabated fossil and existing low carbon nuclear unit cost. It is the same level of cost as predicted for new 3rd generation nuclear. C CS is still a relatively unknown cost at present. The other commercially viable renewable sources, hydro and biomass, require equal or less financial support, but opportunities and so rate of growth, are more restricted. For Offshore Wind, ‘near s hore ’ R ounds 1 & 2 costs a re about 3X current electricity cost. Round 3 is expected to be even more costly but steps are being taken by the developers/generators to drastically reduce these costs by way of a co-ordinated development programme ( see below 3.) and by using l arger, 5 or 6MW, wind turbines . However this cost reduction programme may not impact until the second half of this decade.The peripheral costs of new long transmission lines for remote wind farms and need for back up power are not included and are likely to add to t he above costs. Performance of wind energy cannot be guaranteed. For instance, from Government statistics, offshore wind output averaged 18% less than predicted over the period 2005 to 2010, but was considerably above predictions in 2011 due to higher winds. Equally the random and often large variations in wind mean it is not viable as a base load. On a cost benefit basis it would therefore seem preferable to focus o n n ew o nshore wind a nd biomass based renewables: and equally on new nuclear. Also minimise offshore wind growth until the planned cost cutting programme is advanced and demonstrated.

2. What do the latest assessments tell us about the costs of generating electricity from wind power compared to other methods of generating electricity? Current average wholesale cost of generation from unabated fossil and existing low carbon (including renewables) generation is £49 per MWh (LEBA). Levelised cost of onshore farms range from £75 to £127/MWh (ref Ove Arup/E&Y), higher on average than Mott MacDonald’s analysis for DECC 2010 of £85 to £95/MWh. Arup gives costs for offshore Rounds 1 and 2 from £149 to 191/MWh in 2010 reducing to £95 to £121 /MWh by 2020. Actual Renewables Obligation (RO) banding levels since 2009 have been 1ROC/MWh for onshore and 2 ROCs/MWh for offshore which equate roughly to £102/MWh for onshore and £154/MWh. 3rd generation nuclear has been variously reported (MML;PB 2010) as £98 to £60/MWh and CCS gas £140 to £60/MWh a nd CCS coal £160 £110/MWh. In summary, offshore wind costs about 3 times more to produce a unit of electricity than conventional gas or coal plant. Onshore wind is only twice and probably comparable to new nuclear; while hydro, biomass firing and landfill gas generally receive less than onshore wind but still more than fossil firing. Other renewable technologies are higher in cost, e.g. solar pv X4, wave & tidal X8 to 16 etc These higher costs represent present development status and not eventual potential.

3. How do the costs of onshore wind compare to offshore wind? As above, levelised onshore costs were predicted in the £75 to £125 range and offshore £150 plus. The DECC ‘Impact Assessment’ for the new RO banding levels for 2013 to 2017 originally suggested a ROC range of 1.0 RO onshore and 2.0-3.0 ROCs for R2 offshore wind

Page 78 (with an operation start in 2014) and an ROC range of 2.6-3.9 ROCs for R3 offshore wind (with an operation start in 2017)”. Note that 2.6-3.9 ROCs is currently equivalent to 3.8 to 5.7 X the current price of wholesale generation. However, suggested levels were actually then placed at 0.9ROC/MWh for onshore and 1.9 to 1.8ROC/MWh for offshore for the proposed new banding levels. The IMechE suggested in the ‘Consultation’ that levels ought to be lower because of. a) greater experience by now, b) benefit of the Carbon Floor Price equal to 0.24ROCs on average for competition with fossil generation but not nuclear. The Institution recommended banding levels of 0.55ROC/MWh onshore and 1.4ROCs/MWh for Rounds 1&2..Round 3 offshore is far more costly, but steps are being taken by a co-ordinated programme by the developers to drastically reduce these costs by using more installation ships with better poor weather capability, better loading & installing methods, standardising of substations and connections, better cables etc., and using larger, 5 or 6MW, wind turbines . This should lead to the cost of such offshore generation eventually reducing nearer to a target of £100/MWh.

4. What are the costs of building new transmission links to wind farms in remote areas and how are these accounted for in cost assessments of wind power? These are significant but no detailed assessment has been made. They are generally taken as System Costs spread across all technologies. It is understood that OFGEM recently put forward an ongoing budget for £7Bn for transmission line extensions and other measures.

5. What are the costs associated with providing back up capacity for when the wind isn’t blowing, and how are these accounted for in cost assessments of wind power? These are significant but no detailed assessment has been publicised. They are generally taken as System Costs spread across all technologies. Various gas fired plant will be held in readiness and cost per unit provided for this service will be a significant factor over normal unit prices.i.e t here is an enhanced operating cost for back up provision.

6. How much support does wind power receive compared with other forms of renewable energy? Onshore Wind at 1ROC is equally supported as dedicated biomass:& landfill gas Hydro and co-firing has less support at 0.5ROC. Other renewables including solar pv, wave, tidal current, geothermal need far more subsidy currently, up to 5ROCs or 6 X current cost of generation. They are being capacity limited to 30MW each year subject to development.

7 Is it possible to estimate how much consumers pay towards supporting wind power in the UK? (i.e. separating out from other renewables) According to OFGEM the cost of the Renewables Obligation (RO) for 2010/11 was £1.3billion. Of this 31% was for onshore wind and 20% for offshore wind, .or about £0.7Bn For wind in total in 2011/12 the OFGEM Register shows ROCs were much higher at 59,194,760 ROCs! Well over twice that for 2010/11. So we will probably b e paying nearer £3 billion support with a much higher percentage due to wind energy. This will increase proportionally for the next 20 years according to build rate (and index- linked to RPI) A stated target was 18GW offshore as against about 2 GW currently.

8. What lessons can be learned from other countries? Most EU countries provide funding support for renewable energy but usually as a fixed price per unit rather than a factoring of current base price on wholesale price which provides another multiplier!. This seems a fairer pricing policy and is more akin to the proposed CfD basis now proposed in the EMR. It is noticeable that countries with the high levels of wind

Page 79 energy such as Germany and Demark also have the highest electricity base rates. Spain has had a policy of maintaining a low base rate regardless of extra wind costs( to encourage competitiveness), but a deficit of £14 Bn has emerged and support funding for new projects has been put on hold! It is noticeable that whereas Germany had 27GW installed wind by year end 2010 they only produced 6% of their electricity having lower average winds If we can engineer offshore economically the cost benefits will be much greater.

9. What methods could be used to make onshore wind more acceptable to communities that host them? Emphasise Local 2MW wind turbines in commercial or industrial areas around towns and cities, away from housing and feed directly into local networks (DES).

June 2012

Page 80 WIND 28

Submission from Barry Smith

The economics of windpower

I am writing in response to the Energy and Climate Change Committee’s invitation for submissions of evidence to the public evidence session on the Economics of Wind Power to be held at 10.00 am on Tuesday 10 July.

1. I have, together with my wife, built up a small business in this area over the last twenty five years which attracts walkers, cyclists and others interested in its beauty and tranquility. Our small enterprise provides B&B accommodation to these visitors and relies entirely on the attractiveness of the surrounding countryside. All our guests are astounded by the wonderful views and how peaceful the area is. We attracted over 250 visitors last year, many of them returning again and again to experience the footpaths, bridle ways and national trails which run through this area.

2. When considering the costs of generating electricity from wind power all the costs involved need to be taken into account. This will include the consequential costs involved in providing infrastructure, loss of natural environment, traffic congestion during construction, increased flood risks, job losses in tourism, negative effect on property values and any public enquiry and planning costs. There is also the economic cost to businesses who find themselves unable to compete in a world economy due to the extra burden of increased energy prices resulting from the subsidies given to the wind industry.

3. The protection of the natural environment is now recognised as providing positive benefits for the economy and society. A key asset of many rural areas of Wales is its natural environment. Rural development projects such as the 'Cynnig Gwynedd – Gwynedd's Offer' project aims to develop the local rural economy by encouraging visitors who seek outstanding countryside, quiet enjoyment of a diverse environment, good local produce and wildlife watching. 'Wildlife Economy Wales': An Economic Evaluation Scoping Study suggested wildlife related activities in Wales could be contributing to 2.9% of Wales' national output, 3% of employment, 2.2% of gross value added and 2.6% of incomes. 4. In a recent IPSOS/MORI poll commissioned by the wind industry itself (http://www.ipsos-mori.com/researchpublications/researcharchive/2946/RenewableUK-Wind- Power-Omnibus-research.aspx) it was found that 17% (1 in 6) of all types of people thought that wind farms on the landscape were unacceptable, while 80%, (a huge majority) thought them less than “completely acceptable.” These attitudes are bound to have an adverse effect on tourism in the areas affected with a huge economic cost in terms of lost revenue a nd jobs . 5. Wind farms are costlier to connect because they tend to be more dispersed, and further away from population centres, than traditional power stations. However, when “levelised costs” are used to compare the price of wind with other technologies they do not include the costs of the extra infrastructure needed. Colin Gibson, former power network director at National Grid, said: “I estimate the extra costs of having wind are coming out at £80 per megawatt-hour of electricity generated. Even if the capital cost of building a wind farm was zero, it would still be more expensive than a conventional power station because of the costs of integrating it into the grid.” 6. The economic costs involved in the areas where wind farms are constructed due to the adverse affect on property prices are now a recognised consequence. This is evidenced by the decision in the Mr. & Mrs, Davis banding case is (see - info.valuation-

Page 81 tribunals.gov.uk/decision_document.asp?Decision=&appeal=/decision_documents/documents/C T_England/2525475651/032C) and also in the Barry Moon legal case (see - http://www.thewestmorlandgazette.co.uk/news/447706.print/) 7. The recent severe flooding around Talybont, north of Aberystwyth, featured on national news on Saturday June 9th will become a regular occurrence in future if plans to construct the Nant y Moch wind farm go ahead. The massive concrete bases of the 60 turbines together with wide supply roads will replace the present highly absorbent and moorland, increasing the likelihood of flooding downstream whenever there is far less rain than at present. This will be repeated in many areas of the UK. Following the disasters in and other parts of the UK there is an increasing acceptance that “flash flooding” is becoming a serious problem in this country resulting from climate change. Whilst investigations are taking place into the mitigating effects of planting trees and hedgerows in preventing such occurrences we have a local wind farm project which proposes a mass felling of 1,742 hectares of woodland! The massive economic consequence of this flooding must be considered in any cost benefit analysis applied to onshore wind energy. 8. The construction phase of an onshore wind farm involves a significant increase in traffic. In the area of Mid Wales this will have a significant economic cost to local businesses. The extra policing involved will also create a burden for local authorities.

9. To consider the economics of windpower ALL the resulting costs need to be taken into account. This will include those consequences detailed above including the costs of Public Enquires and the vast amount of resources applied to the planning process and transport issues. Only then will the true cost to the UK economy be identified.

June 2012

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Submission from The Wildlife Trusts (TWT)

Energy and Climate Change Committee inquiry: Future of Marine Renewables in the UK

Background

There are 47 Wildlife Trusts across the whole of the UK, the Isle of Man and Alderney. We are working for an environment rich in wildlife for everyone. With more than 800,000 members, we are the largest UK voluntary organisation dedicated to conserving the full range of the UK’s habitats and species whether they be in the countryside, in cities or at sea. More than 150,000 of our members belong to our junior branch, Wildlife Watch. We manage 2,300 nature reserves covering more than 90,000 hectares; we stand up for wildlife; we inspire people about the natural world and we foster sustainable living. The Wildlife Trusts have a collective vision to create A Living Landscape and secure Living Seas for the whole UK.

Introduction

1. In principle, The Wildlife Trusts supports the development of the marine renewables industry. However, The Wildlife Trusts believe that uncertainties exist regarding the levels of impacts of these technologies on the UK’s marine biodiversity and therefore a precautionary approach needs to be applied to their development. To ensure the precautionary approach is applied, an assessment of environmental sustainability of the development should be undertaken which takes account o f t h e:

• Risk of damage to marine ecosystems from development • Risk of damage to ecosystems as a result of unmitigated climate change • The net carbon impact of development • Any environmental benefits from development.

2. The Wildlife Trusts believe that the most environmentally sustainable approach for marine renewable developments is likely to be one that delivers a net reduction in carbon emissions while maintaining the integrity and function of marine ecosystems and avoiding damage to nationally and internationally important features. Nationally important marine features (including both species and habitats) are currently not adequately considered during the planning and deployment of marine renewables.

Positive environmental impacts of marine renewables

3. Marine renewables have a key role to play in meeting the UK’s commitment of generating 15% of its energy needs from renewables by 2020, thereby helping to reduce the effects of climate change on biodiver s ity.

Negative environmental impacts of marine renewables

4. Different technologies have different potential impacts and therefore it is vital for the right technology to be developed in the right pl a ce.

Page 83

5. The main sources of potential damage from wave and tidal devices are believed to be disturbance or displacement of key species during construction, and habitat loss beneath and adjacent to the installed devices. During operation the main risks are from injury and mortality through collision with moving components, disturbance due to operational noise, barrier effects, and changes to benthic habitats and loss of foraging a r eas.

6. For wind turbines the main sources of potential damage during the construction phase are similar, with a particular concern over the noise impacts of pile driving. Barrier effects, potential changes to benthic habitats and foraging areas are also considered imp o r t a n t.

7. The risk of damage to ecosystem integrity and function from marine renewables has not been studied in detail. It is generally acknowledged that greater understanding is needed of a whole range of ecosystem components, including water column ecology and processes and the role of benthos and fish within wider ecosystemsi to be able to adequately assess the impacts of marine renewables.

The future

8. The Wildlife Trusts believe that marine renewables can play a key role in reducing the UK’s carbon emissions, thereby helping to reduce climate change impacts on biodiversity. However, The Wildlife Trusts recognises there is also uncertainty over the relative level of impact of such devices on our unique and internationally important marine biodive r sity.

9. All developments must be subject to full environmental impact assessment and that where unacceptable impacts are predicted, alternative sites should be selected. The environmental impact assessment should also identify the most appropriate ‘end use’ where the appropriate level of decommissioning is identified which causes the minimal disturbance to the marine environment and allows restoration of habitats if needed.

10. Licence and consent agreements for marine renewable energy installations should include conditions requiring ongoing development and management of the site to be responsive to best practice recommendations emerging from research and monitoring programmes.

11. The Marine and Coastal Access Act (2009) which has established a new marine planning and licensing system and is establishing an ecologically coherent network of marine protected areas, which must be fully implemented in order to ensure that marine renewables can contribute fully to sustainable marine development.

12. The Marine Strategy Framework Directive should be used as a tool to help direct marine renewable developers and the licensing authorities towards marine sustain ability.

13. The current strong policy driver for maximising the potential of marine renewables could, if not informed by sound science, in the long term damage the sustainable

Page 84 development of the sector. We recommend that greater focus on the following areas would benefit both the marine renewables industry and the natural environment :

Cross-sectoral co-ordination – greater co-ordination and shared objective-setting across the energy, climate change, biodiversity and marine sectors of government is required.

Precautionary principle - economic and political drivers and the imperative for the rapid deployment of renewables to cut carbon emissions have resulted in the timing of developments pre-empting strategic consideration of their potential environmental impact. This is not an ideal situation and the precautionary principle should be used if there are uncertainties over the potential environmental impacts from a given development.

Protection of the functioning of the marine ecosystem - Although efforts are being made to minimize risk to the environment, environmental sustainability and the Ecosystem Approachii are not at the heart of strategic decision-making. There is currently an over-reliance on mitigation rather than avoidance of sensitive areas. The important role of healthy marine ecosystems in natural carbon storage and in ensuring resilience to climate change needs to be promoted more. Design of devices to benefit marine biodiversity, which could be delivered at minimal cost, should also be prioritised.

Protection of nationally important marine features - while the EU Habitats Directive ensures that a limited number of protected sites and species are taken into account in development decisions, there is still a concern that nationally important marine biodiversity is not adequately considered in decision making due in part to the urgency of marine renewables deployment.

Environmental data - baseline data and understanding of impacts on habitats, species and ecosystems, although growing, is still lagging significantly behind development.

Cumulative impacts – while the Habitats Directive allows, in principle, for the cumulative and in-combination impacts of development to be considered in respect of some marine habitats and species, speed of development and lack of baseline data will make such impacts difficult to assess. There is no mechanism for considering such impacts for nationally important marine features or, crucially, for ecosystem function.

Setting upper thresholds for development and adaptive management – while the Habitats Directive allows, in principle, for developments to be scaled-back to reduce impacts on some marine habitats and species, there is no such legislative mechanism for nationally important features or ecosystem function. In the absence of sufficient baseline data to provide the necessary evidence, setting upper thresholds for development and scaling back or amending development will be difficult to implement.

Carbon impacts – while initial estimates indicate that marine renewables will deliver a net carbon benefit, there should be a requirement to calculate and minimise

Page 85 adverse carbon impacts either as part of strategic development decisions or at project level.

Community and other stakeholder engagement – there is currently no independent expert scrutiny of key environmental documents, for example Strategic Environmental Assessment (SEA). Non-statutory stakeholder groups, for example communities and environmental non-governmental organisations, should be brought within the decision making process.

June 2012

i UK E nergy Research Centre, 2009, Spatial planning for marine renewable energy arrays workshops ii See Annex I for the Convention on Biological Diversity principles of the ecosystem-based approach to conservation

Page 86 WIND 30

Submission from Wyck Gerson Lohman

During the – so far three and a half – years during which my wife and I were forced, much against our wishes, to fight a wholly inappropriate wind farm proposal planned right in front of our bedroom window, we have gathered so much information that we could fill at least seventy pages and attach well over 200 relevant documents relating to the questions posed for consultation by the committee. But since the committee invites only short submissions of evidence with a limit of two A4 sides I shall just respond to the questions raised about back-up capacity, what methods could be used to make onshore wind farms more acceptable and what can be learned from other countries. I should very much welcome the chance to give further evidence in person.

As part of any wind farm application a developer will issue a statement proclaiming that the proposed turbines will generate the equivalent to the annual average electricity needs of an x number of homes. According to our wind farm developer the proposed 147.2 MW wind farm (64 –2.3MW turbines) will generate the annual average electricity needs of about 65,000 homes. I will not for a moment dispute these figures. However, this does not mean in any way that a 147.2 MW wind farm will actually supply 65,000 homes, nor that the equivalent amount of fossil fuel is saved needed to supply 65,000 homes, nor that an equivalent amount of CO2 emission is cut if the project goes ahead. The plain truth is that this is simply not the case. Wind farms need constant back- up, up to 80%, experts say, is a realistic figure. Just so as to be totally realistic, let us put the figure at 70%. This means that if this particular proposal is given the go ahead the fossil fuel savings and reduction in CO2 emissions will be to the equivalent of supplying no more than 19,500 homes. I have successfully challenged two energy multinationals through the Advertising Standard Agency for making false claims regarding assumed carbon savings from wind turbines. Converting coal powered stations to CCGT while developing renewable alternatives which could deliver real base-load power, such as Biomass, Tidal, Enhanced Geothermal and Ocean Current would effect far greater carbon savings and would, in all probability, be more cost effective in the long run too. I want to stress that my wife and I have always been very reluctant about nuclear- and wholly supportive of renewable energy. So we particularly dread the fact that, for short term financial gain, the preference for a renewable source which will never deliver base- load power is making an at least partial switch to nuclear power, in order to meet the needs of future generations, inevitable, as is now conceded even by the Liberal Democrats including previous opponents of nuclear power such as Chris Huhne and the Rt. Hon. Edward Davey.

On the issue of ‘what methods could be used to make onshore wind more acceptable to communities that host them?’: The very first thing that springs to mind is to stop ignoring the plight of innocent victims of close proximity to turbines. The Wind Industry, with the full backing of the Department of Energy and Climate Change, seems oblivious to the fact that they put such

Page 87 residents in a position where they have only two choices: to accept that their life will be wrecked and possibly wrecked for good if a project in close proximity of their home gets the go-ahead, or to go all out to try and fight it. By ignoring the plight of such people and suggesting to those who suffer turbine noise and sleep deprivation that what they are experiencing is a figment of their imagination and telling those who have tried and failed to sell their properties due to close proximity to (proposed) turbines that there is no proof that close proximity affects house prices the Industry has managed to put itself firmly on the way to killing off their own industry.

In February of 2010, a few months before the General Election, the DECC put out a consultation document to enable interested parties to have their say regarding the then draft National Policy Statement for Energy Infrastructure. In my response document I proposed for the first time my reasonable and straightforward solution to the problem of possible property blight from close proximity to (giant) turbines. I believe that my proposition was utterly fair to wind farm developers and residents alike: ‘obliging developers to buy the properties of any residents wishing to move away from a proposed development within two kilometres from their homes at a price somewhat above market value to compensate for loss of income, cost and inconvenience of moving, would offer the industry the one and only way to prove, once and for all, that their claim of house prices not suffering in close proximity to turbines is correct. However: should it turn out that such properties are not sold on quite as easily as the Industry makes out, it would be entirely fair for the Industry to bear the cost and not the innocent victim of such a development.’

I have put this proposal to the DECC a number of times. The last time in an email which included well over 40 testimonies from residents suffering serious noise- and flicker problems, from residents who had lost the value of their homes and from Estate Agents stating they could not take on certain properties as they were considered unsaleable due to close proximity to turbines. Please find the DECC's answer as copied straight from their response: 'We have yet to see any compelling evidence that the proximity of wind turbines adversely affects house prices' I am aware it is against the protocol to accuse a government official or department of telling lies. But a lie is simply a lie and I know for a fact that the DECC have received many more testimonies from residents in similar situations from all over the UK.

I maintain that my proposal is utterly reasonable and if DECC and Industry are really telling the truth there would be no reason whatsoever not to implement it: it would not cost the industry a penny as they could simply sell the properties on. And since the Industry asserts that those living in close proximity to turbines are the greatest supporters of wind energy, they should even be able to make a handsome profit!

So what lessons can be learned from other countries?

In Denmark loss of property value due to the erection of wind turbines is recognised and properly addressed, see:

Page 88 http://www.ens.dk/en-us/supply/renewable-energy/windpower/onshore-wind-power/loss- of-value-to-real-property/sider/forside.aspx, which reads:

‘An erector of a wind turbine has a duty to pay compensation for loss of value of real property following the erection of the wind turbine. The size of the loss of value is determined by an appraisal authority.

If a property loses more than 1 per cent in value due to the erection of new wind turbines, the owner is ensured full compensation for his loss. The owner of the property must notify his claim for compensation for loss of value to Energinet.dk. As owner of the property you can choose to enter into a voluntary agreement for compensation for the loss of value with the erector of the wind turbine, or you can ask an impartial appraisal authority to make a specific appraisal of the property and determine the scope of your loss.

The claim from the owner of a property affected must be notified before the wind turbine has been erected. The erector of the wind turbine is therefore obligated to visualise the project and prepare other material as well as provide information to the citizens affected at a public meeting no later than four weeks before the municipal planning process ends. Any claims raised at a later stage will only be assessed as an exception to the rule.

Energinet.dk, which is responsible for operating the electricity grid in Denmark, is managing the scheme.’

So how is it that the same Vesta turbines which cause property devaluation in Denmark do not affect the value of properties in the UK? It is high time for the DECC and the Industry to get real.

June 2012

Page 89 WIND 31

Submission from B A Kibble C.Eng M.I.Mech.E. Bsc(Hons)

On shore Wind Power

According to the Arup report carried out for DECC1 as part of the ROC banding consultation, the ‘levelised’ cost of on shore wind was as low as £75 per MWh in 2010 and is continuing to decrease to a likely £72 by 2015. This compares very favourably with the figures produced for DECC by Parsons Brinckerhoff2 of the costs for gas (CCGT) of £76.6 per MWh and nuclear at £74 per MWh. Thus on-shore wind is, as the wind industry boasts in the press, fully competitive as regards the costs seen by the developer and operator. It should thus receive no subsidy. Note: levelised cost consists of all costs including capital, funding, fuel, operating and maintenance etc.

The same Arup report identified the most optimistic prediction of extra on-shore installed capacity by 2030 would be 24GW and this would require extremely large areas of the UK to become windfarm landscapes and virtually no further suitable sites would exist other than in National Parks or AONBs. This prediction agreed with that of the windfarm industry. Adding this onto the present capacity of 5GW gives a total of 29GW. It is impossible to believe that political expediency, public opinion, planning constraints or investment funds would lead to more than half (i.e. 15GW) of this capacity being built. However installed capacity does not equal output. Taking into account an average load factor of 27% gives an average annual output of only 4GW. Since the maximum power required to satisfy the UK Grid demand is 60GW on-shore wind power cannot be a strategic supplier to the Grid and can hardly even be called ‘a valuable part of the mix’.

In order to identify other power generating assets that could be displaced by this windpower, or need not be renewed, the amount of power that can be called upon on demand from on shore wind has to be identified. Statistically this is reckoned to be a maximum of 10% of installed capacity although some authorities claim it may be as low as 0%. Taking the optimistic 10% the ‘dispatchable’ power of that 15GW would thus be 1.5GW. Since 60GW must be found for the Grid (and this will increase to about 135GW as we electrify our heating and transport3 ) that means 58.5GW, and in the future 133.5GW, must be available from other sources as on shore wind will have contri9buted virtually nothing. Capital must be provided to supply a parallel resource. Again, on this reckoning, on shore wind cannot possibly be considered a strategic resource.

The generating plants constructed to parallel the 90% of on shore wind power will have to be used in less efficient operating cycles and as the government has admitted they will have to be subsidised out of the consumers’ bills. This may be the case for their capital as well as their running costs. These costs will obviously be many £billions which the consumer alone will fund. Sir Donald Millar, former Chair of Scottish Power4 opined that at least 20% of

1 Review of the generation costs and deployment potential of renewable electricity technologies in the UK. Arup Associates 2011 2 Electricity Generation Cost Model. 2011 update review 1 August 2011 Parsons Brinckerhoff for DECC 3 Energy without the Hot Air (2009) D. MacKay 4 Evidence to the public Inquiry for proposed Whinash windfarm, Cumbria (2005) Sir Donald Millar

Page 90 the effect of the windfarms was lost due to this effect and Dutch research5 even demonstrates that the total gas consumption effect is greater than if the gas stations supplied all the electricity without the windfarm perturbation in the system.

Although the contribution of average and dispatchable power by on shore wind has been shown to be miniscule the extra costs, on top of the above ‘parallel’ power supply systems, are immense. The Grid will have to be re-engineered both in infrastructure and control terms principally because of wind power as it is so geographically dispersed, intermittent and unpredictable in nature. This is perverse for so little power. The cost of the so called ‘ Smart Grid’ is reckoned to be somewhere between £50 and £100 billion and again all to be funded through consumers’ bills and not by the windfarm developers or operators.

In addition to the above it is considered that storage facilities will be required to cope with the intermittency of wind. At present these are either prohibitively expensive or not technically possible on the scale required. However it appears from DECC’s advisor, MacKay6, that they will be pursued in the form of pumped storage and/or electric car electricity storage. These again will add many £billions to consumer bills for little actual wind energy to the Grid.

There are many other costs that society has to bear for on shore wind power that would be identified if a proper socio-economic analysis were carried out. These of course include loss of our extremely valued landscapes, visual amenity loss, noise pollution, stress to neighbouring residents, tourism losses, massive economic and social disruption during the construction phase (estimated at 10 years in Mid Wales) and so on. Proper analysis would show these costs to be many £ billions borne again by the population and not by the windfarm developers and operators.

In summary, on shore wind power :

¾ Is competitive in costs to the developer and operator with the other lowest priced power generat o r s

¾ Is not a strategic supplier of power and hardly worth considering in the ‘mix’

¾ despite the derisory output produces £billions of on-costs that the consumer alone has to b e a r

¾ most likely causes more gas to be consumed than if it didn’t exist

¾ causes more concern and disturbance to the population than any slight benefits could possibly outwe i gh

¾ cannot possibly, considering all the above, justify ANY subsidy to the developers and operators from the consumers through the ROC system

June 2012

5 he hidden fuel costs of wind generated electricity K de Groot & C le Pair 2011 6 op cit 3

Page 91 WIND 32

Submission from W P Rees BSc. CEng MIET

Practical Electrical Generation by On-Shore Wind and Reducing Carbon Emissions

1. Summary

The cost and Carbon reducing effectiveness of any particular wind turbine generator (WTG) will depend primarily on the amount of energy the WTG can produce over an extended time period – say a year. This is usually expressed as the Capacity Factor (CF). This on-shore CF varies massively across the UK from a maximum of around 33% down to well under 15%. There is a massive variance on the energy produced from turbine to turbine. Two identical turbines in different locations can have a have a variance of over 100% in their annual energy production.

This short paper argues that effective turbines should continue to receive support from the ROC support mechanism. But under-performing WTG's should have a large reduction in their ROC support, or should be denied ROC support altogether.

2. The Importance and Individuality of Capacity Factor (Load Factor)

On-shore wind turbines are capital intensive. The costs of running the turbine are virtually fixed. A turbine at a good windy site can produce twice as much energy as an identical one built in an area with low wind speed. The consequence of this is that the unit energy cost of the poorly performing turbine would have to be virtually twice that of the high performing turbine in order for both to be equally viable. There obviously comes a cut off point where the CF is simply too low for the turbine to ever pay its way without a continuing massive subsidy.

3. What is a Viable Capacity factor?

There are a number of recent reports that are highly pessimistic about the economic viability of on-shore wind. I will not use these here. Instead, I will reference reports and data that is seen generally as “wind positive”. These are the well known “wind positive” reports and the CF they used:

• “The Renewable Energy Review 2011” (DECC) footnote 19 page 111 – 2 7 %

• “The Case For And Against Onshore Wind Energy in th e UK” (Grantham Research Institute 2012 ) footnote 10 bottom page 10 - 2 8%

• 2050 Pathways (DECC 2011) – 30%

• “UK Electricity Generation Costs Update” (Mott Macdonald 2010) median CF – 28%

• “Levelized Cost of New Generation Resources in the Annual Energy Outlook 2011” (US Energy Information Service 2010) Table 1 - 3 4%

Each of these reports, using the stated CF, produced a levellised price for on-shore wind that

Page 92 is near competitive with other generation techniques assuming carbon mitigation payments are made.

From the above, it would seem seem reasonable to assume the DECC 2050 Pathways value of 30% CF as the benchmark of WTG economic viability. So a wind turbine with a CF of 30% is economically viable. Clearly, it would also be reasonable to assume a wind turbine with a CF of 20% is equally not viable.

4. What Capacity Factors Are Actually Achieved by the UK Fleet?

The good news is that there are on-shore turbines in the UK that meet and even exceed a CF of 30%. These WTG's should be encouraged and actively supported.

The bad news is that many WTG's in the UK fleet fail to come anywhere near this level. Consequently, these poorly performing turbines, without massive financial support through the ROC, are wholly non-viable either financially or as carbon reducers. They are a liability not an asset. They are essentially a waste of the ROC investment. When the ROC is reduced, these WTGs will inevitably be shut down, so wasting the ROC investment in them.

Nothing is going to get better about this. Wind speed is not a lottery. There is no magic fix for the low wind speed where these poorly performing WTG's are located. They are doomed to be low performers for ever. There will be no long term benefit to the country from the money squandered on these low performers. The ROC payments will have been wasted.

But it gets worse. Most of the “good windy sites” are already taken, consequently new WTG's are creeping down into wholly inappropriate low wind areas. These WTG's, like many of their existing low performing peers will only make a profit because they are cynically exploiting the incentives offered from the ROC payment, which is the only way they can ever be profitable.

5. So, Overall, Are On-Shore Wind Turbines Cost Effective Carbon Reducers?

Without doubt there are some WTG's that deserve support. These are the turbines that meet the CF of around 30%. The ROC payment to these high performing WTG's is arguably a worthwhile investment to reduce carbon emissions.

But what about the poorly performing WTG's with dismally low CF's that are cynically exploiting the generosity of the ROC subsidy? Should the government naively continue to allow itself to be seduced into providing massive benefits to developers who can only produce pitiful environmental returns? Should the government continue to allow the desecration of whole communities simply to allow voracious WTG developers to turn a healthy (though unproductive) profit? I hope the answer to those questions is a resounding No!

6. Final Comments

The cost effectiveness of on-shore wind turbine generation must be judged turbine-by- turbine. Currently it is welded into a false homogeneous mass which shields the under- performers from scrutiny. Each turbine must be considered solely on its own ability to produce a viable amount of electricity. It is wholly fallacious to use the national average CF

Page 93 as a best guess as to how a turbine will perform. The data, turbine by turbine, location by location is already known.

Today, in the planning process, developers do not even have to reveal the potential output of proposed turbines, let alone have the CF regarded as a primary planning consideration. If wind turbines are to be built, then each individual turbine must be effective. There is no room for free loaders or carpet baggers. The government needs to sort the wheat from the chaff.

June 2012

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Submission from the Chartered Institution of Water and Environmental Management (CIWEM)

1. CIWEM welcomes the opportunity to provide written evidence to the Energy and Climate Change Committee on the economics of wind power. This response has been prepared by our Energy Network. There is an unequivocal need to decarbonise the UK’s electricity sector. Onshore wind is currently the cheapest renewable technology in the UK and could become fully competitive with older conventional sources of energy by as early as 20161. CIWEM believes the choice should be between wind power and other low-carbon energy sources with the local environmental impacts of each taken into account.

2. What do cost benefit analyses tell us about onshore and offshore wind compared with other measures to cut carbon? The machinery needed for onshore and offshore wind turbines has much in common, hence their ‘carbon’ contents per unit of installed generating capacity is broadly similar. However, their installation ‘energy’ costs including the provision of foundations and the production and operation of installation equipment differ starkly, probably by a factor of 3-4 in favour of onshore projects.

3. The only other forms of renewable energy making significant inputs to the UK electrical network are hydro, solar and geothermal power. Of these, hydro power ought to be competitive in its own right; solar and geothermal power are showing potential but are still on a learning curve. Tidal (range) power is not held back for economic reasons; it should be able to compete with conventional hydro power because of the large scale of some projects, whereas sea wave energy remains to cross the commercially reliable threshold, not yet having made meaningful commercial inputs to either national or i s land e lectrical n etw o r k s.

4. How do the costs of onshore wind compare to offshore wind? Recently published information (although experience with ‘wind-farm’ scale offshore installations is still limited) confirms the relatively high cost of offshore wind compared with that of onshore wind-power projects, and added to this are the unfavourable costs of maintaining offshore installations. Yet higher wind-speeds offshore and less constraint in their siting offsets these disadvantages.

5. Relative lifetimes and hence the full-life-costs of projects are likely to favour onshore projects by a substantial margin, though operating experience with offshore developments may in time come to be more positive. There is a long-term and expensive learning curve to pass through with offshore developments (which has already been well-trialled onshore taking into account environmental as well as p o l i ti c al issues). It is unlikely that offshore wind will compete economically with other recognised means of generating electricity within the next ten years.

6. What are the costs of building new transmission links to wind farms in remote areas and how are these accounted for in cost assessments of wind power?

1 Bassi, S., Bowen, A. and Fankhauser, S. 2012. The case for and against onshore wind energy in the UK. The Grantham Research Institute and Centre for Climate Change and Economic Policy

Page 95 Standard practice is for much of the full cost of new transmission links to be charged to the ‘energy’ developer, though this may be softened by political circumstance, also if the connection ‘spur’ is required to be up-graded in capacity to meet additional demands as a result of being needed by more than one project. Electrical utilities are required to share costs wherever possible.

7. What are the costs associated with providing back up capacity for when the wind isn’t blowing, and how are these accounted for in cost assessments of wind power? The costs of providing back up capacity depends on the time of day, day of the week and the time of year involved. There are options to deal with such periods of deficiency in generation by, for example, reducing transmission voltages. Sm art grids and improved load management can also compensate for variability.

8. Only a statistical approach to representing such down-times will permit their cost implications to be estimated. H owever, on the ‘marginal plant’ operating concept, the cost of providing cover for (any) inoperable generating plant will be higher than the cost of operating the most expensive plant which is then being called into service. The cost will therefore hinge on the scale of consumer demand when the lack of capacity occurs. O nly a statistical approach could provide an estima t e.

9. How much support does wind power receive compared with other forms of renewable en ergy? For good reason, wind power currently receives more national financial support than any other renewable energy source, followed by sea wave energy and . The m easures of commercial opportunity, wider investor commitment and promise justify wind power’s financial status (likewise solar power), but the timescale for this to continue will come into question if offshore wind turbine arrays involving multi-megawatt machines are not shown to be technically viable within the next five years.

10. Is it possible to estimate how much consumers pay towards supporting wind power in the UK? (i.e. separating out from other renewa b l e s ) Yes, based on data for the percent of all electrical energy supplied by wind power, and hence that produced by all other sources, the marginal cost of the wind energy element can be estimated. One consideration here will be the degree to which the non-wind sources were or were not called up to ensure that supply targets were met at any time.

11. What lessons can be learned from other countries? Networks which supply similarly demanding industrial demands, i.e. those which involve an inflexible time-of-day element will be most valuable. This means networks supplying several gigawatts of capacity; Germany is a leading example of this, perhaps followed by Spain. The EU move to bind Member States into a more integrated framework will help all forms of generation and supply, especially if ‘Atlantic’ energy comes to be called upon using feeders which extend from Scotland, the West coast of Ireland and South-West England across to mainland Europe. The issues here are political and economic, not technical; such a framework is likely to transform the development of renewable energy in Europe, which at present is still hindered by national boundaries, especially in the UK and Ireland.

12. What methods could be used to make onshore wind more acceptable to communities that host them?

Page 96 Community engagement is essential from the outset with any wind project, being contentious with their visual and noise intrusion. Providing the community with incentives from l ow-cost electricity can help to make projects more acceptable. More attention to involving the public in the need for projects will also help, for example the ‘Rance’ tidal barrage project in Northern France has become t he most visited industrial development project in France when a free-admission public presentation facility was added to its publicity-inclined demonstration resources. T he cost of this addition was quickly repaid by the arrival of visitors to the many other attractions in the area, endorsing the community case f or integrated infrastructure.

June 2012

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Submission from Councillor Ann Cowan

I would like to make a couple of comments concerning your Wind Farm consultation.

1) Cost to the Consumer.

There is a serious issue in that it is politically unacceptable to me as a Conservative Councillor with Perth & Kinross Council, that owners of large estates are applying for wind farms together with Energy Companies, and they are in line to make many millions over the life time of the Wind Farm. The ROCs they receive as subsidy come straight out of the pockets of every consumer of electricity. When I look at people in my ward, many of whom are not at all well off, many living in Council houses or modest homes, I feel ill at ease that it is they who are paying for the rich landowners and Energy Companies to make huge profits.

Further, the maximun fee for an application, even for the huge wind farm at Griffin consisting of 68 turbines, is the sum of £15,950. T his goes nowhere near the cost of the Council processing a large application. Then, if the Council turns down the application and the developer appeals to Edinburgh, more often than not the Council ends up paying the cost of the subsequent enquiry when the decision is overturned as it frequently is, in line with 's dash for wind policy. So the Council is even further out of pocket and must find the money somewhere - difficult in these times of budget cuts!

2) Q uestionable saving in CO2

According to the Aarhus Convention, which the UK signed along with other EU countries, it was required that for each Wind Farm as assessment must be made of the amount of Carbon savings it would generate. That is putting it in layman's terms but that is the essence of it. Nobody ever does this. Why not? I believ e it is because the developers know full well that they save very little on account of the stop / go nature of wind generated power, forcing the conventional coal or gas generators doing the back-up to keep changing gear, thus emitting more CO2 than if the Wind Farm was not there.

There are many other questions about the cost to the landscape, the cost to peoples health, the damage to the tourist industry which is only now being realised. These things should all be studied.

I rest my case however on the two issues I have detailed above.

June 2012

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Submission from Ian M Thompson, member of the Olveston Windfarm Action Group

Is the procurement of 2 power stations in order to generate a single supply of electricity affordable or sensible? An argument in favour of commonsense.

Aim

1. This paper does not offer new technical insight into the strengths and weaknesses of wind powered electricity generation. The aim is to set out a logical and commonsense argument to demonstrate that generating electricity in this way is flawed.

Executive Summary

• Wind power is currently favoured due to technical maturity and an ability to deliver a visual signal that 'something is being done'.

• Wind generated electricity must be seen at a system level in a national context.

• The characteristics of wind mean t hat it is unsuited for the generation of both base load and fluctuating demand led electricity s u p ply.

• Wind generation of electricity at full rated capacity is only available for 28% of the time; to guarantee supply 100% backup generation capacity is required. This is unaffordable.

• A more strategic view is required for carbon free energy generation. Significant investment in green energy engineering would be a more productive use of resources currently supporting the wind industry, to the benefit of the UK economy.

Discussion

2. There is no disagreement with the assumption that wind generated electricity produces significantly less carbon dioxide at the point of generation than other means. This is the root of the appeal of wind powered generation. Combined with a technical maturity in advance of other means of carbon free electricity production and a simple visual confidence check that 'something is being done', this has produced an unbalanced expansion of this means of generation. The commitment to wind generation is out of perspective to its cost, wider contribution to carbon dioxide reduction and the national power requirement. Wind generated electricity must be seen at a system level in a national context.

3. The availability of wind as a power source is variable and unpredictable. Onshore wind is strong enough to drive full generating capacity from a wind turbine for only 28% of the time1. This means that for 72% of the time a wind turbine cannot deliver the rated capacity for which it has been installed. For more than half the time the wind delivers less than 20% of rated generating capacity2. The argument that the wind is blowing somewhere

1 John Muir Trust report ‘Analysis of UK Wind Power Generation Nov 08 – Dec10’ dated March 2011. 2 Ibid.

Page 99 in the UK all of the time is flawed; the high pressure weather system that contributed to unseasonably warm weather in early spring 2012 affected not only all of the UK but north west Europe as a whole.

4. The technology to achieve storage of electricity in industrial quantities does not yet exist, and is unlikely to do so for several decades. Storage of energy is currently only available in the form of fuel or the potential energy of, for example, water held in a reservoir (currently in the UK approximately 3% of electricity supply for less than 24 hours). Therefore national demand can only be met through the generation of electricity at the time of use.

5. The first conclusion from this is that if wind is to be part of the solution there must either (a) be an acceptable level of power cut that the country can tolerate when the wind is not blowing strongly enough or (b) backup generating capacity must be procured to make up the shortfall. For perspective a city the size of requires a steady supply of approximately 400MW, to maintain domestic, industrial and service needs. An intermittent supply is not an option; if wind is part of the solution then back up generation is essential.

6. Total national electricity generating capacity consists of those power stations that provide base load generation and those that are more suited to producing fluctuating load generation driven by demand. Given its inability to produce constant reliable output, wind generated power is unsuitable to deliver base load. Equally it cannot be relied on to deliver demand led supply, as appropriate wind conditions and customer demand may not coincide.

7. The example of a proposal for a wind driven power station between Bristol and the Severn Estuary is instructive. The site is located in direct line of sight between Oldbury nuclear power station (currently dormant, but a site identified for expansion) and Seabank gas powered station. The wind site has an advertised capacity of 5.4 MW of electricity with 3 turbines. This is roughly 2% of the output that Oldbury generated all the time, whatever the weather. This means that you would need 50 sites of this size – 150 turbines – to equal the output of a small nuclear power station. Seabank power station is rated at 1200 MW, so locally over 270 wind farms of 5.4MW (820 individual turbines) would be required to deliver the combined capacity of these 2 power stations, sufficient for 3 medium sized cities. But for only 28% of the time, requiring the continued existence of alternative supplies. The contribution of wind is negligible in the context of the national electricity supply requirement.

8. The technology most suited for backup power, the ability to meet fluctuating demand, would be gas. This produces half the CO2 of the best coal fired power stations, so does represent a significant improvement in itself. Most analysis suggests that these power stations will rarely operate at full efficiency and so will produce more CO2 than if operating constantly at full output, however the argument in this paper is to highlight their original necessity. This represents the purchase of a second power generating facility to guarantee a single supply of electricity. In addition, while for individual wind sites the local power infrastructure required is relatively small, due to the necessarily dispersed nature of wind farms, the cumulative infrastructure is likely to be much greater than that of many fewer larger power stations. If 20% of the UK’s electricity supply is to be delivered by wind, the total installed national generating capacity must be 120% of requirement in order to guarantee supply. The concept of procuring 2 power stations, including associated infrastructures, to secure a single supply of electricity is flawed and unaffordable.

Page 100 An Alternative Strategic Path

9. Given an assumption that the current trend to wind generation has been politically driven, a more strategic approach is required to deliver supply in the future. Substantial investment by government is required i n green energy technology and engineering, with the aim of developing solutions that can really make a difference in the UK and can be exported to the benefit of the UK economy. This requires a vision that goes beyond political timescales. Investment in research and development wholly funded by government - with appropriate controls! - will reduce risk to companies and encourage true innovation. Identification of what does not work through industrial scale trial represents positive knowledge, and is as valuable as identifying what does work. The opportunity and challenge is for the UK not merely to install existing mature solutions, but to become a genuine world leader in supplying the technology t o others .

June 2012

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Submission from E.ON UK plc

Introduction We are investing in a range of renewable energy projects in the UK, including both onshore and offshore wind, and have committed to around £1bn of investment over the last nine months. This is at the heart of E.ON’s strategy for the UK market. However, we recognise that if renewable investments are going to be sustainable for the long term, will need to be competitive with other low carbon technologies if we are to meet our carbon reduction targets at least cost to customers.

Onshore wind is now one of the cheapest forms of renewable energy. It is not a silver bullet but we believe it is an important part of the low carbon mix, tapping into our natural resources. Once consented, projects are relatively quick to construct and, as a responsible developer, we always look to develop projects in the right location both in terms of performance and community impact.

Offshore wind can be constructed at large scale and increased wind speeds can be available offshore. There is great potential to harness this natural resource and we have a number of successful projects both in operation and in development and construction. We are also committed to the reduction of the cost of offshore wind and to tackling some o f the challenges we face when constructing in deeper waters.

What do the latest assessments tell us about the costs of generating electricity from wind power compared to other methods of generating electricity?

1. In its Renewable Energy Review1, the Committee on Climate Change (CCC) compared the levelised cost of producing electricity (LCOE) from renewables with other forms of gene r a t ion. 2. Whilst unabated coal and gas are some of the cheapest forms of generating electricity, the report identified onshore wind as one of the cheapest forms of renewable electricity at between £80/MWh and £95/MWh, a range not too dissimilar to nuclear, and considerably cheaper than coal and gas fitted wi t h C C S in its current state of development. 3. Whilst the current cost of offshore wind is around £140/MWh, the industry is committed to reducing the LCOE to £100/MWh by 2020, broadly comparable with the onshore wind sector which is a more mature technology. By 2030, the CCC report estimated onshore wind would still be a lower cost technology compared with offshore wind, but both would be within a range broadly comparable with nuclear or coal and gas with CCS, with ranges of costs overlapping. This is consistent with our own view. 4. It is important that we continue to focus on driving down the costs of all renewable technologies and that we continue as a country to promote a diverse mix that includes both onshore and offshore wind, recognising that this represents the best value solution for customers of moving to a lower carbon energy mix.

What are the costs associated with providing back up capacity for when the wind isn’t blowing, and how are these accounted for in cost assessments of wind power?

1 http://www.theccc.org.uk/reports/renewable-energy-review

Page 102 5. The amount of time wind turbines are capable of generating any electricity over the course of a year is over 80%. There will be some periods where a wind farm is operating at its maximum rated capacity, while at other times when the amount of wind that can be utilised and transferred into electricity is low, other plant will be dispatched to back-up the system. In its 2011 Renewable Energy Review, the CCC estimated that the costs of providing back-up are currently small but will rise as the volume of intermittent generation on the system rises. The CCC f elt that the cost implications of intermittency were unlikely to be prohibitive until very high levels are reached. For example, even for renewables shares up to 65% in 2030 and 80% in 2050, its analysis suggested that the cost associated with intermittency is only up to around 1p per kWh of additional intermittent renewable generation. We agree with this analysis. Intermittency system costs are additional to th e cost estimates given above. 6. The cost of intermittency will vary both in relation to the total volume of intermittent plant on the system, and the cost of maintaining security of supply from alternative sources of power or reductions in demand. More flexible demand response is a key priority in reducing the cost of intermittency. Intermittency costs will also be lower, if back-up gas-fired plant operating at low load factors is not required to fit CCS. Costs will also be affected by the extent to which the UK is interconnected with other countries and the types of generation on their systems. Our analysis suggested that additional interconnection would have less value if adjacent systems were also expo sed to intermittent sources of power because low wind conditions often cover much of North- West Europe. Overall this suggests very high levels of intermittent wind generation should be avoided. However, the optimum level of wind will vary in relation to other costs. This is consistent with the UK continuing to adopt a balanced mix of low carbon technologies.

How much support does wind power receive compared with other forms of renewable energy?

7. If we assume that the long term value of a ROC is £40/MWh in 2012 prices, the new banding proposals that come into effect from April 2013 will see onshore wind receive £36/MWh and offshore wind £80/MWh on top of the market price. This compares with £40/MWh for enhanced co-firing and conversion, £60/MWh for dedicated biomass and £200/MWh for wave an d t idal.

Is it possible to estimate how much consumers pay towards supporting wind power in the UK?

8. If we look at the renewables obligation (RO) in 2010/11 the cost of supporting the RO on a per household basis was £15.15. In this year, wind (onshore and offshore) accounted for 51.1% of ROCs produced, effectively putting the annual cost of wind per domestic household at £7.74.2

What methods could be used to make onshore wind more acceptable to communities that host them?

2 Figures calculated based on Ofgem's Renewables Obligation Annual Report 2010-11

Page 103 9. Community engagement has to be at the heart of what we do and we always consult from the earliest stage possible. Onshore wind in particular can lead to concern in communities and the challenge for us as the developer is to build a better di a log u e. 10. First we need to be clear about the benefits of onshore wind and that it is part of a balanced low carbon ener gy mix which will help mitigate climate change. When we develop an onshore wind farm, we also want local people to benefit so we create a Community Bene f its F u nd. 11. Even more importantly it is important that the community makes its own decisions on how the fund is spent as they know their own community best. The money can be used to fund a variety of activities such as environmental education programmes, community building refurbishments and energy efficiency schemes, and also to support local groups and organisatio n s. 12. This helps but we believe we also need to look at more innovative ways to involve the community – through perhaps some form of ownership. This is something Ministers have recognised has to be addressed but more still needs to be done to provide leadership and direction to communities.

June 2012

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Submission from Brian D Crosby

WIND TURBINE LOCATION

There may be a place for Wind Turbines provided that the high cost of the electricity generated can be accepted and :

· Adequate set back from habitation ( 2 kilometres minimum) is made · Not built on natural wild life passage ways

Most importantly, natural beautiful views enjoyed by everyone should not be damaged. The Minister recently stated that Wind Turbines should not be built on the Norfolk fen lands where there are no geographical features to break up the view.

This consideration should be given not to build wind turbines anywhere where the views of wind turbines are not disguised or broke up by geographical features.

June 2012

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Submission from Peter Ashcroft

I am presenting this document as someone who moved close to a wind farm three years ago with no preconceived ideas as to the costs or benefits of the technology. Observing the existing installation and proposed further industrialisation of the Powys (and wider U.K.) landscape has inspired me to evaluate the real effects of the proposals using publicly available information. I conclude that:

A. recent studies indicate that the technology may not offer any significant CO2 reduction; B. the impact on local communities is being ignored in a rush to acquire a 21st century equivalent of the “Emperor’s suit of clothes”; C. local economic activity is being destroyed by State sponsored vandalism of the most inspiring landscapes of the U.K. with the erroneous claim that the damage can be undone; D. this policy is making a small number of landowners a n d multinationals wealthy at the expense of the British Public; and E. there has been totally inadequate planning / consultation by both the Welsh and U.K. Governments.

1. The issue of cost / benefit evaluation of wind generated electricity is complicated by the distortions introduced in an attempt to stimulate investment in renewables. An inevitable result of this stimulus is that the promotion of wind generated electricity has been transformed until it seems to exist solely for the benefit of company shareholders and landowners. In the rush for cash the practicalities and even the rational evaluation of the current technology has been ignored. The creation of a rational subsidy would have meant I would not have passed my local windfarm today where 48 of the 60 visible turbines were stationary and half the others were running very slowly! Subsidies should be cut for existing installations if the plant is not maintained at close to 100% operational efficiency. 2. In terms of the real benefits of the technology the one overriding and unarguable item is the availability of wind. The problems arise when we try to capture the energy in a useful form. There is now a great deal of political credibility attached to the technology which makes an honest evaluation increasingly embarrassing when bad news surfaces. It is mad e more difficult because the exploitation is via independent commercial operations that all have their own priorities, not necessarily the benefit of the wider community. 3. There have been recent evaluations of wind technology in Ireland and the USA which cast serious doubt on the benefits accrued by construction of wind farms (1,2 ) . These studies were able to access suitable data for analysis, not freely available in the U.K. The existence of these conclusions should, regardless of any other information, make consideration of a moratorium on further wind farm construction a priority. An evaluation based on turbines near Schiphol in the Netherlands (3) clearly concludes that the p redicted

CO2 benefits are illusory. It is an inescapable fact that windfarm output can increase or

Page 106 decrease over a matter of minutes, equivalent to switching on or off a major power station.

Increased penetration of the technology will lead to such variabili t y that an y CO2 benefit will be eroded. 4. The installation of the turbines is usually accompanied with the prediction that they will last 20 to 30 years and will be removed and the landscape reinstated. At Llandinam (not 20 years old) I recently counted 36 not working (personal video4) and others groaning from wear and tear. The noise making a mockery of the noise control claims made during planning enquiries. 5. Wind farm construction involves excavation of land to make roadways across the sort of open landscapes that inspired the Kinder Scout mass trespasses of the 1930s. These enable access to excavate even bigger craters to pour concrete in5. These excavations and concrete are effectively permanent despite the exhortations of the promoters. Repowering of windfarms simply means more borrow pits, more roadways, more, and bigger, foundation excavations and more concrete. How can this NOT adversely affect the landscape, wildlife, land drainage….? This leads to inevitable further adverse impact on both normal and economic life. 6. According to National Grid pylons typically last 80 years6. Compare this to the 25, or more likely 15 or 20, year lifespan of a windfarm. Who can rationally justify the economics of such investment in new transmission network when there is a serious risk that th e t echno l o g y does not provide the predicted benefits and the true costs have not been evaluated? 7. The support of the wider public is continually assumed. The fact that communities local to windfarms have changed from support to objection should clearly indicate that the reality has no resemblance to industry promises. It is plain from most of the published opinion polls that the answers and interpretations are based on the common strategy of question manipulation. 8. A problem, inevitable when m a j or strategic projects are driven by financial manipulation, is that the practical aspects of the project are lost in the minutiae. Here, where I live, we have one area (Powys) planned to have hundreds of turbines in a short period (75% of the numb er planned for England). To achieve this target it will require multiple abnormal loads, daily, for years (thousands of movements in total). This, together with the associated HGV movements (tens of thousands in total), will inevitably create havoc in mid-Wales7. In addition to this chaos during wind turbine installation it is intended to construct new transmission lines and a massive sub-station to service the turbines. Quite apart from the impact on the major source of income, tourism, the wider economy will be totally disrupted. In contrast to England, mid-Wales has a very restricted road network, in fact this is the reason for the numerous motorcyclists who visit the area to enjoy the winding, narrow roads. The Emergency Services in mid-Wales already have an onerous task. No public evaluation of the effects of these massive traffic movements on their work has been made. Whilst the polled the impact on tourism i n Sc otland in the early days of wind farm construction. I can think of only one reason why the Welsh and U.K. Governments have not repeated the exercise in Wa les or England. Perhaps they do not care to hear the a nsw e r ! 1. http://www.clepair.net/IerlandUdo.html 2. http://www.bentekenergy.com/documents/bentek_how_less_became_more_100420- 319.pdf

Page 107 3. http://www.clepair.net/windSchiphol.html 4. http://sh.digitalvault.bt.com/invite/login?c=686970706f6772697068&i=3bcb8- 136bbb26452-gemini04&t=657da9a5253718ec&r=mg&lang=en 5. https://www.facebook.com/photo.php?fbid=314044312007839&set=a.273519562726 981.65558.110563539022585&type=1&ref=nf 6. http://www.nationalgrid.com/NR/rdonlyres/2019B49C-67A0-4489-97B4- D0B7EFA9F683/47728/OverheadLineconstruction_refurbishmentfactsheet.pdf 7. http://www.bbc.co.uk/news/uk-wales-mid-wales-16604457

Ju n e 2012

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Submission from the Campaign to Protect Rural England (CPRE)

The Campaign to Protect Rural England ( CPRE) believes that climate change poses a major threat to the character and quality of England's countryside. As one of the least expensive renewable technologies to develop and operate currently, wind energy will play a role in helping to mitigate its impact. The effect of onshore wind on the landscape, however, poses real environmental and economic costs which mean that the location and extent of onshore wind needs to be carefully controlled. T his w ill ultimately constrain its development.

We believe that the planning system is best placed to reconcile the sometimes competing environmental objectives of protecting the landscape from intrusive development while ensuring we address the urgent need to tackle climate change. Recent research commissioned by CPRE, with the National Trust and RSPB, Inexpensive Progress?, recognises that economic analysis has the potential to make a valuable contribution to the development of planning policy. However, over-reliance on economic drivers in assessing the contribution of wind power risks ignoring important ‘non-market’ values, such as the intrinsic value of landscapes and the quality, diversity and tranquility of the countryside.

When exploring which methods could be used to make onshore wind turbines more acceptable to the communities that host them, we would therefore urge the committee to look beyond economic incentives and recognise other important ‘non-market’ considerations that help determine whether development will be publicly acceptable. As outlined in our report, Generating light on landscape impacts, CPRE believes that a strategically planned, locally accountable approach which uses an understanding of landscape capacity to identify those areas where onshore wind is and is not appropriate will best enable us to locate onshore wind turbines while protecting cherished countryside.

June 2012

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Submission from Scottish Renewables

Executive Summary i. Scottish Renewables recently reported t h a t there are more than 11,000 people working in renewable energy in Scotland, showing onshore wind as by far the largest employer with 2235 people employed and many more working indirectly on grid upgrades and across multiple sectors. Despite being an emerging sector, almo st 1000 people are currently working in offshore wind in Scotland1 with the potential to create up to 28,000 jobs by 20202. ii. Renewable electricity generated in Scotland in 2011 rose 45 per cent on 2010 to 13,750GWh, a record for Scotland. Assuming gross consumption in 2011 was similar to 2010 figures, around 35 per cent of Scotland’s electricity needs came from renewables in 2011; a considerable increase on the Scottish Government’s target of 31 per cent. Wind generation also had a record year in 2011 with wind farms in Scotland producing 7,049GWh of electricity3, contributing the equivalent of around 18 per cent of our electricity needs. iii. Scottish Renewables estimates that renewable electricity produced in 2011, the majority of which was wind power, had the potential to displace the equivalent of over eight million tonnes4 of carbon dioxide from fossil fuel generating stations, around 15 per cent5 of Scotland’s total emissions. iv. The Stern Review, which investigated the economics of climate change in the UK, stated that the overall costs and risks of climate change will be equivalent to losing at least five per cent of annual global GDP, ‘now and f o r eve r ’6. Therefore, when considering the economics of wind power, it would be remiss to overlook the cost implications of wind’s ability to displace carbon dioxide emissions7 and the corresponding climate change ef f ects. Committee Questions How much support does wind power receive compared with other forms of renewable energy? Is it possible to estimate how much consumers pay towards supporting wind power in the UK? What do cost benefit analyses tell us about onshore and offshore wind compared with other measures to cut carbon? 1. In 2010/11 £1.3bn was invested in Renewables Obligation Certificates (ROCs), the main financial support mechanism for the renewables sector, and of that the majority went to wind energy as this is responsible for the largest share of renewable electricity generated. This compares to an annual government expenditure of £2bn in nuclear decommissioning8. Table 19 Number of ROCs received in Scotland by technology and number proposed by DECC (due to commence in April 2013) Technology Current ROC Proposed ROC Onshore Wind 1 0.9 Offshore Wind 2 1.8 Wave 5 5

Page 110 Tidal 2 5 Hydro 1 0.5 Dedicated Biomass 1.5 1.4

Table 210

Contribution of RO support payments to an average household annual 2011 2012 2013 2014 2015 2016 electricity bill Continuing with current bands £20 £26 £34 £41 £48 £52 Changing to proposed bands £20 £26 £33 £40 £47 £50 *At the time of writing this submission the government has yet to indicate to industry what ROC band levels are likely to be from April 2013. 2. Wind energy compares favourably with other low carbon technologies in terms of cost11 and grid flexibility12, as well as economic development and employment opportunities13, while other measures to cut carbon emissions such as carbon capture and storage (CCS) has yet to be proven in t h e UK. What do the latest assessments tell us about the costs of generating electricity from wind power compared to other methods of generating electricity? How do the costs of onshore wind compare to offshore wind? 3. According to research by Mott Macdonald, published last year, some forms of renewables are already cheaper at generating electricity than other low carbon alternativ e s : • Large scale onshore wind output at £83 per megawatt hour (MWh ) • Nuclear at £96 to £98/MWh • Carbon Capture and Storage at £105 to £140/MWh • Offshore wind £169/MWh14 4. The Crown Estate has concluded that reaching £100 per MWh for offshore wind is achievable within the next seven years and the Offshore Wind Cost Reduction Task Force recently set out key actions for industry and government to take in order to achieve this15. What are the costs of building new transmission links to wind farms in remote areas and how are these accounted for in cost assessments of wind power? 5. Building the grid: It is the duty of the independent regulator, Ofgem, to determine whether investment in building electricity transmission links represents good value for money for the electricity consumer. Ofgem has estimated that work in Scotland to upgrade the high voltage network, partly to assist renewable energy generators like onshore wind farms, will add 35 pence per year to consumer bills in 2013 – 202116. 6. Connecting to the grid: The cost of connecting a wind farm to the transmission network forms part of the developer’s capital and operating expend i ture o f a project. The use of the transmission system is then calculated as an annual operating expenditure for the wind farm. If these costs prove prohibitively high and render the project uneconomic, then development of the project would not go ahead. It is the developer who must take the view as to whether a project sited remotely would be economic given the cost to connect to the electricity network.

Page 111 What are the costs associated with providing back up capacity for when the wind isn’t blowing, and how are these accounted for in cost assessments of wind power? 7. Wind power forms a crucial and growing part of the UK’s energy mix and works in conjunction with other technologies, all of which have different characteristics. The Government has stated that, “in delivering more low carbon generation and maintaining security of supply, average household bills after the implementation of market reform are expected to be, on average, lower than what they would have been”17 and wind power can play a major part in this while simultaneously helping to combat climate change. Studies have also shown that there are future cost savings in scenarios where there are more renewable energy sources in the energy mix compared to a continued reliance on fossil fuels18 19. 8. In addition, UK Government statistics show that payments for the balancing and constraint of wind farms totalled £24.8 million in 2011, compared to overall constraint payments to all energy generators totalling £708m20. What lessons can be learned from other countries? 9. There is an ongoing programme of investment in the wind energy sector worldwi d e: • A report by the Pew Charitable Trust showed that there was almost $80 billion (£51.2 billion) invested in wind energy worldwide in 2011, with over 239 Gigawatts (GW) of installed wind energy capacity across the world.21 • The USA has 47GW of installed wind energy and installed 6.7GW of wind energy in 2011 alone - which is more than the sum total of installed wind capacity in the UK.22 • China installed nearly 20GW of wind capacity in 2011, up from 17GW in 201023. • Some 25 per cent of Denmark’s electricity is now provided by wind, with the country aiming to meet 50 per cent by 202024. • Wind met 18 per cent of the Republic of Ireland’s electricity demand in 2011, one of the highest penetrations in the world25. What methods could be used to make onshore wind more acceptable to communities that host them? 10. In addition to the clear economic and environmental benefits brought by w ind power to the general public, wind projects also create benef its to com munities ac ross Scotland, and are already regarded as acceptable by most people. A recent YouGov poll found that a majority of Scots surveyed – 7 1 per cent – are supportive of the continued development of onshore wind26 and a recent ComRes poll for The Independent newspaper suggested that 68 per cent of the UK public believe that new wind farms are "an acceptable price to pay" for greener energy in the future27. 11. Wind farm developers work closely with c ommunities throughout the development period, and often over the lifetime of a project, to bring additional bene f it s t o host communities. Based on knowledge of current arrangements between communities, developers and other third parties, including local authorities, the Scottish Community Foundation estimates that the £1.2 million it currently administers for operational developments around Scotland represents around 20 per cent of the total value of community benefit funds currently being paid in Scotland. This would su g gest t h at Scottish communities benefit from approximately £6 million per annum which can be spent where they feel it is needed most. 12. Scottish Renewables supports the Scottish Government i n it s inte n tion to m ake publicly available a community benefit register28 to show where these payments are being made and to show how communities are utilising them for the benefit of local p eople.

Page 112 June 2012

1 http://www.scottishrenewables.com/static/uploads/publications/final_sr_jobs_report_21032012_-web.pdf 2http://www.scottishrenewables.com/static/uploads/publications/100804_ipa_final_public_report_as_issued_to_steering_group_ 2010_08.pdf 3 http://www.scotland.gov.uk/News/Releases/2012/03/geenenergytargets29032012 4 Based on wind farms displacing carbon dioxide at a rate of 589g/kWh, calculated using DECC generation statistics for Scotland in 2010 and figure for carbon emissions displaced for the same year, as quoted as evidence by the Secretary of State for Energy and Climate Change (2012) - http://www.publications.parliament.uk/pa/cm201212/cmhansrd/cm120112/text/120112w0002.htm#12011297000139 5 Scottish Greenhouse Gas Emissions 2009, Scottish Government (2011) - http://www.scotland.gov.uk/News/Releases/2011/09/06123057 6 HM Treasury (2006) The Stern Review o n the Economics of Climate Change – accessed at http://webarchive.nationalarchives.gov.uk/+/http:/www.hm-treasury.gov.uk/sternreview_index.htm 7 http://www.publications.parliament.uk/pa/cm201212/cmhansrd/cm120112/text/120112w0002.htm#12011297001443 8 http://www.nda.gov.uk/documents/upload/NDA-Business-Plan-2011-2014.pdf 9 http://www.scotland.gov.uk/Publications/2011/10/27123530/2 10 http://www.decc.gov.uk/en/content/cms/news/pn11_85/pn11_85.aspx 11 http://hmccc.s3.amazonaws.com/Renewables%20Review/MML%20final%20report%20for%20CCC%209%20may%202011.pdf 12 Evidence given to Economy, Energy and Tourism Committee by Duncan Burt, Customer Services Manager, National Grid, 23/05/12 http://www.scottish.parliament.uk/parliamentarybusiness/28862.aspx?r=7047&i=64151&c=1315222 13 Page 6, Executive Summary, Powering Scotland, http://reformscotland.com/public/publications/Powering_Scotland_.pdf 14 http://hmccc.s3.amazonaws.com/Renewables%20Review/MML%20final%20report%20for%20CCC%209%20may%202011.pdf 15 http://www.decc.gov.uk/en/content/cms/news/pn12_074/pn12_074.aspx 16 http://www.spenergynetworks.co.uk/serving_our_customers/pdf/RIIO_T1_fast_track_press_release_20_Jan.pdf 17 P.20 http://www.official-documents.gov.uk/document/cm83/8362/8362.pdf 18 http://www.ofgem.gov.uk/Markets/WhlMkts/monitoring-energy- security/Discovery/Documents1/Discovery_Scenarios_ConDoc_FINAL.pdf 19 http://www.decc.gov.uk/assets/decc/11/tackling-climate-change/international-climate-change/5276-fossil-fuel-price-shocks- and-a-low-carbon-economy-.pdf 20 http://www.publications.parliament.uk/pa/cm201212/cmhansrd/cm120117/text/120117w0003.htm#12011767000070 21 http://www.newenergyfinance.com/WhitePapers/download/68 22 Ibid. 23 http://fs-unep-centre.org/sites/default/files/publications/globaltrendsreport2012_0.pdf 24 www.ens.dk/en-us/info/news/news_archives/2012/sider/20120328newdanishenergyagreement.aspx 25 http://www.rechargenews.com/energy/wind/article310836.ece?WT.mc_id=rechargenews_rss 26 http://www.scottishrenewables.com/news/poll-suggests-majority-scots-support-wind-power/ 27 http://www.independent.co.uk/environment/green-living/build-more-turbines-poll-shows-public-wants-wind-farms- 7814798.html 28 http://www.communityenergyscotland.org.uk/register

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Submission from Greenpeace, World Wildlife Fund, Friends of the Earth

This is a joint submission from Greenpeace, Friends of the Earth (England, Wales & Northern Ireland) and Green Alliance. We welcome the opportunity to submit evidence to the Committee on the economics of wind power. Our submission looks at the falling costs of wind power, its economic benefits, the limited impact on bill payers and benefits for communities.

Cost evolution of wind power and how it compares to other alternatives 1) Onshore wind: Recent analysis by Bloomberg New Energy Financei shows that the levelised costs of onshore wind globally had fallen dramatically in recent years and that the best onshore wind farms in the world already produce power as economically as coal, gas and nuclear generators, whilst the average onshore wind farm will reach grid parity by 2016. The same report shows that if one takes the price of carbon into account, onshore wind farms already produce power as economically as gas. In the UK, onshore wind is currently estimated to cost £90/MWh. A 2010 IEA reportii indicated costs are lower in Denmark and Sweden due to cheaper finance and better locations, partially determined by planning laws and community acceptability. We believe it is vital to support onshore wind whilst providing the right policy environment including financing and community ownership to reduce its costs in the medium term. 2) Offshore Wind: The Crown Estate Offshore Wind Cost Reduction Pathways Studyiii shows that there are several pathways that could result in the costs of offshore wind going down to £100/MWh or less by 2020, with further substantial cost reductions possible in the 2020s. The report makes clear that long-term term predictability in terms of minimum volumes of deployment and financial support hold the key to delivering these costs reductions. The Offshore Valuation Reportiv, put together by a consortium of major industry players, reached similar conclusions and argued that the costs of fixed offshore wind could go down by 50% by 2030 (down to a levelised cost of £70-£80/MWh compared to around £150/MWh today). 3) All independent forecasters v expect r is i ng gas prices in Europe over the medium term. Reports by Poyryvi and Deutsche bank suggest shale gas is unlikely to significantly influence the gas pric e . 4) A Greenpeace trend line analysis of all available projections of wind and gas generations costs, (data attached) shows that offshore wind becomes comparable in cost to gas from 2025; however a combination of low wind cost scenarios and high gas prices could bring the point of equal cost to 2017. These levelised costs include the costs of transmission links for remote wind farms, whilst overlooking the costs of backing up wind energy. However, a recent report by the energy consultant David Milborrowvii showed this latter point would only increase energy bills by at most 2%, based on 20% wind power, and so does not affect these results. 5) As reported in the Economistviii nucle ar c o s t s appear to be rising sharply post-Fukushima. The flagship EPR project at Olkiluoto in Finland is now 5 years behind schedule and twice over budget

Page 114 at €6.6bn, whereas the latest EPR reactor at Flamanville in France in now going to be 4 years late and almost twice over budget at €6bn. A note from Citigroup analyst Peter Athertonix indicated that at the current construction estimates, new nuclear in the UK would prove more expensive than offshore wind at £166/Mwh at a commercial cost of capital. A similar analysis by Tom Burke found the cost to be £155/Mwhx cost of capital. With regard to CCS as a low carbon alternative that could complement a system mainly based on renewable energy, the CCS component is currently estimated to double the cost of energy production over gas without CCS[xi]. Cost estimates for CCS are speculative as no commercial scale example yet exists. 6) Given the falling costs of onshore wind and the significant potential for reducing the costs of offshore wind, we believe that a greater deployment of onshore and offshore wind, coupled with ambitious energy efficiency measures and measures for grid balancing such as interconnection, is the best option to stabilise consumer bills and power our economy securely, cost effectively and sustainably. It is therefore key to create investor certainty through the introduction of clear volume targets and predictable and simple financial support mechanisms in the Energy Bill, together with action to reduce the cost of capital through other important tools such as a reform of the currently under- capitalised and very weak Green Investmen t Ba n k.

Economic growth implications of a greater reliance on wind power in the UK 7) The UK will import 70% of its gas by 2020xi; therefore, all options which displace fossil fuels with UK-produced energy could have a positive impact on our balance of payments, directing spending on energy into the UK economy. A report by Innovas for the REAxii f ound that in a high gas price scenario, £60bn would be saved on fossil fuel imports by 2020 if the government hits its renewable target s. 8) For onshore wind, a recent study for DECCxiii found that in 2011 the industry supported 8,600 UK jobs and was worth £548m to the UK economy, with 1,100 jobs created locally to the projects. The 13GW envisaged in the Renewable Energy Roadmap would create up to 11,600 jobs, with £700k per MW installed benefiting the UK economy. 9) For offshore wind, a recent study by the Centre for Economic and Business Research foundxiv that under its central scenario offshore wind would create 40,000 jobs by 2020 and boost GDP by 0.2%. The same study found the sector will deliver increased exports of £18.8bn by 2030, equivalent to 75% of the UK’s trade deficit. The CEBR’s study built on the findings of the Offshore Valuation Group, who found in 2010 that the UK’s offshore renewable resource (offshore wind, wave and tidal power) is of a scale that could make the UK a net electricity exporter, create 145,000 jobs by 2050, and result in an industry with a net present value of £36bn.xv 10) The Offshore Wind Developers Forum and The Crown Estate recently announced plans to increase the proportion of UK content in the offshore wind supply chain to at least 50%.xvi 11) The recent announcement by Vestas to delay its investment in an offshore turbine factory in Sheerness, which could have employed up to 2,000 people, highlights the importance of providing clear signs as to the UK’s commitment to the sector. 12) We are not convinced of the wider economic benefits of nuclear power. Proposals for new nuclear in the UK are predicated upon either French or Japanese technologies and on foreign companies, like EDF. As made clear in the Committee on Climate Change’s report on Low-Carbon Innovation, nuclear power is not a technology that can be “developed” in the UKxvii, as opposed to other

Page 115 technologies such as offshore wind, , tidal power and potentially CCS where the UK is currently an early mover. This provides little or no export potential and limited economic benefit. 13) The econ o m ics o f Carbon Capture and Storage for gas o r coal are – as yet – unknown and depend on a variety of factors including international gas prices , export potential and the location of supply chains.

Impact on bill payers & community benefits 14) According to DECC’s estimated impact of all their policies on energy prices, the cost per household is £17.xviii Renewables UK have calcu l atedxix the total per household cost for onshore and offshore wind to be £7.74p per year. In response to a query from Greenpeace, Ofgem suggested that in March 2012 1.9% of the average bill was accounted for by the RO – meaning around 0.9% pays for wind power. According to the latest Ofgem RO report for 1 April 2010 to 31 March 2011, the total annual cost to households of the Renewables Obligation is £398.5million, which equates to £15.15 per household.xx Using the Ofgem figure of £15.15 per household, and the fact that 7.7 million ROCs went to onshore wind, that suggests that £4.68 went on onshore wind per household. All estimates therefore suggest the cost to bill payers is very small. However, whilst these calculations are indicative it is clear that greater transparency is needed in this area. 15) Looking forward to 2020 and taking into account predicted efficiencies such as those linked to replacing old boilers, the CCC’s Household Energy Bills xxi analysis suggests that average domestic energy bills will increase in the UK from £1060 in 2010 to £1250 in 2020 in real terms and that the rising price of gas will add more to bills (£175) than low carbon policies (£110). It is also worth highlighting that the CCC’s analysis suggests that further significant energy savings out to 2020 are feasible, bringing bills down to 2010 levels, if stronger policies are put in pla c e 16) A report by DECC and Renewables UKxxii has highlighted community ownership, community benefit funds, investment in local infrastructure and locally generat e d job s 17) We believe that encouraging community ownership of renewable energy is vital for opening up the energy market, improving the flow of benefits directly to communities, and increasing the acceptability of onshore wind. A report for the then DTI by the Centre for Sustainable Energyxxiii found community ownership was key to the greater acceptability of wind in Denmark and Germany in particular.

June 2012

i http://bnef.com/PressReleases/view/172 ii http://www.nrel.gov/docs/fy11osti/48155.pdf iii The Crown Estate, Offshore Wind Cost Reduction Pathways Study, May 2012: http://www.thecrownestate.co.uk/media/305094/Offshore%20wind%20cost%20reduction%20pathways%20study.pdf iv www.offshorevaluation.org v http://www.decc.gov.uk/assets/decc/11/about‐us/economics‐social‐research/2935‐decc‐gas‐price‐projections.pdf vi http://www.poyry.co.uk/News_items/1328616116.html vii http://www.greenpeace.org.uk/files/pdfs/climate/wind‐power‐managing‐variability.pdf viii http://www.economist.com/node/21549936 ix http://uk.reuters.com/article/2012/05/08/uk‐nuclear‐britain‐edf‐idUKBRE8470XC20120508 x http://tomburke.co.uk/2012/05/28/hinkley‐and‐sizewell‐will‐cost‐us‐155‐billion‐over‐30‐years‐under‐the‐cfd/ [xi] http://www.pbworld.com/pdfs/regional/uk_europe/decc_2153‐electricity‐generation‐cost‐model‐2011.pdf xi http://www.nationalgrid.com/uk/GrainLNG/needs/ xii http://www.r‐e‐a.net/resources/rea‐publications xiii http://www.decc.gov.uk/assets/decc/11/meeting‐energy‐demand/wind/5229‐onshore‐wind‐direct‐‐wider‐economic‐impacts.pdf xiv http://www.cebr.com/?p=911 xv http://www.offshorevaluation.org/

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xvi http://www.thecrownestate.co.uk/energy/offshore‐wind‐energy/working‐with‐us/offshore‐wind‐developers‐forum/ xvii Building a low‐carbon economy: the UK’s innovation challenge, Committee on Climate Change, July 2010, http://hmccc.s3.amazonaws.com/CCC_Low‐Carbon_web_August%202010.pdf xviii http://www.decc.gov.uk/assets/decc/11/about‐us/economics‐social‐research/3593‐estimated‐impacts‐of‐our‐policies‐on‐energy‐ prices.pdf xix http://bwea.com/media/news/articles/pr20120315‐2.html xxhttp://www.ofgem.gov.uk/Sustainability/Environment/RenewablObl/Documents1/Renewables%20Obligation%20Annual%20Report%20 2010‐11.pdf xxi Households Energy Bills – impacts of meeting carbon budgets, the CCC, December 2011: http://downloads.theccc.org.uk.s3.amazonaws.com/Household%20Energy%20Bills/CCC_Energy%20Note%20Bill_bookmarked_1.pdf xxii http://www.decc.gov.uk/assets/decc/11/meeting‐energy‐demand/wind/5229‐onshore‐wind‐direct‐‐wider‐economic‐impacts.pdf xxiii http://www.cse.org.uk/pdf/pub1049.pdf

Page 117 CCGT Offshore wind Onshore Wind All available levelised costs were Year Cost Level Source Year Cost Level Source Round Year Cost Level Source used from reports all published 2009 80.3 main MM10 2009 145 main TPA/UKERC‐ 2009 93.9 high MM10 in 2010 or since. No 2011 100 high PB 2009 160.9 high MM10 R2/2.5 2009 87.8 main MM10 inconvenient data has been 2011 76.6 main PB 2009 148.5 low MM10 R2/2.5 2009 77.8 low MM10 omitted. The reports used are 2011 45 low PB 2009 136.9 main MM10 R2/2.5 2010 75 low ARUP Mott McDonald 2010 (MM10), 2013 86.7 main MM10 2010 149 low ARUP R2/2.5 2010 91 main ARUP Parsons and Brinckerhoff (PB), 2017 120 high PB 2010 169 main ARUP R2/2.5 2010 108 high ARUP Technology and Policy 2017 88.45 main PB 2010 191 high ARUP R2/2.5 2013 86.7 main MM10 assessment report of UKERC 2017 50 low PB 2013 146.1 main MM10 R2/2.5 2015 72 low ARUP (TPA), ARUP, and Mott 2017 96.5 main MM10 2015 123 low ARUP R2/2.5 2015 88 main ARUP McDonald 2011 (MM11). 2017 113.2 high MM10 2015 139 main ARUP R2/2.5 2015 105 high ARUP 2017 50.5 low MM10 2015 158 high ARUP R2/2.5 2017 86.3 main MM10 2023 112 main MM10 2017 145.4 high MM10 R2/2.5 2020 71 low ARUP 2017 112.4 low MM10 R2/2.5 2020 86 main ARUP 180 2020 170 low ARUP R3 2020 103 high ARUP 2020 145 main ARUP R3 2020 55 low MM11 160 2020 127 high ARUP R3 2020 62.5 main MM11 2025 115 main TPA/UKERC‐ 2020 70 high MM11 140 Gas 2020 140 high MM11 ‐ 2023 85.8 high MM10 120 2020 105 main MM11 ‐ 2023 71.3 low MM10 2020 70 low MM11 ‐ 2025 69 low ARUP Onshore Wind £/MWh 100 2023 127 high MM10 R3 2025 84 main ARUP 2023 108 low MM10 R3 2025 101 high ARUP 80 2025 151 high ARUP R3 2030 68 low ARUP Offshore Wind 60 2025 129 main ARUP R3 2030 82 main ARUP 2025 113 low ARUP R3 2030 99 high ARUP 40 2030 122 high ARUP R3 2005 2010 2015 2020 2025 2030 2035 2030 105 main ARUP R3 2030 92 low ARUP R3

Note: where distinct projections were made between R2/2.5 & Scottish Territory wind farms and R3 wind farms, R2/R2.5/STW were used up to 2017 and R3 for 2020 and afterwards. This appears to agree with when R2/2.5 should come to completion and when R3 will begin development properly. The TPA/UKERC and MM11 reports did not do separate predictions for the different rounds and so were used for all available

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Submission from the Wales and Borders Alliance

This is a response of to the Select Committee’s inquiry paper and submitted by the Wales and Borders Alliance, comprising the following bodies: Conservation of Upland Powys, STOP Windfarms and Pylons, Montgomeryshire Against Pylons and windfarms, CPRE Shropshire, Rhiwcynon Against Pylons, Abermule Action Group, Mochdre Action Group, Llansanffraid Action Group, GALAR - Gwirfoddolwyr Abergorlech Llansawel a Rhydcymerau, Shropshire North Against Pylons, Cambrian Mountains Society, The Rainbow Trails Project Dyfnant Forest Llangadfan, Trannon Residents Against Power Plans, CYNGHRAIR HIRAETHOG ALLIANCE (An Alliance of the Ramblers' Association, CPRW Branches, PACT, DART and CLOUT), No Nant y Moch Windfarm, CLAWS, SWATT/GVAG (South Wales Alternative to Turbines, Green Valley Action Group), Country Guardian and Glyncorrwg Action Group.

1. The wind industry claims that the “levelised cost” of on-shore wind makes it a fully competitive power source – as low as £75 per MWh in 2010, decreasing to £72 per MWh by 2915 compared with gas at £76.6 per MWh and nuclear at £74. (see Arup Associates 1 and Parsons Brinckerhoff reporting to DECC 2.) If that were the case, no subsidy whatever would be justified. Levelised cost consists of all costs including capital, funding, fuel, operating, maintenance etc.

2. Present on-shore wind “installed capacity” is 5GW (DECC figure) and Arup 1 predicts an increase to 29GW by 2030. But installed capacity is no guide to output/load factor which, optimistically, might reach 27 per cent of capacity (DECC figure). Thus, the average annual output on 29GW would be 8GW. Against this, the power required to satisfy U.K. grid demand is 60GW (DECC figure) which compels the conclusion that on-shore wind cannot be counted as a strategic supplier to the Grid.

3. The 29GW by 2030 projection is un-real. If it were realized it could only be against the background of a truly vast area of the UK becoming a turbine/pylon landscape. It is impossible to believe that political expediency, public opinion, planning constraints or availability of funding could lead to that dire situation. Even Chris Huhne would quail in face of the national outrage. Outside the world of fantasy we suggest that the (still almost unthinkable) maximum capacity reached by 2030 could not be more than half Arup’s 29GW. Scaled down to 15GW @ 27 per cent that produces a mere 4GW of average annual output at which point on-shore wind, as a contribution to the Grid demand of 60GW, becomes an insignificant element in a multi-source energy mix. And at what gigantic cost?

1 Review of the generation costs and deployment potential of renewable electricity technologies in the UK. Arup Associates 2011

2 Electricity Generation Cost Model. 2011 update review 1 August 2011 Parsons Brinckerhoff for DECC

Page 119 4. What other/parallel/alternative energy sources will be displaced by an on-shore wind contribution of such puny scale? That is critically dependent on the operation of the Grid and its demand for 60 GW. At this point, the 27 per cent figure for output is no longer relevant and we need to substitute a much lower figure, somewhere between zero per cent and 10 per cent 3 which, most inconveniently, will confound the Grid in its present form because it is elusively inexact. The variability of this ingredient in the calculation is troublesome because wind is, almost uniquely, unpredictable in its contribution to national energy supplies. Disregarding that factor for the moment (until paragraph 5 below) we test the position on the basis of Birkett’s 3 upper range 10 per cent. At this level, and using the (unreal) Arup projection of 29GW for 2030, the Grid-relevant on-shore wind quotient is a mere 2.9GW (or an even smaller 1.5GW if you take our alternative projection of 15GW). In other words, the Grid’s current demand of 60GW would, to the extent of 57.10GW or 58.5MW, need to be supplied from energy sources other than on-shore wind. But it does not stop there because the current Grid demand of 60GW is predicted to increase to about 135GW 4 as we electrify our heating and transport, at which point the on-shore wind contribution, in proportionate terms, will be miniscule and the gas/nuclear/coal contribution even more vast. The game is not worth the very expensive candle.

5. As indicated earlier, the Grid’s difficulty in coping with variable inputs creates more far-reaching consequences. Because on-shore wind is geographically dispersed, intermittent and unpredictable its presence in the mix of energy sources will dictate the need for a new “Smart Grid” at a cost of somewhere between £50 billion and £100 Billion. Who is going to pay for it?

6. An essential concomitant of a new Grid, re-organised to take account of wind’s intermittency would be the provision of large-scale storage facilities both prohibitively expensive and, at present, not technically feasible on the scale required. The only ideas put forward by DECC in this connection (see McKay’s paper at 3 are:

(1) Pumped s torage (2) Electric vehicle sto ra g e

It is difficult to imagine the first of these becoming available on the massive scale required and, in any event, such a system carries an inefficiency loss of about 30 per cent. The second idea borders on science fiction. It looks forward to a great new world in which we all own electrically propelled vehicles. The theory is that the vehicle owner, parking his car in the early evening, would feed the un-used energy into the Grid and then re-charge the car battery overnight when demand is at its lowest. The best one can say about this scheme is that it is no more grotesque than a range of other solutions (and, indeed, purported facts) engineered by a wholly dysfunctional DECC still under the malign influence of its former czar.

June 2012

3 When will the lights go out? Derek Birkett, 2010

4 Energy Without the Hot Air (2009) D MacKay

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Submission from the National Opposition to Windfarms The economics of windpower This submission is made on behalf of the National Opposition to Windfarms1(NOW). We are willing to give oral evidence to the committee and will be available. In areas where windfarms are planned or proposed thriving businesses already exist, wholly or largely dependant upon on the existing environment. Tourism is a significant source of income and employment. Other businesses are drawn to areas with attractive environments as they are able to recruit and retain the calibre of staff required; this has knock on effects on schools, education, housing and local purchasing transactions – the economic multiplier. 1. A Public Inquiry into the Cumulative Effect of Windfarms in Powys (2001) established that windfarms always negatively impact landscape; the question is whether the level of impact is acceptable. The Planning Inspectorate concluded th at cumulative impact on the visual and recreational value of upland mid-Wales would be unacceptable. This finding was fully endorsed by the National Assembly for Wales. Turbine height has increased by over 40m. upto 185m., increasing the area of visual impact of these moving structures in a relatively still landscape over hundreds of square kilometres. 2. Wales Tourist Board 2 and Visit S c o t l and3 investigations into the Potential Impact of Windfarms found that the commonest reasons for visiting the country were the scenery, wild landscapes and unspoilt environment. 71% of respondents identified things which most spoilt landscape views were pylons, transmission lines or wind turbines. The Scottish survey found, over a quarter of respondents said they would actively avoid areas with windfarms and a further 25% preferred areas without windfarms. The value that rural communities place on their landscape is evidenced by the almost universal local objection to large scale windfarm developments, m ost notably by the thousands of mid Wales residents who mounted a mass protest on the steps of the Senedd in Cardiff on 24th May 2011 3. The Valuing Our Environment partnership4 produced Wildlife Wales: An Economic Evaluation Scoping Study in 2007 found that the value of wildlife related activity to the Welsh economy can be considered to be substantial and as a ‘snapshot’ is estimated over a year to be at least: total output5 of £1,936millions with a direct output value of £1,426millions; total employment of 31,766 (full-time equivalents6); total Gross Value Added7 (GVA) of £894.9millions; and total income to labour8 of £478.5millions

1 Launched on 24th April 2012 and currently has 13649 signatories to its charter 2 www.ecodyfi.org.uk/tourism/Windfarms_research_eng.pdf

3 www.viewsofscotland.org/library/docs/VS_Survey_Potential_Impact_of_WF_02.pdf

4 The National Trust Wales leads the Partnership with core partners: Countryside Council for Wales, Environment Agency Wales, Heritage Lottery Fund, and Welsh Assembly Government – Department of Innovation & Networks. 5 Output refers to the ‘fruit’ of economic activity within the sector/industry in question; i.e. whatever is produced by the ‘factors of production’ (including land, labour and capital goods) 6 Not all of these jobs will be full time. The figure is calculated as an equivalent to the number of full time jobs – eg. two part‐time jobs equal one full time job. 7 GVA is the difference between output and intermediate consumption for any given sector/industry. That is the difference between the value of goods and services produced and the cost of raw materials and other inputs that are used up in production.

Page 121 This study is wildlife related and does not include other forms of landscape appreciation and outdoor activity; however the report continues, “A research study9 commissioned by Scottish Enterprise looking across the world at successful examples of green and eco-tourism (which includes wildlife tourism) identified a range of ‘good practice’ characteristics that could be used as the basis for developing the sector in Wales. Scotland has seen a significant growth in wildlife tourism during recent years.” 3. The partnership also produced - the Economic Impact of the Environment of Wales' and found its quality environment is fundamental to prosperity in Wales.£6bn GDP is directly dependent on the environment. Sustainable use and management of the environment contribute around £1.8bn in wages in Wales, and account for 1 in 6 jobs. Over £6bn of business turnover in Wales, associated with over 117,000 jobs and £1.2bn of wage incomes, can be directly attributed to the management and use of the Welsh environment. 4. National Trust report on the socio-economic value of the South West’s protected landscapes, 1999: By the late 1990s 78% of holidays to the South West were motivated by the region's conserved landscapes, leading to an industry annually worth £3.7 billion, and 54,000 full time equivalent (FTE) jo b s. 5. SW Environmental Prospectus, 1999: Excluding tourism, other businesses capitalizing on the high quality environment and protected landscapes of the SW generated £744 million in output annually and provided 55,000 jobs. 6. South West Tourism Report, 2003: By 2002, the economic value of the South West Coastal Path alone was worth a minimum annual worth of £48 M . 7. AONB Team Study, 2005: The worth of the SW Coastal Path has increased further to the extent that it is currently contributing £97M each year to the economy of Cornwall. 8. One North East Report, 2004 The annual contribution from the protected landscapes of North East England is a £700M business turnover and 14,000 FTE jobs. A quality landscape and environment was a critical factor or a significant influence on 49% of businesses that had relocated to the North East. 63% of business respondents believed landscape quality and environment reflected positively on their business performance. 75% of businesses thought landscape and environment deterioration would have a negative impact on their businesses. 9. Kentish Downs AONB Report, 2003-4: The Downs AONB is a capital resource that underpins much economic activity in Kent. Its high quality environment helps attract businesses, contributes to the quality of life that people in the county value so highly and supports a substantial visitor economy. 10. The Malvern Hills AONB, Malvern and Ledbury Area Tourism Economic Assessment, 1998/99This study found that the AONB was enormously important to the local economy. 1.11m day trips; 0.14m overnight visitors were being made to the area. £28 million being spent by visitors in the local economy. 740 FTE jobs were supported directly and 200 FTE jobs indi r e ctly. There was close social and economic symbiosis between all the Malvern townships and the countryside on their doorstep. 11. Wye Valley AONB, In Touch, November 2005. Every £1 of financial support provided by the four Local Authorities working in partnership with the AONB attracts at least another £3 to benefit the ar e a.

8 ‘Income to labour’ refers to the disposable income to labour. That is, the disposable income that is generated for the labour force. 9 Nature Capital (2004) Perspectives on International Best Practice Green Tourism. Scottish Enterprise.

Page 122 12. In Scotland10, most overnight visitors prefer a landscape from the hotel bedroom without a wind farm (63%). This showed an average 23.2% reduction in the amount someone was willing to pay for a hotel room from which a wind farm was visible. 13. Very few people living within sight or sound of a windfarm will welcome its destructive intrusion. The small minority in favour are those who have succumbed to bribery on a scale which exceeds the diminution in value of their homes. This creates extreme polarisation in rural communities. The deserted caravan park is the enemy of its adjoining windfarm.

June 2012

10 The economic impacts of wind farms on Scottish tourism ‐ A report for the Scottish Government March 2008

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Submission by Mr DJ Milborrow

1. The author is a consultant with 34 years experience in wind and energy. He is, or has been, adviser to clients in both the public and private sectors, in the UK and elsewhere. This submission is made, however , i n a p ersonal c apa c ity. 2. This submission addresses just one of the Committee's questions: – What are the costs associated with providing backup capacity for when the wind isn't blowing, and how are these accounted for in cost assessments of wind po w er? A number of related issues are also discussed. 3. No backup needs to be provided specifically to cater for windless days. Backup comes from a common ‘plant margin’ that is needed by all electricity networks. This issue can perhaps best be addressed by considering an electricity system with similar characteristics to those of the UK system, but with ‘round numbers’ to aid the argument. 4. A electricity system with thermal plant only and a peak demand of 50 GW would require approximately 60 GW of thermal plant in order to ensure that demand was met at all times with a high degree of reliability1. It may be noted that the ‘plant margin’ of 10 GW is not associated with any particular type of plant, and is calculated on statistical principles. 5. If, say, 20 GW of wind plant is added to this notional electricity system, then the reliability of that system improves. Windpower would be available during most of the year, even if it were not available at the time of peak demand. But no extra plant would need to be built, a point made by National Grid2. 6. Whether or not some of the thermal plant could be retired is a complex issue that has been the focus of numerous analyses. There is a substantial body of evidence that points to wind energy having a capacity credit -- in other words some conventional plant can be withdrawn from service as the amount of wind energy bu i lds u p. 7. The latest work that has been carried out for National Grid suggests that the 'capacity credit' of 20 GW of wind energy is about 2 GW3. In other words, the capacity of thermal plant in the notional system could be reduced to 58 GW, without compromising system reliabil i ty. 8. Estimates of capacity credit use statistical analyses of several years of operational data. The fact that wind power output may be low during one particular system peak does not invalidate the argument. A parallel may be drawn with the capacity credit of nuclear plant – around 80-85%. Although the availability of the nuclear plant during winter 2008/9 was around 50%, that does not negate the assumption that the capacity credit should be about 8 5%. 9. Although no extra plant needs to be built to cater for windless days, there are nevertheless three costs associated with the operation of electricity systems with wind energy: 1) for additional short-term operational reserve, 2) those associated with depression of the load factor of the thermal plant, and 3) those due to wind energy surpluses. 10. National Grid has esti mated4 that the additional requirements for Short Term Reserve (for 29. 5 G W of wind) will lie between 4 GW and 6 GW. Some of this is likely to be demand-side management. The remainder is likely to be part- loaded thermal plant. The corresponding extra costs for 20% wind –

Page 124 energy basis – interpolated by the author from National Grid data – are in the range £3-6/MWh, assuming the costs are assigned to wind energy. 11. It may be noted that the additional costs associated with operating the system when the larger nuclear units come into service appear likely to be absorbed as 'system costs', rather than be debited to the nuclear fleet. These additional costs are exactly analogous to the additional short-term costs for operational reserve for wind, inasmuch as they both deal with the additional uncertainty that is imposed upon the system. 12. Reduced load factor of thermal plant: Above the 5% wind penetration level (approx), the capacity credit of wind is less than its capacity factor. So 26,000 MW of wind, say, (roughly 20% energy penetration) delivers electricity that corresponds to around 10,700 MW of thermal plant (assuming a wind capacity factor of 35% and a thermal plant load factor of 85%) but only displaces around 3000 MW of thermal plant. This reduces the load factor on the remaining thermal plant. Their generation costs increase, as capital cost repayments are spread over fewer kilowatt-hours. This provides a basis for estimating the ‘additional costs of backup’, with methodology used by Dale et al5. Assuming a cost for combined cycle plant of £700/kW, these costs amount to around £2.5/MWh of wind (at 20% penetration), rising to around £6/MWh of wind at 40% penet r a t ion. 13. As any incumbent generator is liable to suffer a reduced load factor when new plant (of any kind) is built, the costs in para 12 may be regarded as ‘system’ costs. 14. Wind surpluses at high penetration levels. Wind power production may occasionally exceed system demand at penetration levels around 25%6. If no market can be found for this ‘surplus’ wind energy, a small cost is attached to this ‘lost’ electricity, as the fixed costs of the wind plant are spread over fewer units of electricity. With 30% wind, this amounts to around £0.6/MWh of wind, rising to around £1.5/MWh with 40% wind, based on an installed cost of around £1300/kW. Ways in which this ‘surplus’ may be utilised are discussed in reference 6. 15. Paragraph 14 considers constraints at the system level, but local constraints may also occur.

June 2012

1 Davies E. (Ed). Modern Power Station Practice, Volume L, System Operation. Pergamon Press, Oxford, 1991. This analysis applied to the CEGB system, but the principles still apply, although there may have been minor changes in some numerical values. 2 Holliday, C. (National Grid), quoted in the Daily Mail of 20 November 2009, “Has dismissed claims that utilities will have to maintain large fleets of idle power stations to backup unreliable wind turbines.” 3 Dent, C, 2010: National Grid Wind Forecasting. Windpower Operation Workshop Presentations 4 N ational Grid, 2009. Operating the Electricity Transmission Networks in 2020. 5 Dale, L, Milborrow, D, Slark, R and Strbac, G, 2004. Total cost estimates for large-scale wind scenarios in UK. Energy Policy, 32, 1949-56. 6 Milborrow, D, 2009. Managing Variability. Report for: World Wildlife Fund, RSPB, Greenpeace UK and Friends of the Earth EWNI. Report accessible at: - http://assets.wwf.org.uk/downloads/managing__variability_report.pdf

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Submission from SSE

1. SSE (formerly Scottish and Southern Energy) is a UK owned and based company. It is the largest generator of renewable electricity in the UK with over 3 GW of installed capacity of which around half is wind. Overall SSE is the second largest generator in the UK with a diverse portfolio of generation technologies. SSE also supplies over 9 million gas and electricity customers and o p era t e s networks in southern England and northern Scotl a nd.

Background

2. Over the past decade the amount of renewable energy installed in the UK has increased significantly, and DECC’s most recent figures for 2011 shows that renewables account for 9.5% of electricity generation in the UK1. Within this, the amount of wind installed has increased from 1.3 GW in 2006 to around 6.6 GW currently, with a further 3.9 GW in construction2. The Renewables Obligation (RO) has been a successful mechanism to achieve this, as can be seen by the fact that UK is the world leader in installed offshore wind capacity and that Scotland met its ambitious 2011 renewables target3.

Costs of wind energy

3. Over time demand for finite commodit i es l i k e oil and gas will become more volatile as supplies diminish coupled with increasing demand from emerging economies. Wind is a source of energy that is an indigenous source of energy and with no fuel costs at the point of delivery, insulating the UK from volatile international energy prices. The cost of wind energy has to be assessed in this context and on the basis that wind farms will last for 25 years or more .

4. As a maturing generation technology it is essential that wind receives the financial support that it requires to reach maturity. The effect of appropriate policy supports should not be undervalued and the viability of the wind industry in the UK remains dependent on their continued existence. It must be noted that no electricity generating technology has developed without some form of initial su p port.

5. Whilst wind does require support in the short term it is expected that the costs of wind energy will continue to fall in the coming years due to technological improvements and the development of the industry and supply c hai n s.

6. It is right that, as technologies mature, gradual and predictable reductions in support levels should occur. This provides signals to the supply chain and developers that they should continue to attempt to drive costs down; allows the UK government and industry to see which technologies can achieve the necessary cost reductions over particular timescales; and ensures that consumers are getting best value for money. However,

1 DECC (2012) - Energy Trends - March 2012 2 RenewableUK (2012) - UK Wind Energy Database - http://www.bwea.com/statistics/ - Last accessed 24th June 2012. 3 Scottish Government (2012) - Scotland beats 2011 green energy target - http://www.scotland.gov.uk/News/Releases/2012/03/geenenergytargets29032012

Page 126 cutting support levels too quickly, without a clear evidence base, will have a number of negative impacts on the industry and would give a poor signal to potential investors in the UK.

Cost to consumers

7. The cost of decarbonisation is borne b y consumer s through a levy on their electricity bills. This levy pays for the Renewables Obligation (RO) and currently accounts for 3% or £17 of the average domestic electricity bill according to DECC4. It must be noted t h at renewables support is not the only Government policy that is levied on consumer bills. In total according to DECC Government policies account for £69 of the average domestic dual f u el bill of £126 0.

8. Although the RO is a cost to the consumers, renewables benefit the electricity market by removing the need for high carbon generation through the merit order effect. This occurs as wind at the point of delivery has no fuel cost and forces marginal high carbon plant off the system, by meeting system demand that would have otherwise had to be met by other generation. Figure 1. highlights the merit order effect wit h the s olid blue l i n e i n dic a t i ng a point when there is a lot of wind generating, and the dashed blue line showing when wind isn’t generating. The diagonal lines show levels of system demand at night, day and peak, with anything on the left side of the diagonal lines being on the system and anything on the right being constrained off.

Figure 1. How wind power influences the electricity market- (EWEA 2009)5

Onshore wind

9. Onshore wind is the cheapest and most scalable renewable technology. It is expected that onshore wind will be commercially viable without support within the middle of the next decade and support levels should be reduced incrementally accordingly over that tim e to provide an appropriate trajectory to industr y .

4 DECC (2011) - Estimated impact of energy and climate change policies on energy prices and bills 5 EWEA (2009) - The Economics of Wind Energy

Page 127 10. Therefore, the independent analysis of onshore wind energy costs undertaken for DECC by ARUP6, on which the proposed reduction for onshore wind from 1 ROC/MWh to 0.9 ROCs/MWh was based, is an accurate reflection of the current costs experienced by developers and accurately reflects the cost reductions that have been made so far. However, any further reductions before costs have reduced would make several projects unviable and would unsettle investor confidenc e .

Offshore wind

11. The U K is t h e w orld leader in offshore wind, and there is significant potential to solidify this position in the next decade with the largest projects in the World due to be complete within the next 12 months, including SSE’s 500MW JV at Greater Gabbard and larger Round 3 projects to be dev e lop e d.

12. However, notwithstanding this initial success, o ffshore wind is still an immature technology with high upfront capital costs. The technology therefore continues to require appropriate levels of financial support and supporting offshore wind with 2 ROCs/MWh until 2014 is sensible, as is the long term aspiration of gradual decreasing support to 1.8 ROCs/MWh by 2016 / 1 7 .

13. Over time the costs will decrease and the Government’s and the Industry’s sha r ed ambition to reduce offshore wind costs by 30% to £100/MWh by 2020 is achievable and SSE fully supports the work of the Offshore Wind Cost Reduction Taskforce. However, any cost reduction will only materialise if industry has the certainty it requires from Government in order to make investment dec i s ion s d evelop the supply chain in t h e UK.

Conclusion

14. The UK must undertake a major change in how its electricity is generated. As an indigenous source of energy, wind will have a considerable role to helping to make this transit i o n .

15. At present the costs of onshore wind compare favourably to other technologies and it is expected that they will reduce still further in the coming years. Wind remai n s an immature technology and whilst still developing requires appropriate levels of support. The industry is however committed to bringing these costs down and is working with the supply chain and Government to achie v e this.

June 2012

6 ARUP (2011) - Review of the generation costs and deployment potential of renewable electricity technologies in the UK

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Submission by H Ferguson

1 I would like to make three points in my statement and hope that they enable the committee to appreciate some of the hidden costs which detract from any benefit wind farms might deliver.

A. What drives people to becoming part of the "small but vocal minority", I count myself as a typical example and feel that it was forced upon me by the threat of losing that which I value highly - the rural location of my home.

B. The social cost of onshore wind farms, difficult to cost but which causes tension and resentment within communities where such tension has not previously existed.

C. What would it take to make wind farms more acceptable to me.

2. What makes people become the small but vocal minority?

It took 20 years in a successful career before I was able to purchase a dream home in the country and another 20 years to create a garden which now meets the standard required for inclusion in the National Garden Scheme. A feature of the garden is that it is part of the local landscape and has no barriers or boundaries around it, the surroundings or borrowed landscape is a feature of the garden.

In 2008 a test mast was erected 2.5km from the garden but was clearly visible. We knew nothing about its purpose but were intrigued. In the summer of 2008 we were approached by a wind farm developer who wanted to do background noise measurements for a wind farm that was being "scoped". We were intrigued rather than alarmed and cycled around to have a look at the site near the test mast and concluded that it was a reasonable location - at a reasonable distance from villages and isolated homes. We assumed that the turbines would be about the same height as the test mast and close to it. The representative was evasive about the location of turbines and was equally evasive about their height.

We agreed to the noise measurement but had become apprehensive - we knew very little about wind farms and the developer was giving us no information. We subsequently found out that information had already been provided to Parish Councils who did not appreciate its significance and had not passed it on.

Just before Christmas in 2008 the developer held an exhibition and revealed the full extent of the proposed wind farm including the size, number and location of the turbines. My wife was heartbroken, turbines would dominate the view from every room in the house and more importantly from most of the garden. In an instant they threatened all that we had worked 40 years to achieve.

It was at that point that I became a member of the "small but vocal minority", determined to do all I could to defend all that I had worked for.

Page 129 The first step - read everything that I could find concerning wind farms - planning law, noise regulations, shadow flicker, impact on wildlife, landscape and visual impact, power generation, the energy market, the RO subsidy system. Having started by thinking that wind farms were an acceptable addition to our landscape and that climate change was a serious concern it became clear that wind farms were ineffective and that there was no certainty about the extent to which climate change was driven by man or even the extent to which the climate was changing.

The only guarantee - wind farms destroy rural environments - but no guarantee that they have any impact on climate change or even that the climate was changing and that CO2 was the main driver of such change.

We should not trade our countryside for an industrial landscape when there is no guarantee o f any benefit.

3. The social cost - the hidden burden on society, fuelling resentment and discontent

- One year scoping, followed by submission of a planning application which after three years has still not been decided. If rejected and the developer appeals it will be another year before a decision. Planning permission may allow 5 years before construction must commence. In total over 10 years of uncertainty. It is unreasonable to put people under such stress for so long.

- The alleged "small but vocal minority " opposing wind farms are the result of them being in the minority of people, selected at random due to location, to have their rural s urroundings transformed into an industrial landscape. Each proposal will drive more people into the "small but vocal minority".

- The impact of a wind farm declines with distance, significant impact closer than 2km and severe at anything less than 1km. These people feel insulted when they are branded as NIMBIES. The loss of amenity and the dismissive attitude generates social tension in communities and between communities.

- This tension is exacerbated by community fund "bribes". People living in remote properties are the ones who suffer the greatest impact, losing the key characteristic of their properties - the isolated rural nature. It is easy to get a majority in favour of a wind farm - simply extend the survey area to 10km when only 4% of people will be closer than 2km and about 50% will be beyond 7km. Promise them community funds and support is secured. But at what cost to those living within 2km. What price will be put on the social tension so generated?

- Further tension is created by the knowledge that the landowner will be receiving a substantial rental income and this will be paid from a subsidy of around £250K per year for a typical 2.5MW turbine.

- Loss of property value - the wind industry have long claimed that wind turbines have no impact on property values. This is widely disputed by those living very close to turbines, but statistically difficult to prove. A property with long distance open rural views will simply not

Page 130 have the same value if 400 foot high turbines are introduced to the near distance. Loss of property value may not be a planning consideration but it must be a factor in any cost benefit analysis.

- Funding for appeals. Local campaign Groups with committed teams may spend up to £100,000 defending an appeal by a wind farm developer. They stand to gain nothing by doing this, other than retaining the environment that they value so highly. The developer will stand to gain £50Million in subsidy over the life of an average wind farm. It is not hard to see why there is tension between communities and developers.

4. What would it take to make a wind farm acceptable to me ?

There is nothing which would make a wind farm closer than 2km to my house acceptable. I would not oppose a wind farm if it was further away than 5km. Industrial turbines over 100 metres high but less than 140metres should be no closer than 2km. Should any dwelling be closer than 2km the developer should be compelled to buy any property at 95% of the pre wind farm market valuation at any time between approval being granted and up to 2 years from the wind farm commencing operation. This is not an unreasonable condition and would save developers by removing or radically reducing opposition at the planning stage. Providing an element of security for home owners and the opportunity to re-locate should they find the presence of the turbines unnacceptable.

June 2012

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Submission by the Grantham Research Institute for Climate Change, London School of Economics. Samuela Bassi & Sam Fankhauser

1. What do cost benefit analyses tell us about onshore and offshore wind compared with other measures to cut carbo n ? 1.1 Onshore wind has the lowest cost of all forms of low-carbon electricity generation. It is also competitive (or will soon be competitive) with fossil fuel-based power, once the economic costs of carbon are fully factored in. Offshore wind, in contrast is still a relatively expensive technology.

1.2 However, the visual impact of onshore wind is a non-trivial local issue and should be built into cost calculations. First, onshore wind developments should not be allowed in areas of outstanding natural value. Second, people value natural landscapes and are willing to pay to preserve them. Studies indicate that willingness to pay could range from 0.3 to 4 p/kWh. This would add between 3 and 60 per cent to the current levelised cost of onshore wind (which is 6.6 to 9.3 p/kWh). Such local environmental constraints can make more expensive renewable technologies – such as offshore wind or solar photovoltaics – potentially attractive. One can think of their extra cost as the premium society is willing to pay to avoid the local environmental cost of onshore wind.

1.3 There is a distributional aspect to wind developments in that those bearing the local environmental cost (local communities) are different from the beneficiaries of a project (electricity consumers and producers). In addition to concern about costs and benefits, there are therefore questions of adequate benefit sharing with (or financial compensation for) local communities.

2. What do the latest assessments tell us about the costs of generating electricity from wind power compared to other methods of generating electricit y ? 2.1 The UK is bound, under the Climate Change Act (2008) and the subsequent carbon budgets, to cut its annual greenhouse gas emissions by half by 2025, compared with 1990. This requires a power sector that is virtually carbon-free by the mid to late 2020s. With this in mind, the issue of wind energy deployment becomes a choice between this and other low- carbon energy sources, not between wind energy and fossil fuels.

2.2 It has been argued that efficient combined cycle gas turbine (CCGT) power plants may be a cheaper way of meeting our 2020 targets. However, the further decarbonisation required in the 20s cannot be achieved by relying heavily on unabated gas power stations. Prioritising penetration of CCGT plants rather than wind energy risks higher costs in the long run as undesirable technologies are locked in that would then have to be scrapped prematurely.

3. How much support does wind power receive compared with other forms of renewable energ y ? 3.1 Renewable energy subsidies can help overcome the market failure related to introducing relatively immature technologies to the market. These market failures mean that new low- carbon technologies will not develop at all or quickly enough if the market forces alone are relied on, for instance because of the so-called ‘valley of death’ between the push of publicly- funded research and the pull of commercial development. Renewable energy subsidies complement (and, where the carbon price is too low, partly replace) policies to put a price on

Page 132 carbon. Carbon must be priced to reflect the environmental cost of climate change and remove the implicit subsidy fossil fuels enjoy for their greenhouse gas pollution.

3.2 Renewables subsidies should be gradually reduced and removed as technologies mature and overcome the market failures. For onshore (but not offshore) wind we can expect this process to be relatively quick. For example, some estimated that onshore wind could be economically competitive with older conventional sources of energy in 5-10 years (see e.g. Bloomberg NEF, 2011). It is important that the phasing-out of subsidies is done in a predictable way, with the criteria and timetable for decisions being clear and transparent. Ad- hoc and sudden changes in subsidy levels creates policy risks which act as a disincentive to private investors and increase energy costs.

3.3 It is worth noting that fossil fuels also benefit from a range of direct and indirect subsidies. Subsidies for fossil fuels are mostly direct consumption subsidies through the lower rate of VAT on domestic electricity (although this may also benefit non-fossil-fuel electricity) and other tax rebates. The OECD (2011) estimates that subsidies for coal, gas and petrol in the UK were in the order of £3.6 billion in 2010. Furthermore, fossil fuels benefit from direct exploration and production subsidies, such as the £65 million support for the development of fields west of the announced by the Chancellor in the last Budget (HM Treasury, 2012).

4. Is it possible to estimate how much consumers pay towards supporting wind power in the UK? (i.e. separating out from other renewables) 4.1 The impact of renewables is embedded in the cost of the Renewables Obligation, the main subsidy mechanism for renewable energy. Using official estimates of future electricity consumption and generation capacity (DECC, 2011; CCC, 2011; ENSG, 2012), and assuming an average Renewable Obligation Certificate (ROC) price of £45 per MWh, it is possible to obtain an indicative value for the contribution of wind technologies to the overall bill. This would be about 0.18p/kWh in 2011 and 0.37p/kWh in 2020 for onshore wind, and about 0.29p/kWh in 2011 and 1.47p/kWh for offshore wind. Assuming the average household consumption of electricity will remain unchanged at 3,400 kWh per year1, this would imply an additional annual cost of £6 in 2010 and £13 in 2020 for onshore wind, and roughly £10 in 2010 up to £50 in 2020 for offshore wind.

5. What lessons can be learned from other countrie s ? 5.1 Experience from Germany and Denmark, which have wind capacities respectively of 27,000 MW and 3,700 MW), confirms that the involvement of local communities is crucial when developing new installations. Unlike the UK, where the majority of onshore wind projects are developed and owned by commercial companies, the majority of projects in Germany and Denmark (up to 80 per cent in Denmark) are characterised by a ‘community ownership’ model, where local communities pool resources to finance the purchasing, installation and maintenance of projects, and individuals are entitled to a share of the annual revenue which is proportional to their investment (CCC, 2011).

6. What methods could be used to make onshore wind more acceptable to communities that host t h e m? 6.1 A study by Bowyer at al. (2009) investigating UK, Danish and German experiences confirms that to create an effective planning system that respects concerns about nature

1 The Department of Energy and Climate Change uses instead a higher estimate of 4,000 kWh. For consistency we adopt here an assumption based on the Committee on Climate Change. This is also more consistent with Ofgem’s estimates – see footnote 16.

Page 133 conservation whilst securing rapid onshore wind development, a number of requirements must be met. These include: early engagement of stakeholders, clarity over nature conservation concerns and high quality environmental impact assessments. It is advisable that such elements are taken into account in the context of the UK planning framework.

6.2 In turn, wind investors will want to see wind developments to be regulated by sound policy-making. As outlined by Bassi et al. (2012) key measures should include: a clear price on carbon; a planning system that (i) reduces the costs for developers, (ii) factors in local environmental concerns and prevents developments in important environmental areas and (iii) ensures appropriate compensation in areas where local impacts are acceptable; and flanking measures e.g. better interconnectivity of grids, are required to ensure that the electricity system can cope with intermittent resources.

June 2012

Page 134 WIND 48

Submission by George F Wood (retired ‘Head of Technical and Economics, Balancing Services’, National Grid)

Economic Factors Associated with Wind-Turbines . 1) If the Renewable Obligation Certificate subsidies (ROC’s) were abandoned practically no more wind-turbines would be built in the UK. This is fact, and therefore in itself proves that wind-turbines are uneconomic compared to conventional power generation sources such as gas, coal and oil fired power stations, and also the existing nuclear power stations. With the current ROC subsidies levels of 6p/kWh onshore and 12p/kWh offshore, this means that the wind-turbine generators receive practically double or treble the level of payments of the current conventional and nuclear power station sources.

2) Wind-turbines require significant levels of additional back-up and regulating reserve support because of their output intermittencies that result from the changeable wind conditions, which: a) almost doubles the wind-turbine generation capacity build factor costs required for the UK Power System in order to provide the adequacy of security of electrical supplies (e.g. on the coldest winter days, with the highest electricity demands, there is generally no wind because of a high pressure zone spreading across the whole of Britain and the Western reaches of Europe which therefore results in no outputs from wind-turbines across the country) b) places an economic burden on the electrical supply costs from the need for and generation from additional regulating and standby generation reserves. These additional costs are charged through the balancing services to each Supplier and not levied directly against wind-turbines

3) Wind-turbines, by their very nature, for safety, noise, and aesthetics, and also because of the the need to capture the windiest spots, have to be built in remote locations requiring new power transmission or distribution connections. The major National Grid infrastructure costs to reinforce the power network will be separately charged and levied back to the customers through the Suppliers tariff charges. These additional costs are not levied directly against wind-turbines.

4) New electrical power interconnectors are being built and further planned to Northern Ireland, Southern Ireland, Norway, between Scotland and England, Belgium, Holland as well as existing interconnections to France. These are all either connected or to be connected via high voltage submarine cables. These future transmission interconnector development costs would not all be necessary or economic if it were not for the continued expansion of wind-turbines. All these additional costs should be factored against the requirements for wind-turbines and will ultimately be charged back through the tariffs of Electricity Suppliers.

5) Additionally, all interconnector power transfers country to country and to remote parts of the British Isles will incur additional power transfer energy losses which will all be factored back to the consumer as ‘add-on costs’ via the ‘Electricity Suppliers’ charges and should mainly be factored against wind-turbine costs.

Page 135 Footnote: Wind-turbines offer minimal or possibly no carbon emissions savings if accurate carbon footprint evaluations were carried out on the UK generating and transmission resources for ‘with’ and ‘without’ wind-turbines.

June 2012

Page 136

WIND 49

Submission from Greenersky.co.uk and Sustainable Sitlington

Wind power generation and Community co-operatives. Financial and social benefits for everyone.

1: Installing wind turbines in any community will always be a contentious issue especially when residents believe that they live close to an area of un-spoilt and natural beauty. Overcoming the issues that residents have can be a considerable obstacle for outside developers often unfamiliar with the area as there may be a feeling that something is being taken away from the community. To overcome this, the formation of community co-operatives has been encouraged, b u t n ow there is an urgent need for investment at a community level. The limited availability of funding and the need for these groups to raise approximately 25% of capital costs may hinder the formation of this type of community co-operative and therefore, the take up and acceptance of wind power by communities. A government backed scheme to enable financing for large scale community projects could address this issue.

2: Planning application costs along with the currently required reports and studies are significant, often in the region of £50,000 and with no mechanism to guarantee an application, the risk of “wasting” this money, will often deter community groups from contemplating the option. A simplified pre-application procedure for community co-operatives and further access to grant funding or possibly a zero application charge could help in this case Also, there could be a consideration given to a centralized government planning system w hich utilizes readily available data to streamline this process and remove local politics from the equation.

3: There is a clear need for a legally defined planning framework. Although the erection and placement of wind turbines is subject to lots of “guidance” planning applications often fail because of interpretation and misunderstanding. Where it is proven that a community will benefit, financially and socially, consideration should be given to the issuing of a Community Development Order (CDO) without the need for a referendum.

3i: Wind Turbines (Minimum Distances from Residential Premises) Bill [HL] 2010-12 proposes a minimum distance from residential premises. If brought into law, then this will severely reduce the area available to onshore wind turbine development, p ossibly forcing developers to look to more rural and offshore areas which, at current installation prices, will increase capital costs and overall KWh costs in some cases. If development is forced offshore, this may lead to an increase in overall KWh costs unless the cost of offshore wind is cut significantly. Current estimates for onshore wind are approximately 4.5p-6.0p per KWh whilst offshore wind is estimated at 12.0p- 15.9p per KWh.

3i: Wind Turbines (Minimum Distances from Residential Premises) Bill [HL] 2010-12 Although this bill incorporates a section where the relevant authority may grant planning permission or development consent subject to certain criteria being met, it will in all likelihood,

Page 137 drastically reduce the available area for the construction of onshore wind turbines reducing the number of communities that could benefit.

3ii: This proposal also allows one household, property owner, l andowner o r tenant to prevent development. In the case of an owner of property or land, this may allow refusal even if they are not resident at the property. [Wind Turbines (Minimum Distances from Residential Premises) Bill [HL] Section 3 (2)] [Ref1]

4: Grid connection costs and the installation of cabling are significant. One recently received quote was £260,000 to install and connect 400 metres of underground cable. A minimum distance bill will in all likelihood increase the distances from connection points, which may in turn, increase KWh costs. [Ref2]

4i: The timescale given for a Distribution network operator (DNO) to carry out installation of underground cables and subsequent grid connections was 12-18 months from the date of acceptance of a quotation for work. This clearly has implications for those planning a project especially with the uncertainty surrounding the feed in tariffs, which without; most projects would not be financially viable. [Ref2]

4i: Feed in tariffs are an important aspect in encouraging the construction of wind turbines, uncertainty surrounding tariffs, and their withdrawal, may prevent projects from being developed, especially by community groups. A guarantee of retaining a set tariff at the time a planning application is submitted would give an element of security to those wishing to embark on a project.

5: Dissemination of information surrounding wind turbines and their effects on people, wildlife and habitat, makes it difficult for individuals to ascertain the truth and also leads to a cautious uncertainty within communities, especially where there may be a minority of vocal protesters who use anecdotal evidence, citing cases of illness, destruction of wildlife and habitats, along with inefficiencies, as “evidence” to persuade residents that wind turbines should not be constructed within specific communities.

5i: If this situation were to be addressed by collating all the available information and running a nationwide, government backed media campaign specifically targeted at communities and the formation of co-operatives, then it is possible that community acceptance could increase, especially when wind turbines are seen to be providing financial and social benefits to many. [See Endnote 1]

6: Allowing energy suppliers, who wish to erect wind turbines, to of fer cheaper electricity to nearby communities should be encouraged. Although there may be some displacement caused, competitiveness should not be subject to regulation unless there is a risk of substantially increasing costs to the consumer.

Lessons to be l earned from other countries?

1: An example of a successful community scheme is Wildpoldsried, Bavaria. With a population

Page 138 of 2600, it produces 321 percent more energy than it needs, generating approximately 4.0 million Euro per annum in revenues from selling the excess electricity. Using a combination of technologies the village has been transformed. Projects such as this can enable self sufficiency within communities, not only in terms of electricity generation, but in the provision of services and social care. There is a tremendous amount that we can learn from Germany and how it has encouraged communities to invest and accept renewable technologies by allowing them to keep the rewards for themselves. It is clear from this example that once a community is empowered [Ref 3]

Summary:

Community acceptance is vital if renewable energy and Co2 reduction targets are to be met Rather than see “big energy” companies take over the landscape, there may have to be community involvement in future onshore wind projects. Limited availability of funding is the biggest obstacle; the formation of a government backed scheme for financing these community projects may be necessary.

Legal binding planning regulations rather than guidance, and pre-planning guarantees will give community groups security when embarking on these ambitious projects.

Uncertainty surrounding feed in tariffs and the minimum distance bill along with what appears to be a constantly changing position by central government on renewable energy policy does not instill confidence.

Grid connection costs and the timescales involved will need to be addressed if communities are to be encouraged to embark on these projects.

A national campaign promoting wind turbines and the community benefits could have a substantial impact on views and perceptions and may encourage more communities to become involved.

Energy companies and wind turbine developers should be encouraged to offer incentives to communities and these incentives should benefit everyone within the community.

Germany has encouraged community groups to be involved in renewable schemes for many years and the benefits are obvious. By helping communities to develop and run renewable energy co-operatives Germany has helped create communities that are both prosperous and socially independent.

References

1: http://www.publications.parliament.uk/pa/bills/lbill/2012-2013/0011/13011.pdf 2: Jon Clarke, Humberside Community Development Agency 3: http://www.zeitnews.org/energy/german-village-produces-321-more-energy-than-it- needs.html

Page 139

Endnote

1: If communities were made aware of the possible benefits through an advertising campaign it may well be that they will demand to be included A community project consisting of just three 500Kw wind turbines could provide income in excess of £20 million over its lifetime (20 years) If this money were to be re-invested into the community and used to fund installations of solar thermal systems, solar PV systems and biomass boilers; this could help reduce fuel poverty amongst certain sections of the population. Coupled with education and energy efficiency measures, communities can contribute significantly in reducing energy bills and the overall Co2 emissions of the UK ahead of the 2020 target.

June 2012

Page 140 WIND 50

Submission from the No NOW group

Summary

This input is from No NOW, a group of local people in Norton, Doncaster (South Yorkshire). No NOW was formed in April 2011, following local concern about 2 proposed 125metre high wind turbines in Norton Parish. Norton is within a mile of the borders of West and North Yorkshire and the proposal therefore impacts on local people who do not live in the Doncaster area.

No NOW is not opposed to responsible renewable energy strategies and strongly supports the recent development regarding the Don Valley Power Project by 2Co Energy for Carbon Capture, Use and Storage.

The Committee has asked for input on 2 sides of A4. It is impossible to cover the range of questions the Committee has asked for input on (plus a number of related issues which must be taken into consideration) in so few words but no doubt experts both for and against wind power will be available on 10 July to give this input.

Specific issues: Instead this brief input will cover the specific concerns No NOW has regarding the local proposals, and which we are aware from discussions with other groups throughout the UK, are similar. Some of these are:

1. Wind power by its very nature is intermittent. This requires back up and therefore wind farms can never be stand alone. As the committee has recognised in the questions it has set, there is significant cost in providing this back-up, to the extent that the current power stations would still need to be in operation, just to support the backup needed by wind turbines. 2. To date no analysis is available on how much CO2 an individual wind turbine can save. Wind turbine applications do not have to document how much energy is consumed in the construction (indirect and direct) of wind farms, and in their running. 3. Wind turbines cannot work in isolation; they have to be connected to the grid and these connections cost substantial amounts of money. Individual applications do not deal with these issues, and they are not costed out locally, regionally, or nationa l ly. 4. In the local area (Doncaster) 25,288 households (20.1%) were identified in 2010 as being in fuel poverty, a significant increase from 14,872 (12.1%) in 2006. This figure will increase further as more and more wind turbines are consented and are connected. 5. The local area has a low average wind speed meaning that the load factor for the local wind farm is likely to be less than 25%. Increasing the number of people in fuel poverty to underwrite the subsidy for intermittent provision of power, which has t o b e backed up at all times, is not a logical use of resource.

The last point the Committee asks for input on is how to make on shore wind more acceptable to local communities. Local people in Norton were asked via local councillors to give their views on the proposed wind turbines. The results were that 78.9% of the households who responded (28.1% of total households) said they were against the wind turbine proposal.

Page 141

Given the points made above it is hard to see how local views could be changed; the economics of the subsidies and the impact that wind turbines can make on power production do not stack up. No NOW’s view is that resource should be put into other renewable technologies, such as CCS, but not into wind power.

June 2012

Page 142 Memorandum submitted by Roger Helmer (WIND 51)

1.1 Democratic deficit & top‐down policy‐making. There has been little public debate about UK energy policy of any consequence. The previous government and present coalition have sought to champion the issue of climate change on the global stage, and pushed for stronger EU and domestic targets and for a global agreement. This green political consensus has deprived the public of the opportunity to hear dissenting opinion, and has sidelined individuals who have criticised climate and renewable energy policies.

1. 2 Proper scrutiny of the economics of wind power is overdue, but welcome. However, 'the economics of wind energy' cannot be understood by itself. The full context of the current emphasis on renewable energy needs to be remembered. The UK's wind energy programme is the consequence of policies at international, EU, and UK levels, which have been characterised as 'target‐oriented' and 'top‐down', setting permissible limits for emissions, and quotas for the production of renewable energy.

1.3 What is most notable about these approaches is that they are prone to failure. The UNFCCC process has failed to find a meaningful agreement between parties. The EU is riven‐through with disagreements about nuclear energy, shale gas, and whether there should be an emphasis on renewable or low carbon sources of energy, with member countries beginning to express their preferences for radically different policies. The UK's own emissions reduction‐targets have been comprehensively missed, and show no signs of being met before 2030i . These failures were anticipatedii, and mistakes which have damaged economies and relations between countries could have been avoided, had there been a more open debate.

2. Lessons from other countries. Stark contrast exist between the energy policies of other countries. The most useful comparisons exist between the USA and Germany. In the USA, a boom in shale gas has allowed energy prices to fall, leading to the cancellation of comparatively expensive wind, coal and nuclear projectsiii. More surprisingly, it has resulted in a substantial reduction in CO2 emissions from the electricity generating sectoriv. Germany on the other hand, which produces approximately 8% of its electricity from wind, has had a very different experience. Germany now has the second highest domestic energy prices in the EU, beaten only by Denmarkv. Although Germany is routinely portrayed as a pioneer of renewable energy, doubts have emerged about the stability of the country's grid, and the ability of consumers to pay for rising costsvi. Furthermore, the decision to phase out nuclear energy has led to planning and approval of 29 gas fired and 17 coal‐fired power plantsvii, and calls for the repeal of emissions regulationsviii.

3 Estimating the cost of wind energy. Most economic analyses of the cost of wind power look simply at a stand‐alone wind turbine. But any realistic costing has to look at the cost of wind power at grid scale plus conventional back‐up. Back‐up generally requires outmoded single‐cycle gas turbinesix . These are not only inefficient, but used as back‐up they have to run intermittently, which further reduces their net efficiency. There is no good estimate of the total cost per unit of electricity from a combined wind plus back‐up system, but the Hughes Report demonstrates that the capital cost of wind plus back‐up is nine to ten times the equivalent capacity in combined‐cycle gas turbines alone.

4.1 Opportunity cost & other hazards. The effect of shale gas exploration on domestic energy costs and CO2 emissions in the USA demonstrates the hazard that could be created by premature over‐emphasis on renewable energy, especially wind: opportunity cost. This in turn has a number of consequences, which have been overlooked in the debate.

4.2 The legacy of a commitment renewable energy. The expense of an ongoing commitment to existing subsidy schemes (ROCS/FITS, etc) and the capital investment necessary to make the grid compatible with the variability of wind have already been identified as factors which may undermine UK competitiveness ‐‐ especially to the high energy industries and manufacturing sectorx. But this disadvantage may worsen if the success of conventional and new gas exploration methods continue to lower prices in the USA and elsewhere.

Page 143 4.3 incomplete cost‐benefit analyses. Attempts to estimate the cost of wind energy to the average household have not been comprehensive and alternatives have not been given due consideration. For instance, the DECC have argued that the cost of wind energy to the average household amounts to just £6 per yearxi, and that renewable energy will begin to yield lower domestic energy bills by 2020, owing to rising fossil fuel pricesxii. But these claims fail to explain what households would be paying under other policy scenarios ‐‐ for example against a scenario in which the USA's success in exploiting shale gas was repeated in the UK. Furthermore, the fact of lower gas and electricity prices in the USA is a material demonstration that the DECC's assumption of rising fossil fuel prices ‐‐ which underpins its estimation of costs caused by energy policies ‐‐ is unsafe.

5.1 Comparisons with other techniques There has been insufficient recognition of the tension between the emphasis on 'saving the planet' and 'keeping the lights on'. While the former has dominated the political agenda, the imperatives of sustaining a competitive economy and keeping homes powered have been diminished. Political ambition has been justified on the basis of the urgent need to tackle climate change. But as has been observed by many climate and energy policy experts, and discussed in paragraph 1.2, top‐down, target‐based policies have comprehensively failedxiii. Due substantially to the poor modelling of the cost of wind energy discussed in paragraph 3, wind energy seemed to be a sufficiently mature technology to meet such policies in theory, but in practice has not helped the UK to meet its renewable energy and climate change targets, or close the widening energy gap.

5.2 Nonetheless, if emissions‐reduction is a worthwhile end, policy approaches which emphasise 'technology‐ up' solutions may offer better near and medium prospects. Gas and nuclear energy are proven near‐term means to reduce CO2 emissions rapidly, and reserves of these fuels do not seem to be in declinexiv. In the longer‐term, renewable energy techniques should be able to prove themselves at grid scales before displacing existing and cheaper forms of producing energy from our energy supply.

June 2012

i Cambridge Econometrics. Press release. September 2011. & Committee on Climate Change. Meeting Carbon Budgets – 3rd Progress Report to Parliament ‐ Executive Summary. June 2011. ii Roger A Pielke Jr. 'The British Climate Change Act: a critical evaluation and proposed alternative approach'. 2009. Environmental Research Letters Volume 4 Number 2 iii Julie Johnsson and Mark Chediak. 'Electricity Declines 50% as Shale Spurs Natural Gas Glut: Energy'. Bloomberg. 2012. iv Lu X, Salovaara J, McElroy MB. 'Implications of the recent reductions in natural gas prices for emissions of CO2 from the US power sector.' Environmental Science and Technology. 2012. v 'Domestic electricity prices in the EU and the G7 Countries' ‐ Digest of UK Energy Statistics. Table 5.5.1. vi Alexander Neubacher & Catalina Schröder. ' Germany's Nuclear Phase‐Out Brings Unexpected Cost'. Spiegel Online. 6/6/2012 vii Reuters. 'Germany plans to build, revamp 84 power plants‐BDEW'. 23/04/2012 viii D. Wetzel & D. Siems. 'Uralt‐Kraftwerke sollen einen Blackout verhindern'. Welt Online. 10/05/2012 ix Gordon Hughs. 'Why is wind power so expensive?'. Global Warming Policy Foundation. 2012 x Ruth Lea & Jeremy Nicholson. ' Policy And The Threat To Manufacturing Industry'. Civitas. 2010. xi DECC. 'Are wind farms the reason my energy bill is so high?'. xii 'Estimated impacts of energy and climate change policies on energy prices and bills'. DECC. 2010. & 'Communication on DECC Fossil Fuel Price Assumption'. DECC 2008. xiii 'The Heartwell Paper'. LSE. 2009. xiv International Energy Agency. 'IEA report sees bright future for natural gas over next 5 years'. June 2012. & World Nuclear Association 'Supply of Uranium'. September 2011.

Page 144 Memorandum submitted by Montgomeryshire Against Pylons (WIND 52)

EXECUTIVE SUMMARY

As the leading campaign group in mid-Wales, Montgomeryshire Against Pylons, would like to make an oral submission to the committee to your very timely inquiry about the costs of onshore wind energy. We are opposing the biggest concentration of giant 150-foot new pylons in Britain, some 600 in all, plus hundreds of smaller feeder pylons, stretching altogether over hundreds of miles (many of which will suffer leakages because of the remoteness of the countryside), connecting up to a proposed 2000 wind-turbines in Wales, Central, North and South. Our most imminent threat is a scheme for some 30 Scottish Power Renewable 600-feet turbines (twice the height of the London Eye) in the Dyfnant Forest, requiring massive tree felling near the historic beauty spot of Lake Vyrnwy which will tower over the low lying but exceptionally beautiful and unspoilt hills of mid Wales and be visible from Snowdonia, some 40 miles away.

Unsurprisingly, although mid-Wales is sparsely populated, we are the biggest protest group so far in Britain staging demonstrations that are regularly attended by some 2000 people and last year held the largest protest outside the Welsh Assembly in its history, with our volunteers paying to be bussed down. Omitting the environmental loss to some of the most beautiful landscapes in Britain and indeed the world, which is perhaps outside the remit of the inquiry, we would object to the economics of wind power from a regional perspective on the following grounds:

1. The penalisation of those least able to pay (see below), in fuel poverty already, to provide windfalls to turbine companies, speculators and some landowners. 2. The devastating effect on tourism and industry estimated in mid-Wales to earn around £700m. 3. The economic impact on farming, the second biggest industry in mid-Wales. 4. The impact on property prices, which some estimates suggest may fall by a third or more. 5. The huge additional costs being saddled on local industry (also see below).

I enclose our view of the wider national economics of wind energy, which we believe is the prime concern of your committee.

ECONOMIC EFFECTS:

1. Levies increasing energy costs to consumers to support climate change policies have impacts of various kinds bearing on the risk of hardship and energy affordability; direct impacts caused by the levies themselves, indirect impacts caused by increased system costs resulting from the adoption of certain renewable technologies, principally wind, and macroeconomic impacts, for example income, employment, and cost of living effects caused by fiscal burdens on and rising energy prices for the industrial and commercial sector.

2. Direct impacts are relatively straightforward to quantify. By contrast, the indirect impacts of policies on overall energy system costs are problematic, and insufficiently studied. These extra costs vary in character from technology to technology, with the most significant arising

Page 145 in the electricity sector as a result of the introduction of high levels of wind power, which is uncontrollably variable. Accommodating these disadvantages requires grid expansion and reinforcement, an increased level of rapid response plant to handle errors in the wind forecast, and the operation at low load factor of a conventional generation fleet equivalent to peak load (plus a margin) in order to preserve security of supply.

3. The actual cost of the renewables programme to the consumer is around £5.6 billion in the period 2002 to 2010, with a likely on-cost of a further £35 billion up to 2020, at which point the annual subsidy cost would be around £6 billion. This latter quantity is consistent with similar numbers found in the Climate Change Committee’s Renewable Energy Review of May 2011, which estimates that renewables policies would put 2p/kWh, or £6.5bn, on the national electricity bill in 2020, an increase in the wholesale price of between 14 and 28 percent on the Committee’s assumptions regarding wholesale prices at that point. Lord Marland, Parliamentary Under-Secretary of State at the Department of Energy and Climate Change, revealed that the department estimated the cost of the Renewables Obligation between April 2002 and March 2011 to be approximately £7.3bn. Lord Marland also said ‘there has been no estimate made of the total cost of environmental policies on fuel poverty’.

4. Annual subsidies in 2020 exceed £8 billion, and the total subsidy taken from 2002 up to that year is around £55 billion, with approximately one third of that figure being charged on domestic bills. If we assume that no attempt is made to meet higher targets than those currently in place, and that, while no subsidy is paid to any new renewable generators built post 2020, the 20 year obligation to support pre-2020 generators is honoured, the total subsidy drawn from consumers in the period 2002 to 2030 will be in the region of £130 billion.

5. Professor Colin Gibson, formerly power networks director at the National Grid estimates that the median costs (those lying on the 0.5 probability mark) for nuclear, the Severn Barrage, coal, and Combined Cycle Gas Turbines are in the range of £60-£70/MWh, whereas the results for offshore and onshore wind are £265/MWh and £190/MWh respectively. To put these estimates of additional system costs into perspective it should be recalled that the current subsidy income is roughly £50/MWh for onshore wind and £100/MWh for offshore wind.

6. Taking these estimates and the subsidy required to meet the 2020 targets, as described above, we can calculate, very roughly, the annual cost of the renewable electricity sector to the consumer in 2020. For this purpose we assume that 13 GW of onshore and 18 GW of offshore wind are built by 2020, which are the central range assumptions given in DECC’s UK Renewable Energy Roadmap, and that, as Gibson assumes, the onshore and offshore wind-fleet achieve load factors of 25% and 32% respectively. On this view the total annual cost in 2020 will be over £13 billion, consisting of £8.2 billion of subsidy, and about £5 billion of additional system costs. Approximately one third of this cost would find its way through to bills for domestic consumers, and two-thirds would be paid by industrial and commercial consumers, with a large part of this eventually being passed through to UK consumers in the prices of goods and services.

This would represent an increase on current annual domestic electricity costs of approximately £130, or 30%, over current costs for those households with a moderate electricity consumption of 3,300 kWh per annum. However, for those who use electric heating we estimate the increase would be approximately £320 per annum on their space

Page 146 heating costs alone, before retail margins and VAT, a point that underlines the inconsistency between the climate change and fuel poverty agendas. On Gibsons’s estimates there would be a significant increase in the cost of living across the entire population, with those using electric heating being exposed to high levels of risk of hardship. Actual hardship would be common. Furthermore, levies on energy, and additional system costs, are applied before Value Added Tax (VAT) is calculated, with the consequence that when the electricity is sold on to customers, VAT is applied to the levies, either at 5% for domestic and certain discounted customers, such as charities, and 20% for all other customers.

June 2012

Page 147 Memorandum submitted by Element Power (WIND 53)

On behalf of Element Power, I would welcome the opportunity to participate in the Energy and Climate Change Select Committee’s one-off oral evidence session to look at the economics of wind power. Element P ower is a global renewable energy developer that develops, acquires, builds, owns and operates a portfolio of renewable generation facilities, with close to 10,000 MW in development worldwide.

Element Power has developed ‘Greenwire’, a project that will involve the construction of close to 40 connected onshore wind projects in the midlands of the Republic of Ireland. When completed, these will generate 3GW of renewable power for direct transmission to the electricity grid of Great Britain (GB), independent of the Irish grid system. The renewable electricity created by Greenwire can help the UK to meet its commitments under the EU Renewable Energy Directive (‘RES Directive’) at a saving to consumers of around £5bn, and with its direct connection to GB will boost security of supply. Element Power is committed to working with Government to secure a route to market to deliver Greenwire to the UK energy market by 2017.

To put Greenwire into context, the UK faces a growing ‘energy trilemma’ over how to fill the looming energy gap while meeting long-term decarbonisation goals, all at least cost to consumers. While coal-to-gas-switching can offer a cost effective contribution to meeting carbon targets in the medium term to 2020, in the long-term the efficient delivery of new low carbon generation will be critical. New nuclear plants are an option, but they will come at significant costs, are over a decade away, and have the potential for huge delays and cost overruns. The potential of Carbon Capture and Storage (CCS) technology remains to be proven technically and commercially. Therefore large scale renewables deployment is essential, with onshore and offshore wind generation likely to form the majority of new plant in the UK.

However UK-based wind projects have themselves been beset by issues (e.g. planning, consenting, financing) that have and will continue to adversely affect the deployment, costs and sustainability of this solution. Offshore wind resources in the UK are among the most plentiful in Europe, which means that this industry can make a significant contribution to the UK’s long-term decarbonisation goals. However in the medium term to 2020, while offshore wind technology is immature and the costs remain high, there is a risk that consumers pay more than necessary to meet renewables and decarbonisation targets.

We note the ambition to reach £100/MWh as stated in the recent Offshore Wind Cost Reduction Task Force Report (June 2012). The report did not provide enough detail to quantify exactly by how much each recommendation will contribute to a reduction from £149-191/MWh to £100/MWh in the levelised cost of offshore wind, so it is difficult to make an overall assessment of how credible this level of reduction is. However to the extent that the cost of offshore wind can be reduced to £100/MWh by 2020, we believe that all of the savings in the financing, contracting and transmission areas, and many of the savings in the supply chain, innovation and permitting areas will also be applicable to Greenwire.

‘Renewable e nergy trading’ (as envisaged under RES Directive) can offer a lower cost decarbonisation solution as the offshore wind learning curve progresses. This could deliver significant economic benefits to the UK, as summarised in the attached document, entitled ‘The economic case for renewables trading’, To explore

Page 148

opportunities for trade, DECC has recently concluded a Call for Evidence on renewable energy trading, and is now considering whether to take enabling powers in the 2012 Energy Bill. The G reenwire concept dovetails with this process, as well as the on-going discussions between the DECC and the DCENR under the ‘All Islands Project’. Greenwire can deliver against each of the UK Government’s energy policy objectives:

• Deliver low carbon generation: From 2017, the project has the potential to contribute nearly 10TWh to the 2020 renewable electricity targets (i.e. over 15% of the new generation required).

• Ensure affordability to consumer: Greenwire is closer to the UK grid than the Round 3 Dogger bank offshore projects, and the anticipated load factor is almost as high as offshore following recent developments in low wind speed turbine design. The capital costs of building onshore turbines are less than half that of offshore, and the maintenance and associated availability of turbines is patently far more reliable when turbines are located onshore. All up, compared to the equivalent volume of Round 3 offshore wind (the marginal renewable technology) we estimate that Greenwire could deliver direct savings to UK consumer s of a ro u n d £ 5 b n o ver 1 5 y e a rs.

• Ensure security of supply – We will be a project dedicated to delivering reliable electricity to the UK, without interacting with the Irish power system. Both the UK and Ireland will benefit from legacy interconnectors of 1-2GW which will aid security and integration between these markets and provide a building block for the ambitious European ‘su p e r g r id ’ .

In addition, there will be further benefits to the UK and Ireland in terms of job creation, inward investment and taxes, and we intend to bring in project partners focused on those that can provide direct investment in the UK.

Given the close interactions with the topics to be discussed, we would welcome the opportunity to discuss w ith your Committee the concept of renewable trading and the opportunity provided by Greenwire in more detail.

June 2012

Page 149 Memorandum submitted by Element Power (WIND 53a)

The economic case for renewables trading

1. There are a number of compelling reasons why consumers in one country would provide economic support to renewables in another, and why the latter would be willing to export the resource. These can be summarised in figure 1 below.

Figure 1 The case for renewables trade among two member states

Uncertainty Constraints in around the cost Challenging domestic of marginal renewable renewable Importing nation renewable ener gy and resource or in technology and carbon targets utilising potential the level of resource Reduced cost of deployment decarbonisation for importer, boosted tax revenues and jobs for Developing a Low domest ic expor ter renewable Undeveloped demand and expor t indust r y Exporting nation renewable grid constraints will boost tax ener gy pot ent ial holding back revenues and investment employment

2. Element Power believes renewables trading can create significant economic benefits for the UK. These benefits could include:

• Reduced cost to consumers ‐ Trade can enable the UK to meet its renewables and decarbonisation targets at least cost, saving costs to consumers, • Enhanced security of supply and interconnection, • UK employment, taxes and competit iv e ness ‐ Inward investment, jobs and commercial opportunities for the UK renewables and associated upstream industries and direct and indirect taxation benefits, and • Long‐term decarbonis ation.

Reduced costs to consumers

Renewable trading can enable the UK to meet its renewables and decarbonisation targets at least cost, saving costs to consumers. In the short to medium term the UK should explore import opportunities, given the challenging 2020 renewables target and the currently high costs of domestic deployment, as illustrated in figure 2 below.

Figure 2 Illustrative comparison of opportunities for cost reduction in meeting renewables targets

Source: Redpoint Energy Page 150 3. Element Power believes renewable energy imports could generate significant savings to UK consumers over the short and medium term (i.e. over the next 15‐20 years), particularly if they can displace the most expensive domestic resources. In our view, the macroeconomic benefits of the resulting reductions in consumer prices (versus scenarios in which higher cost domestic resource is used) will be significantly larger than the jobs created by investment in domestic renewables.

4. Table 1 below seeks to illustrate, using a simplified example, the aggregate savings to consumers available by importing high quality, secure renewable energy. We have chosen a value of £110/MWh to illustrate the scale of the potential savings, but the precise cost of overseas generation will depend on many variables, including exchange rates, financing costs, regulatory regime, technology developments etc.

Table 1 Cost savings from displacement of marginal renewables – simplified example

Technology Levelised cost Cost to support renewable volumes over 15 year period (£bn)

9.2 TWh 29 TWh 58 TWh

(3GW project1) (25% of 2020 target) (50% of 2020 target)

GB offshore wind £150/MWh 20.7 65.3 130.5

Overseas renewables £110/MWh 15.2 47.9 95.7

Total cost savings from £bn 5.5 17.4 34.8 overseas renewables

5. In summary, a saving of £40/MWh on the marginal renewable technol o gy (deep‐water offshore wind) could generate savings of around £5 billion for 9TWh of renewable output. If 50% of the 2020 target were met by cheaper renewable imports, the savings could be as high as £35 billion.

6. These high‐level figures illustrate that renewables imports could deliver more affordable electricity to UK consumers, which could be particularly important given DECC estimates that consumer bills could rise by up to £200 per annum by 2030.2

Enhanced security of supply and interconnection

7. Renewables projects supported by renewable energy trading and which are directly connected can also deliver security of supply benefits to the UK. For example, direct connection of renewables can increase the diversity of supply sources and, given the geographical dispersion of the wind resource, reduce the correlation of renewables output for the importing member state. In other words, the wind doesn’t blow in the same place at the same time, and if regions are linked together, the cost of carrying reserve and backup is reduced the more diverse the generation.

8. In addition, such projects provide the additional legacy of transmission interconnection between member states which further aids the development of a single market in energy delivering the associated bene fits.

UK employment, taxes and competitiveness

9. Renewable imports have the potential to lead to some a somewhat slower deployment of domestic UK renewables and associated jobs and inward investment. However, Element Power believes this displacement will be more than offset by the lower costs to consumers delivered by renewables trading and the wider macroeconomic benefits which would

1 Assuming a 35% load factor

2 DECC, Electricity Market Reform: Policy overview, May 2012, p.24. We estimate that if 50% of the 2020 target is met by renewable imports UK households could save up to £25 per annum in 2030.

Page 151 result. Lower costs for electricity could not only increase household income, but it could also increase the competitiveness of UK energy‐intensive industry.

10. Certain components such as HVDC converter stations are likely to be manufactured in the UK regardless of where the overseas generation is located.

11. In the long‐term, by opening up the sector to (some) competition renewables trade could drive cost efficiencies in the offshore wind industry. Such competition‐driven cost efficiencies could combine with the natural learning process to provide the platform for a viable long‐term industry capable of export in the 2020s and beyond. Thus, renewables trading could increase the competitiveness of the UK offshore wind industry and open up a new export market in the future. We understand the UK Government’s objective to enable the development of a viable offshore wind industry that can provide investment and employment opportunities in the UK.

12. There is no reason why renewables trading should represent a threat to the development of the UK offshore industry. Offshore wind resources in the UK are among the most plentiful in Europe, which means that this industry can make a significant contribution to the UK’s long‐term decarbonisation goals. The key question in this context is not “if”, but “when”. In the period to 2020, while offshore wind technology is immature and costs remain high, renewables trading can offer a lower cost solution as the offshore learning curve progresses.

Long‐term decarbonisation

13. The rationale for renewables trade under the RES Directive is to encourage least cost delivery of the 2020 renewables targets. However the ultimate rationale should be to facilitate least cost renewables decarbonisation across Europe in the long‐term. This is particularly relevant for ‘direct‐connect’ renewables projects, which would involve the physical transfer of renewable power to the UK as the importer (with or without a connection to the exporting member state). By displacing fossil fuel generation the output from the direct‐connect project can generate carbon savings that contribute to the UK’s long‐term decarbonisation goals. In this way, renewables trade can make a significant contribution to the long‐term decarbonisation agenda in the UK and across Europe.

June 2012

Page 152 Memorandum submitted by Jeremy Elgin (WIND 54)

Background

I am a farmer in Buckingh amshire w orking on submitting a planning application for a single medium scale turbine – which will be used to supply electricity to the farm as well as the grid.

I am p repared to give oral evid ence if required.

My main issue in proceeding with my project has been coping with the complexities of the planning system, combating many of the urban myths surrounding wind turbines and persuading local acceptance for the project.

On local acceptance, I have found that there is widespread support from a lar gely silent majority. There is recognition that wind turbines can and should play a significant role in the UK’s energ y generation, and our reliance on fossil fuels is detrimental both from an environmental standpoint, but also from fiscal and energy security points as well. The opposition is centred on a relatively small number of individuals, who are well educated, well funded and locally influential. Cutting through the smoke screen of objections , the overriding issue is that of the possible effect on house prices. This is tied in with, or lea ds to, a total denial of the need to upgrade the UK generation and dis tribution infrastructure. With some there is recognition for the need of wind, but “only in appropriate places” – this t ranslates to not anywhere near me, and the definition of “appropriate ” i s stran gely elusive.

In terms of making them more acceptable to local communities, the key is to make the benefit of the turbine available to the immediate local community. I do not think that just making contributions to a community fund is the right answer as the benefit is not readily identifiable with the project and many of the objectors are not users of local services, nor do they get much involved in the Parish Council etc. If owner/operators could make electricity at a reduced rate available to those nearby, perhaps via the local authority then I think there would be some change in attitude.

The intermittency of wind is often r aised, and again I would like to see more emphasis/publicity on energy storage – i.e. pumped storage (like Dinorwig), fuel cells for augment ing the grid and use in vehicles (fu ture ).

Subsidy levels – s ubject to urban(or rural) myths – I will receive huge subsidies even if it does not work. The level of subsidy for on shore wind is towards the bottom of the FIT/ROC schemes. While some figures are available it is difficult to compare total support given to renewables as compared to other forms of generation ie nuclear and fossil fuel with ccs.

I am convinced that onshore wind has to be amongst the most cost effective form of generation. Unlike any other form of generation, I know what my construction

Page 153 costs are likely to be and I know what my fuel costs will be over the length of operation (zero) and I have a good idea of what my decommissioning costs will be. No other generator can say that.

The request for consultation asks if it is possible to quantify how much consumers/tax payers pay for wind. Given the way support is structured (generation specific) I would hope that this is feasible – but comparison s should be given for all forms of generation and include total cost, not just the subsidy (so as to give an accurate overall cost price per KWh including fuel, CCS, decommissioning, etc.).

The recent decisions by various local government authorities to try and oppose further development, and the publicity around these moves, has not been helpful (ie min separation distances from dwellings) . These actions appear (to a lay person such as myself) to be in opposition to the NPFF and associate guidance from central government on renewable energy. Developers, such as myself, find ourselves in the situation where we a perusing a course encouraged by central government, but frustrated by local government. The Planning Inspectorate can provide remedy, but it does add significantly to the risk, cost and time. On the planning issue, the only other point I would make is that the MOD now only respond to radar clearance once a planning application is submitted. Surely, the MOD could and should respond at a pre investment/screening stage.

In conclusion I would say that renewables in general and onshore wind in particular should remain supported and more must be done by all parties to inform the public as to the challenges and costs involved to providing a solution for our energy needs.

June 2012

Page 154 Memorandum submitted by Brian Catt (WIND 55)

I am an independent electrical engineer, physicist and businessman, and have studied energy policy and its physical and economic reality for the last 8 years, together with others. I have answered some of your key questions, and welcome the opportunity to present the evidence, simply, using referenced DECC, OECD, RAE sources as well as the basic physics. Not opinion. Just the facts.

1. “Does it really make financial sense to generate low-carbon electricity from wind? Or are there cheaper ways to cut carbon emissions from our power stations? NO, in physical terms wind energy is relatively weak and uncontrollable vs. fossil, consequentially it can only ever be inadequate and expensive, why it was abandoned when steam arrived to power our economic development. And YES, building gas then nuclear power delivers the only truly carbon reducing then zero carbon alternative to fossil generation, and the cheapest electricity to the consumer (DECC 2011), while permanently removing equivalent fossil capacity from the system, first coal then gas. Nuclear is the only truly adequate, long term sustainable zero carbon electrical energy source we have. And all we will have left to stay developed when fossil has gone. Subsidies can’t make the wind stronger, only generators richer, at public cost. The weakness of wind energy is why so many of these massive and expensive devices are needed in far away places to collect not enough energy when it isn't needed, varying uncontrollably with the cube of the wind speed. In physical terms real time solar derived sources - wind, solar and wave - must always be expensively inadequate. Ultimately the only thing wind farms are good at harvesting is subsidies. e.g. It would take 300,000 1MW wind turbines operating at their optimum 20% average rated output (impossibly generous, 20% is an optimum onshore figure) to meet the UK's current 60 GW peak demand. 3 per square mile over our whole 100K square miles. This demand will at least double when fossil is gone for heating and local transport (DECC). Wind turbines were developed in the 1980's, so the technology won’t improve much. The energy source will remain weak.

Wind turbines are uncontrollably variable. Their output varies with the cube of wind speed. Not something the grid can cope with much of, and should not be adapted for, because, again, there are much better grid investments available - trebling capacity in place for the end of fossil and establishing new short term gas and long term nuclear connections t o its core, for a start.

There are NO benefits to consumers or the environment from current politically blessed “alternatives ”. Just waste and eco damage from the massive amounts o f e xpensive i nfrastructure.

The reliable unsubsidized base load power plants we REALLY depend on to power us with the cheapest electricity have high build cost, and longer pay back than wind. Offshore wind is the most expensive for us, but makes great financial sense for generators, their shareholders and banks w hile double ROCs guarantee the fastest, largest, profit of all - protected from the requirement to generate efficiently and cost effectively for 25 years by law. A lobbyist fraud on the bill payer, legalised by Parliament.

2. Alternatives Are Not What is Claimed for Them: They depend entirely on fossil backup so are not even zero carbon, taken as a system. Matching capacity fossil plant is essential backup for the life of the supported wind farm, so wind prolongs fossil use avoidably and is obsolete without it. Not zero carbon and not sustainable w/o fossil backup. The combination creates a mix of 20-30% wind to 70- 80% fossil electrical energy - more expensively through duplication. But generators with mixed fossil and wind generation make more profit this way through subsidies for the wind element. Simply replacing coal with gas would have a larger effect on emissions, with no subsidy.

3. Economics: A developed economy must have intense and manageable energy sources to power its grid adequately and affordably. GDP is 1:1 powered by energy use. Less is less. Wind, wave and solar can’t produce enough electrical energy for UK Pageplc’ s155 needs today. We will need 2-3 times today’s electrical energy, at today’s prices as other’s plan with copious nuclear, or get p oorer .

4. A SMART grid does not solve the problem of adequacy, it collects then releases still not enough expensively variable energy, managing avoidable scarcity at an even higher cost. Compounding the irrationality. Dumb. And one reason Denmark has the highest electricity prices i n Europe.

The energy density and related cost factors are absolutes. We need, and can have, more cheap energy, not less expensive rationed energy, and reduce emissions fastest. But not with current policy. On the simple facts “alternatives” are a waste of money and the worst available way to reduce carbon emissions. Long-term nuclear power will be the only sustainable alternative to fossil energy - intense, controllable, adequate, and sustainable. Rationally we should use gas to replace coal and gap fill in the interim, it’s cheaper with less emissions than the wind plus coal backup combination. Ideology cannot deliver our energy future, only science, but ideology’s subsidies are expensively delaying the deliverable solution f or generator’s profit. By law.

5. “And how much these subsidies really add to our electricity bills?”

Simple maths with DUKES data from DECC. ROCs roughly double or treble the price paid by the grid, so small changes don’t change the outcome much. To keep prices comparable and eliminate mark ups I compare prices paid by the grid, to which distribution costs are later added. This considers generation only. Here’s an exact calculation based on DECC 2011 DUKES figures:

In 2011 we generated 314 TWH actually sold to the grid. 12.67TWh of that was wind power o f which 5.13TWh was Offshore and 7.54MWh Onshore. Offshore electrical energy receives 2 ROCs, Onshore 1. Assuming the current value of a ROC is £45/MWh - it can be adjusted below - then the premium paid for wind power was:

((2x£45) x 5,130,000 MWh) + ((1x£45) x 7,540,000 MWh) = £801,000,000 in 2011

So a 4% wind contribution cost the grid a premium of £801M per annum on our bills in 2011 over fossil or nuclear generation, now guaranteed at whatever the ROC is valued at till 2035. That's about £40 per 20M households, as the DECC also state. At this mix 2020’s 20% would be £4B pa per annum = over £100B avoidably wasted over 25 years preferring wind and prolonging coal use as backup to the fastest and ultimately inevitable way to zero carbon, gas then nuclear.

It is time for Parliament to create a realistic plan to take UK plc through the end of fossil that is truly carbon reducing, adequate, sustainable and affordable. Wind power is physically none of these things, so can’t ever deliver, and current policy cannot meet its claimed objectives. The only achievable goal of current legislation is private profit at public expense. The laws of physics and the evidence of the data cannot be changed by legislation and an energy inquisition. A technological society can’t survive and compete based on irrational political belief. With better legislation we can invest our s carce capital and create jobs much more productively, power our economy competitively, and better meet climate change objectives. You make the laws. Brian RL Catt CEng, CPhys, MBA

June 2012

Page 156 Memorandum submitted by National Grid (WIND 56)

1. Introduction

1.1. National Grid owns and manages the grids to which many different energy sources are connected. In Britain we run systems that deliver gas and electricity across the entire country. In the North East US, we provide power directly to millions of customers. We hold a vital position at the centre of the energy system. We join everything up. 1.2. That puts National Grid at the heart of one of the greatest challenges facing our society; supporting the creation of new sustainable energy solutions for the future and developing an energy system that can underpin our economic prosperity in the 21st century. First and foremost this is a scientific and engineering challenge. Decisions around the future of our energy infrastructure – its cost, local impacts, objectives and risks – will of course involve most of s ociety. 1.3. Nation al Gri d p ublishes energy scenario analysis that incorporates assumptions on the costs of different forms of power generation. These assumptions are based on estimated cost ranges from publically available data including from the Arup 20101 review of costs for potential renewable technology (carried out for DECC), the Mott MacDonald 20112 electricity generation costs update (carried out for DECC), and from the 2010 US Department of Energy report. These costs show us that on a capital cost basis (£/kW) onshore wind is the cheapest form of new low carbon generation. Offshore wind, nuclear and dedicated biomass are all in a broadly similar, but higher cost range. On a breakeven price basis (£/MWh), onshore wind and nuclear are broadly comparable, offshore wind is at a higher cost range. 1.4. However, there is significant uncertainty around the costs of different generating technologies. The offshore wind industry, as it continues to grow, has been able to identify opportunities for efficiency, for example, The Crown Estate recently published it’s offshore wind cost reduction study which, following industry collaboration identified a number of steps to reduce the cost of offshore wind to £100/MWh. 1.5. National Grid’s 2011 Gone Green scenario includes 9GW of onshore and 17GW of generation connected to the transmission system in 2020

2. Questions Posed by this Inquir y

What are the costs of building new transmission links to wind farms in remote areas and how are these accounted for in cost assessments of wind power? 2.1. The UK energy landscape is changing, and more onshore and offshore wind, larger nuclear power stations, and increased interconnection are all driving the need to reinforce and extend our transmission network. Offshore wind generation is a significant driver for network extension as it is constructed where no transmission network currently exists. National Grid, together with The Crown Estate have published an Offshore Transmission Network Feasibility Study (similar work has been carried out by DECC and Ofgem). This study found that significant savings can be made through an integrated transmission network, by co-ordinating connection across multiple wind farms, and optimising for onshore constraint boundary reinforcement. Similar to onshore network reinforcements, this type of network serves multiple connecting customers, and so the costs should not be solely targeted at connecting wind power. Both onshore and offshore, where dedicated links are constructed to serve wind

1http://www.decc.gov.uk/assets/decc/What%20we%20do/UK%20energy%20supply/Energy%20mix/Renewable%20e nergy/policy/renew_obs/1834-review-costs-potential-renewable-tech.pdf

2 http://www.decc.gov.uk/assets/decc/statistics/projections/71-uk-electricity-generation-costs-update-.pdf

Page 157

connections (or any other power generation) the costs are transparent and are targeted at that developer. 2.2. When considering new transmission network extension or reinforcement, we have to balance a number of key issues. We have no preference for overhead lines, undergrounding or offshore solutions for any of our projects. Our approach is always to work with all of our stakeholders and local communities to find the right balance between keeping costs down for consumers with the need to minimise the visual impact of these new lines. Each assessment is done on a case by case basis to ensure that local considerations are fully understood and accounted for3.

What are the costs associated with providing back up capacity for when the wind isn’t blowing, and how are these accounted for in the cost assessments of wind power? 2.3. As we continually work to balance the system, we can ask generators of all kinds – not just wind farms – to come on or off the grid to help us balance supply and demand, or to manage ‘constraints’ – effectively bottlenecks – in the network. This is something we do many times every day, and have done for years. It is a normal part of our day job, and we have a number of well-proven tools to help us do it, including buying generation onto or off the network one or two days ahead of real time, and bids on the balancing mechanism within one or two hours of when the energy is needed. 2.4. Different types of generation plant regularly come on and off the system or otherwise vary their output, be it due to operating faults or for commercial reasons. In the case of wind generation operating faults and wind variability are the primary drivers. Acceptable operating limits are controlled at an industry level through connection agreements and connection codes that all developers are signed up to. Within those codes and limits, variable operation of any power station has no impact on the safe operation of the transmission network; it is simply another variable in system balancing. 2.5. Our demand forecasting team is always planning ahead, so we can make sure there is enough back-up power available to any potential shortfall, whether that is due to a power station breakdown or an unexpected event. For instance, in very high winds, many wind farms will shut down their turbines for their own protection, often automatically. When this happens, we can use backup generation to balance the system.

Is it possible to estimate how much consumers pay towards supporting wind power in the UK? (i.e. separating out from other renewables) 2.6. There is a cost in the balancing activity; however this is very low for consumers – no more than a few pence a year on a typical bill, although National Grid recognises that it is important to keep costs to minimum, even more so in times of austerity. Ofgem regulates these balancing costs and provides incentives to keep them d o wn . 2.7. As part of a ‘balancing mechanism’, each power station makes a ‘bid’ that reflects what they are willing to be paid – or to pay – to be taken off or moved on to the net w ork. 2.8. The total constraint costs from January to December 2011 for generation of all types were about £250 million. The overall cost for balancing the network in 2010/11 was £708 million, which makes up around 1% of a consumers bill.

June 2012

3 Deciding where and how to build new high voltage electricity transmission lines is a complex issue. Most of the existing network takes the form of overhead lines, as these provide the most economic solution to the energy transmission challenge, and therefore the least impact on consumer bills. As we build the country’s new network, we need to balance the need for secure and reliable energy supplies with affordability for bill-payers and the visual impact of the netwo rk. Further details are at National Grid approach to the design and routeing of new electricity transmission lines

Page 158 Memorandum submitted by the Centre for Energy Policy and Technology, Imperial College (WIND 57)

Covering note This submission has been prepared in the following format: A two page summary – pages 2 and 3 – provide key points/issues. Additional detail is provided in pages 4 through 8, the technical annex. ICEPT is an interdisciplinary research centre focused upon the interaction of technology and policy. From its base at Imperial College, the centre is uniquely placed to gather insights into technological and scientific developments relevant to contemporary debates in energy policy. ICEPT is funded by a wide range of bodies, including UK research councils, industry, the EU, and NGOs. It is independent and does not exist to promulgate any particular agenda related to wind, renewables or energy policy more widely. The centre also has policy analysis expertise, drawing upon a wide range of system modelling, scenario and technology assessment techniques. ICEPT runs the Technology and Policy Assessment function of the UK Energy Research Centre (www.ukerc.ac.uk). The reports it produces have been widely cited by select committees and in policy documents. This submission draws upon UKERC reports on the costs and impacts of intermittent generation, investment decisions in electricity generation, and the costs of offshore wind in UK waters. It draws also upon forthcoming UKERC research, which is undertaking a thorough meta‐analysis of estimates of the costs of wind, gas, nuclear, solar and CCS. This project also explores the means by which we make judgements on the future costs of power generation. The submission draws upon expertise developed by the authors into the relative costs/performance of various technologies through a wide range of research projects going back to the early 2000s. The authors experience in meta‐analysis indicates the importance of scrutinising methodology carefully, particularly when estimates are outliers emanating from special interest groups. There is considerable agreement around issues, methods and approaches in the international literature from peer reviewed, government and other reputable sources. This note seeks to present this evidence. 2 Page Summary: Key Issues

1. What do cost benefit analyses tell us about onshore and offshore wind compared with other measures to cut carbon? Accounting for the full costs and benefits of different technologies is complex. Complicating factors include potential for cost reduction through deployment (learning by doing), wider industrial or regional benefits, or environmental costs. German cost benefit analyses have been very positive, see point 7 below. Generally speaking decarbonising power generation is more costly than measures to cut demand. However many analyses of long term decarbonisation point to the importance of decarbonising power, with wind a proven and relatively low cost option for doing so. Costs of nuclear and CCS are uncertain, but higher than onshore wind. Offshore wind costs and the costs of first of a kind nuclear/CCS appear similar. In the UK wind also offers a large potential resource. The Annex provides more detail.

2. What do the latest assessments tell us about the costs of generating electricity from wind power compared to other methods of generating electricity? Onshore wind is among the cheapest of the non‐fossil options. Wind costs fell steadily during the 1990s until the mid‐2000s. Absolute costs for all sources have risen recently due to global commodity prices and market factors, but wind costs relative to other generation options have declined, see Table 1 in the Annex. By the mid 2020s the range of forecast costs for onshore wind and gas‐fired generation (CCGT) show an overlapping

Page 159 range. Gas prices are uncertain and the cost of wind lies in a range due to varying wind speeds/sites. Figure 1 in the Annex shows the results of a meta‐analysis of cost estimates from around the world. Onshore wind is currently about 10‐15% more costly than gas in a UK context, and cheaper than estimates for new nuclear.

3. How do the costs of onshore wind compare to offshore wind? Figure 1 and Table 1 in the Annex show that onshore wind costs are substantially below offshore wind, with onshore currently costing around 40% less per unit of electricity. What Figure 1 also shows is that most analyses suggest that the scope for cost reduction in offshore wind is considerably greater than the scope for cost reductions onshore, since the onshore wind industry is relatively mature, and the opportunities for continued cost reductions offshore are more substantial. Details on the sources of cost reduction offshore are provided in the Annex.

4. What are the costs of building new transmission links to wind farms in remote areas and how are these accounted for in cost assessments of wind power? Transmission requirements associated with the government’s plans for renewable energy have been assessed in great detail by network operators, utilities, experts, DECC and Ofgem. This Electricity Network Strategy Group (ENSG) first reported on the transmission costs of the 2020 targets in 20091. The estimates were updated in February 20122. The ENSG estimate from 2009 was that around £4.7 billion in total investment in transmission upgrades would be needed to accommodate a mix of onshore and offshore wind, together with other changes to the generation mix.

4.1 A 2011 report from the CCC3 annualised the ENSG expenditure estimate of £4.7 billion, and distributed it over anticipated electricity demand4. The resulting 0.1 p/kWh on bills is reported in the CCC note on bills5. The annualised cost amounts to £275 million per year from 2020 on. If we assume 29 million households in 2020, with households accounting for around 30% of demand, the annual cost is around £3.20 per household per year. The latest ENSG capital cost estimate is rather higher at £8.8 billion. Very approximately therefore the estimated transmission cost per household should be increased to around £5.70 per year. These costs are not attributed to individual wind farms.

4.2 Offshore network costs are paid for by generators, are borne directly by offshore wind farms and hence already show up in analyses of the costs of the RO, outlined below.

5. What are the costs associated with providing back up capacity for when the wind isn’t blowing, and how are these accounted for in cost assessments of wind power? The costs and impacts of the ‘intermittent’ nature of wind any other renewables has been comprehensively studied by academics, utilities and consultancies from around the world. A thorough systematic review and meta‐analysis by the authors in 2006, with input from a wide spectrum of leading experts, indicated that the cost of intermittency amounted to around 0.5 to 0.8 pence per kWh of wind generation, should intermittent generation reach around 20% to 25% electricity supplied in Britain6. This work needs updating to reflect 2012 costs, which will be higher, since electricity costs have risen. But more recent analysis by Poyry for the Committee on Climate Change, combined with the ENSG data, provides an indication that the 0.8 p/kWh figure is broadly consistent with contemporary analysis7. 0.8 p/kWh of wind is equivalent to annual expenditure of approximately £600 million, at 20% renewables, or £740 million for 25% renewables. Assuming the domestic sector bears 30% of this, the cost per household for intermittency in 2020 is around £6 to £8 per year8.

6. How much support does wind power receive compared with other forms of renewable energy? Is it possible to estimate how much consumers pay towards supporting wind power in the UK? (i.e. separating out from other renewables) Ofgem produce an annual report on the Renewables

Page 160 Obligation (RO) which identifies the total value of the support provided and the share for each technology. For the most recent data (2010/2011)9, the total annual value of support for all renewables through the RO was £1.28billion, with onshore wind accounting for 30.9% (£395million) and offshore wind accounting for 20.2% (£258million)10. Assuming the domestic sector bears 30% of this across 29 million households, then this translates to around £6.75 per household for onshore and offshore wind combined, compared to around £6.50 for all other renewables. Renewables can exert downward pressure on wholesale electricity market prices. This can partially offset the costs of the RO. By 2020 DECC estimate that the effect on wholesale prices will amount to a bill reduction of £20 per household/yr. More details in the Annex.

7. What lessons can be learned from other countries? The evidence suggests that stable and investable policies – in particular fixed Feed in Tariffs, FiTs, bring down costs, create industries, allow consumers to invest and generally maximise social benefits. The evidence that more competitive schemes do more to reduce costs is questionable. Indeed the academic evidence suggests that the UK NFFO in the 1990s, an auction based scheme, favoured the big utilities, was antagonistic to domestic manufacturers, created a perceived ‘rush’ for the best locations, often also the most scenic, and led to disappointing levels of delivery. By contrast, the fixed FiTs in our near neighbours provided a simple and stable system that allowed large levels of local/community ownership and lots of new entrants. This was assisted in some instances through favourable loan schemes from community or state backed banks11. Germany has assessed costs and benefits associated with its FiTs and found a strongly positive economic benefit12. However the international experience is mixed. Alongside positive experiences are examples of things going wrong; tariffs, planning, grid management13.

8. What methods could be used to make onshore wind more acceptable to communities that host them? Evidence from countries where wind has already been developed on a much larger scale (e.g. Denmark and Germany) suggests that there is a direct relationship between the extent to which local people can take a meaningful stake in a wind farm, and the extent to which local people object to wind development14. The potential for community ownership is further enhanced if financial vehicles exist to facilitate it, as noted above. In the UK context the most straightforward way to encourage greater community/local owned schemes would be to extend the micro‐generation FiT for wind from 5 MW to perhaps 50 MW, so that smaller wind farms could benefit from the simplicity and revenue stability that the FiT can provide relative to the RO, and proposed CfD15.

Technical Annex

Relative costs of wind and other technologies

Figure 1 is based upon ongoing UKERC research, which is undertaking a thorough meta‐analysis of estimates of the costs of electricity generation technologies, examining how those estimates are arrived at, and assessing what lessons can be drawn from the accuracy or otherwise of past estimates and projections. The left hand half of the diagram shows the historical trajectory of the average (mean) of Europe‐wide estimates for electricity generation costs for onshore wind, offshore wind and gas‐fired plant. The wide range of UK forecasts, shown on the right hand half of the diagram, result from differing assumptions that studies have adopted for key cost drivers such as capital and operating costs, plant load factors, fuel costs (in the case of gas plant), and discount rates. These estimates do not take into account intermittency/network costs, which tend to increase system costs, or ‘merit order effects’ (see below) which tend to decrease system costs.

Figure 1 Comparative costs of electricity from CCGT, onshore and offshore wind16

3

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Support for wind in other countries – Feed in Tariff rates in the EU

Figures 2 and 3 show FiT rates for selected European countries, for onshore and offshore. This indicates that the UK (assuming 1 ROC for onshore) is towards the upper end of payment levels for onshore wind. UK offshore wind tariffs look around average in comparison to other EU country tariffs. However, both The Netherlands and Germany use a range of tariff rates; an average of the rate is given in Figure 3. The German tariff is dependant on the duration of payment and scheme chosen by system operator, whilst The Netherlands uses four stages of subsidy level that is allocated on a first come first serve basis. It is important to note that both The Netherlands and Germany have much higher rates than the UK at, 23.37 and 23.62 GBP pence/kWh respectively. When, where and how these rates are employed will determine how attractive these countries offshore tariffs are in relation to other country tariffs. UK figures assume £48/MWh for ROCs (2011 ERoc average), and wholesale price of £55/MWh. The latter figure is obviously quite variable, having reached £80/MWh in 2008 and varying between £38 and £58 during 2010 and 201117.

Selected EU onshore primary Selected EU offshore primary wind wind tariffs in GB pence/kWh tariffs in GB pence/kWh 12 20 10 15 8 6 10 4 5 2 0 0

Page 162 Onshore tariffs; currency conversion to GBP as of 28/06/12, EUR = 1.243 GBP. All rates valid for 2012. Austria rate for 2012‐2013; Belgium rate set in 2006, set as a minimum price of certificates; Finland current price valid until end of 2015; France current price set in 2008; Germany price set in 2012, range of rates (average presented in graph); Ireland current price for 2012; Slovakia price set in 2009 valid for 3 years, finishing in 2012; Spain set in 2007 current price.

Offshore tariffs; currency conversion to GBP as of 28/06/12, EUR = 1.243 GBP. All rates valid for 2012. Germany and Netherlands rates are averages of a range of rates provided. Netherlands; 14.05 ‐ 23.37. Germany; 4.35 ‐ 23.62

Figures 2 and 3 wind tariffs in selected countries18

Sources of cost reduction offshore

Whilst onshore wind is a comparatively mature industry with relatively limited scope for major cost reductions (especially since cost savings through increased unit size are limited by physical constraints on handling very large components such as the turbine blades on land), the scope for cost reductions in offshore wind is significant. Major areas of potential cost reduction include increasing turbine size, the introduction of turbines designed specifically for offshore (rather than adapted from onshore designs), improvements in installation techniques, and enhanced reliability through design and optimised maintenance regimes to maximise plant availability and therefore load factor (a key driver of generation costs for wind plant). In addition, the increasing size of the offshore wind market is attracting new entrants, improving competiveness and building confidence and resilience in the supply chain19.

Page 163 Table 1 Cost rises by technology20

2006 2009 £/MWh £/MWh

CCGT £42 £80

Coal £32 £102

Nuclear £46 £97

Onshore £66 £88 wind

Offshore £99 £149 wind

Costs per tonne of carbon saved Cost per tonne of carbon saved will depend upon a range of factors, these include the cost and financing assumptions made about the wind farm, nature of plant displaced, any wider impacts such as emissions in wind farm construction or from back up plant. There is widespread agreement that the lifecycle emissions associated with wind are small, of the order of 10g/kWh (compared to 380g/kWh for gas plant). Analyses of the impacts of intermittency reviewed by the authors also indicate that any emissions from back plant or extra spinning reserve amount to a few percent at most of the emissions savings from wind that result from reduced use of fossil fuel plant21.

One of the simplest representations of abatement cost is the so called ‘MAC’ or Marginal Abatement Cost curve. Over reliance upon them has been criticised for failing to recognise dynamic effects and cost reduction over time, and interactions between choices of technologies and between sectors22. It also does not account for the volume of abatement possible over time. Nevertheless most assessments show wind to be a ‘mid range’ contender, more expensive than energy efficiency but cheaper than many other ‘supply side’ options.

Wind and wholesale price formation (the ‘merit order effect’)23

Wind power is generated at near zero marginal cost and is therefore generally dispatched when it is available. In the short‐term, where the rest of the generating capacity remains unchanged, wind power therefore pushes high marginal cost plant out of the generating mix and wholesale spot prices become depressed, especially at times when wind output is high. This ‘displacement’ effect is illustrated in Figure 1 where wind is characterized as reducing residual demand because it is always dispatched (subject to transmission constraints). During periods of very high wind (and low demand), where wind output exceeds demand, prices in the GB market could go negative since wind operators would still be willing to trade in the market so long as the price they ‘pay’ is less than the value of a Renewable Obligation Certificate. This will be exacerbated if thermal capacity is kept running to avoid cycling costs.

Page 164 Similar conditions occur in other markets, since the Feed in Tariffs common in other countries also insulate wind generators from wholesale price movements. Indeed in many instances renewables are given priority access by system operators. Studies from overseas are therefore relevant to the British situation and numerous modelling and empirical studies have attempted to estimate the impact of renewables on electricity markets. These studies all conclude that wind will depress prices. For example:

• Sensfuss et al (2008) use a simulation model to estimate the impact of renewables (mainly wind) on spot market prices in Germany. They estimate that a wind penetration of around 10% in 2006 (52 TWh) results in a reduction of average spot price of €7.83 / MWh (approximately 15%), compared to a counterfactual with no wind. Neubarth et al (2006) conduct a statistical analysis of time‐series data in Germany in 2004/5 when wind penetration was around 5%, concluding that wind power reduces the average daily spot market price by €1.89/MWh for every GW of average available wind energy. They estimate that the 18.4 GW of installed capacity resulted in an overall average price reduction of €6.08/MWh (approximately 12%).

• A modelling study by the regulatory authorities in Ireland (CER and UREGW, 2009) looked at the effect of wind on wholesale prices under a range of scenarios with wind penetrations ranging from 16% to 42% and with different mixtures of conventional generation. For most of the scenarios prices were significantly depressed (by between 9 and 21%). However, the exception was a scenario which assumed a high proportion of Open Cycle Gas Turbines (OCGTs), where prices were 10% higher than the counterfactual.

• Moesgaard and Morthorst (2007) statistically analyse spot prices between 2004 and 2007 in Western Denmark and concluded that they were reduced by 5‐15% as a result of wind power. During this period the penetration of wind was approximately 20‐25%.

In summary, these studies generally conclude that wind has a negative impact on average spot prices of the order of 1% for every 1% of additional wind penetration. Price effects may be more extreme under similar wind penetrations in GB because it has relatively low supply‐side flexibility ‐ interconnection and hydropower capacity ‐ to balance fluctuations in wind output, compared to some of the countries studied above (DECC, 2009b).

In the long term, where the make‐up of the conventional generation mix can change more radically (through closures and new build), it is more difficult to predict the impact of wind on electricity prices. The lower load factors experienced by plants with relatively high capital costs (and low marginal costs) means they may be replaced by peaking plants with low capital cost and higher marginal costs, such as OCGTs (Nicolosi and Fursch, 2009; Saenz de Miera et al, 2008). This would push up average prices (see Figure 4).

June 2012

Page 165 Figure 4: The long‐term impact of wind on electricity prices (Author’s illustration)

Figure 1 is an illustrative representation of equilibrium prices in two peak demand scenarios: (i) where the conventional generation mix order remains dominated by CCGTs and coal stations and (ii) where the conventional generation mix is adapted to a high wind penetration with higher proportion of higher marginal cost plants (such as OCGTs). Under a standard generation mix, the market clears at PSL and PSH under high and low wind conditions respectively. Under a ‘wind‐ adapted’ generation mix, the corresponding prices are higher, at PAL and PAH. In this way, the dynamics of the conventional generation mix as a response to wind could work to push up electricity prices in the long‐term. This could partially offset or even exceed the ‘displacement’ effect of wind.

1http://webarchive.nationalarchives.gov.uk/20100919181607/http://www.ensg.gov.uk/assets/ensg_transmiss ion_pwg_full_report_final_issue_1.pdf 2 http://www.decc.gov.uk/en/content/cms/meeting_energy/network/ensg/ensg.aspx 3 http://www.theccc.org.uk/reports/household‐energy‐bills 4 320 TWh ‐ Personal Communication with the CCC secretariat, Feb 2012 5 http://www.theccc.org.uk/reports/household‐energy‐bills 6 See http://www.ukerc.ac.uk/support/Intermittency and Gross R, Heptonstall P, 2008 , The costs and impacts of intermittency: An ongoing debate, Energy Policy (36) Pages: 4005‐4007; Skea J, Anderson D, Green T, Leach, M, 2008, Intermittent renewable generation and maintaining power system reliability, IET Generation, Transmission & Distribution, (2) Pages: 82‐89; , 2007 , Renewables and the grid: understanding intermittency, Proceedings of ICE Energy (161) Pages 31‐41 7 The CCC’s 2011 total figure is 1 p/kWh for intermittency and transmission combined, and as noted above, the transmission cost element is around 0.1 p/kWh of intermittent renewables. 8 Assumes 29 million households and electricity sales of 370 TWh, households 30% of sales. The UKERC work also notes that cost estimates lie in a range, which depends upon the nature of the system (extent of interconnection, availability of demand response, mix of fossil/nuclear plant) mix of renewables and operational rules for the System Operator. 9 See Renewables Obligation Annual Report 2010‐2011, Ofgem, London, available from http://www.ofgem.gov.uk/Pages/MoreInformation.aspx?docid=278&refer=Sustainability/Environment/Renew ablObl 10 Landfill gas accounted for 20.1% (£257million), biomass including co‐firing 19.4% (£248million), hydro power 7.5% (£96million), with the remainder including sewage gas and PV accounting for around 2% (£26million) 11 See Gross R, Heptonstall P, 2010, Liberalised Energy Markets: an obstacle to Renewables? In Rutledge I, Wright P (eds.), UK energy policy and the end of market fundamentalism, Oxford University Press, Oxford 12 German data is presented in http://www.dbcca.com/dbcca/EN/_media/Paying_for_Renewable_Energy_TLC_at_the_Right_Price.pdf

Page 166

13 Deutsche Bank retains a wide ranging library of international review papers http://www.dbcca.com/dbcca/EN/investment_research.jsp 14 As 11. 15 The proposed CfD should offer revenue stability overall, but this will be subject to securing a PPA and achieving the reference price for power output. At the time of writing the micro‐gen FiT apears far simpler. 16 This graphic appeared in the Guardian and is based on data collected by the authors for UK Energy Research Centre project: http://www.ukerc.ac.uk/support/tiki‐index.php?page=Cost+Methodologies 17 http://www.decc.gov.uk/assets/decc/11/about‐us/economics‐social‐research/3593‐estimated‐impacts‐of‐ our‐policies‐on‐energy‐prices.pdf 18 http://www.e‐roc.co.uk/trackrecord.htm http://www.consumerfocus.org.uk/policy‐research/energy/paying‐for‐energy/wholesale‐retail‐prices http://www.decc.gov.uk/assets/decc/11/about‐us/economics‐social‐research/3593‐estimated‐impacts‐of‐our‐ policies‐on‐energy‐prices.pdf http://www.res‐legal.de/en/search‐for‐countries.html 19 Greenacre P, Gross G, Heptonstall P, 2010, Great Expectations: The cost of offshore wind in UK waters, UK Energy Research Centre, London, http://www.ukerc.ac.uk/support/tiki‐ index.php?page=Great+Expectations:+The+cost+of+offshore+wind+in+UK+waters 20 Adapted from: Heptonstall P, Gross R, Greenacre P, Cockerill T, 2012, The cost of offshore wind: Understanding the past and projecting the future, Energy Policy (41) Pages 815‐821 21 http://www.ukerc.ac.uk/support/Intermittency 22 http://www.whoseolympics.org/bartlett/energy/news/documents/ei‐news‐290611‐macc.pdf 23 Excerpt from Steggals W, Gross R, Heptonstall P, Winds of change: How high wind penetrations will affect investment incentives in the GB electricity sector, Energy Policy, 2011, Vol:39, Pages:1389‐1396

Page 167 Memorandum submitted by Abundance Generation (WIND 58)

We are willing to appear before the committee to provide evidence.

Abundance Background

1. Abundance is an FSA authorised online community investment platform, which enables local communities and the wider public to invest into renewable energy projects of their choice.

2. As an online and regulated entity we aim to make it as easy for project developers to raise finance from the local communities as it is to seek finance from banks or private equity funds. By doing this we aim to significantly increase the number of people who are engaged and directly benefit from the growth of wind energy and other renewables, while also ensuring that as far as possible the wealth created through renewable energy project development is captured locally.

3. We believe that this new model of development based on aligning the interests of the community with those of the landowners and developers is critical to breaking down the current barriers the country faces to growing onshore wind.

4. We work with private equity, corporate as well as community led developers. Abundance launched in April 2012 and in July we are opening £3m of projects for investment, we have a £180m project pipeline. The team behind Abundance includes founders of both egg Bank and Zopa.com and bring significant experience in building scalable financial services business as well experience in community engagement and renewable energy.

Question: What methods could be used to make onshore wind more acceptable to communities that host them?

5. Problem: Over the course of three years Abundance has conducted many hours of research trying to understand what could be done to more positively engage communities with onshore wind. Opposition is motivated by many factors, but underlying most of the attacks is that communities often perceive that they receive all the downside of renewable development but little of the upside. A central concern is that the wealth created by renewable energy projects is rarely captured locally.

6. Research consistently shows that between 60‐75% of people support the growth of wind energy. In rural communities this figure tends to be at the lower end of the range but there is still a majority of supporters. However until recently this silent majority has had little reason to get out and support project. The anti campaigners have therefore led the debate in rural communities.

7. Solution: The current development model relies on a partnership between the landowner and the developer. A new model of development would see this partnership extended to the local community so that the three parties have equal opportunity to benefit. In Germany where the concept of community investment has been pioneered, 51%(1) of turbines are owned by communities in line with this the level of acceptance of wind is much higher than in the UK.

8. Our research and commercial experience indicates that the ideal community investment product should include the following features:

Page 168 9. Accessible: the investment opportunity should be open to everyone in the community. Abundance has therefore designed its product and service delivery to make it possible to offer a minimum investment amount of £5.

10. Returns linked to energy production: our research with communities indicated that ideally communities would like to receive their energy from their local wind farm. Currently it is very difficult to achieve this therefore Abundance simulates the experience of generating energy. This is achieved by linking the investment return to performance so that when it is windier or energy prices are rising the investment return increases. The projects energy production is communicated to the investors in real time via desktop, smartphone or Facebook apps. Abundance also allows its customers to pay their energy bill with their investment return closing the circle and creating an experience for the customer, which is similar to owning their own energy generator.

11. Debt product: our research indicated that outside of the financial world, people feel much more comfortable lending money and therefore getting capital paid back than they do buying shares. Therefore the product Abundance markets is a debt product, specifically a Debenture. Using a Debenture increases the number of people who feel comfortable making the investment decision and therefore increases the accessibility of the community investment opportunity.

12. Easily tradable, the investment is a 20‐25 year investment, it is therefore important that the investment is transferrable and that people can trade in and out if circumstances change. Abundance therefore offers an ebay like trading platform for Debentures.

Why has Community investment not taking off in the UK?

13. Prior to the launch of Abundance, communi ty ownership or investment propositions have focused entirely on the needs of the community not of the developer. The community models have tended to focus on co‐operative structures and offline process, both in their own ways create additional complexities and inefficiencies for developers. Abundance has therefore spent time constructing its product and service so that it meets the needs of the developers as well as the communities. Specifically this includes the following:

14. Regulated Financial product: regulated financial product which fits easily into the financing structure of wind farms and due to its long term nature and variable rate of return very often boosts IRR returns for developers, while also providing an attractive risk return investment to communities.

15. Simple Administration: Abundances IT systems have been built to ensure that we can administer the investors efficiently on behalf of the developer ensuring the developer only has to worry about running the project not administering a community of investors.

June 2012

References: (1) http://www.wind‐ works.org/coopwind/CitizenPowerConferencetobeheldinHistoricChamber.html

Page 169 Memorandum submitted by W R B Bowie (WIND 59)

Wind power saves little or no CO2 and other Green House Gases

The fundamental argument in favour of wind power is that despite its very high cost, it produces less CO2 etc. than conventional power plants. This is, however, completely incorrect. Wind saves little or no CO2.

Wind is an intermittent source of power that cannot be ‘turned on’ when re quired like conventional sources of power. ERCOT of Texas says that they only consider wind power as reliable source of supply for about 8.7% of its name plate capacity. The E.On wind report of 2005 is more pessimistic saying studies show, “Wind energy currently contributes to the secure production capacity of the system by providing 8% of its installed capacity” and a lso that this guaranteed supply will, “fall continuously to around 4%” as winds share of the generating capacity rises up to 2020. As an example at 17.30 on 7th Dec 2010 the UK wind fleet of 5200 MW produced just 300 MW; a load factor of 5.8%. At the same time both Germany and Denmark had lower load factors; 3% % 4%

When plotted in a graph the rises and falls of wind’s capacity looks like a comb! Rapid shifts in power are quite unsuited to the user’s requirements. Because of the erratic nature of wind power, almost without exception, the wind power providers E.On, , Scottish Power etc say that it is essential that wind has ‘back-up’ from conventional sources of power that can rapidly be turned on & off, to match fluctuations in the wind . Whilst they are agreed ‘back- up is needed, there is some latitude in the estimates of the minimum ‘back-up’ needed. Dr Paul Golby CEO of E.On UK, says 90% whilst Mr Rupert Steele of Scottish Power says, “Thirty Gigawatts of wind maybe requires twenty-five GW of backup”

As a consequence of the need for power to match demand, ‘back-up’ plants are run start/stop to match the wind’s fluctuations. We might like use hydro, but UK has insufficient hydro resources, so the ‘back-up’ is probably a fossil fuel plant; usually gas. An open cycle gas turbine [OCGT] is effectively a jet engine, and a combined cycle gas turbine [CCGT] is this jet engine in which the heat from the combustion is collected and used to make steam to drive a secondary generator. The CCGT produces about 0.4 of a ton of CO2 per MWh. This is 50% more efficient than the OCGT that may produce same amount of power but uses more fuel and this results in about 0.6 ton of CO2 per MWh. When CCGT machines are used to ‘back-up’ wind power the gas plants are switched on & off [to match the wind] often do not reach a sufficient temperature to make steam and thus operate as if they were OCGT plants. Knowing this some powers suppliers just use OCGT as ‘back-up’ to wind.

Since the wind turbines only operate at about 25% of their rated or name-plate capacity* the ‘back-up’ has to supply the remainder, of 75%. Since, as shown above, a gas turbine operating stop/start produces approx. 0.6T/MWh the average is [75% x .6=] 0.45ton per MWh. This is more CO2 [and SO2, Nox etc] than would have been produced by an efficient CCGT working full time; 0.4ton per MWh. On the attached sheet I have shown this together with the costs of generating electricity by wind power. My sheet paraphrases the situation but detailed studies showing little or no saving in CO2 etc as a result of wind power have been produced by Prof G Hughes of Edinburgh University [“Why is wind p ower so expensive?”]. A Dutch study by Udo, de Groot and le Pair comes to similar conclusions as does the BENTEK report for Colorado and Texas,

My sheet also shows the cost of wind power vis à vis a CCGT plant. The result is that the cost of wind power is at least double the cost of power from CCGT. Other UK studies, such as those by the RAE or Mott MacDonald have similar results, as do studies from the USA. Other conventional types of electrical generation e.g. coal &nuclear result in similar costs per MWh to cost from gas. A very thorough Paper produced by Mr Colin Gibson formerly Power Network Director with the National Grid in Oct last year shows an even larger discrepancy between the cost of power form conventional sources and wind [ x3 onshore & x4 offshore]. See IESIS Glasgow.G2 9DS.

Since wind power does nothing to reduce CO2 and GHG emissions and costs at least twice as much as other sources of power, w hat on earth are we using it for? Why damage industrial competitiveness and put millions into fuel poverty for no benefit to climate?

William R B Bowie C.Eng, BSc, MICE, FCIHT. The Old Iron Mill, Ironmills Road, Dalkeith EH22 1JP

If my experience working on several power stations is of interest I should be happy to testify.

June 2012

* See Report for John Muir Trust covering period Nov 2008 to Dec 2010 whe re capacity was 24.08%

Page 170

CCGT Wind Wind Offshore Onshore e.g. e.g. Clyde

Capital Cost per MW £600,000 £3,000,000 £1,400,000 Additional cabling/MW say £0 £200,000 £100,000 £600,000 £3,200,000 £1,500,000 Load Factor / Capacity 80% 30% 27% Life Expectancy years 25 18 20 Lifetime Power Produced MWh 8760 175,200 47,304 47,304

Plant Cost per kWh in pence 0.34 6.76 3.17 OH and Maintenance say 0.34 2.00 1.00 Gas at 2.1p/kWh at 60% Efficiency [EEP] 2.1 3.50 0.00 0.00 Back-up cost ¾ of CCGT cost 0.75 0.00 3.14 3.14 Cost in pence per kWh 4.18 11.90 7.31 if applicable 0.36 0.27 0.27 Cost per kWh in pence 4.54 12.17 7.58

Renewable Options Certificate till 2014 say -8.40 -4.20 Wind Cost less ROC's 3.77 3.38

Comparitive Costs Wind to Gas 1.00 2.68 1.67 Wind mix offshore share 75% 2.43

CO2 from CCGT plant ton/MWh 0.40 0.40 CO2 OCGT plant run as back-up ton/MWh 0.60 0.00 0.45 0.45 CO2 from Peat medium scenario 17,127 ton [REF] 25% 0.00 0.00 0.09 CO2 from sea grass 0.00 ? 0.00 Total emissions 0.40 0.45 0.54

Scotland's CO2 Emissions t/MWh in 2002 0.3573 > >> >>>

Cost per kWh in pence with gas price X 4.5 16.8 21.36 16.8

N.B. 1 Scotland and the UK's emissions/MWh are low because of the share of nuclear power If nuclear is repaced by wind [with its 'back-up'] more not less GHG's will be produced

N.B.2 Wind is intermittent and wind-power fluctuates; as often as 100 times/day. Under such conditions a CCGT back-up plant does not get hot enough to make steam. Thus the CCGT plant runs less efficiently as a Open Cycle Gas Turbine.[OCCT] This means about 50% more fuel per MWh and thus 50% more CO2 per MWh.

N.B.3 Back-up from conventional power plants is essential to accommodate for wind fluctuations and thus provide a steady reliable source of electricity. UK wind can

Page 171 vary 100 MW in five minutes

N.B. 4 As the UK does not have the potential for much additional hydro [1 or 2 MW] the 'back-up' is likely to be fossil fuel; say gas fired, plants. Since the average output of UK wind turbines was just 24.08% of the name-plate capacity [*JMT] 75.92% must be supplied by the 'back-up' so if the gas price goes up the cost of the 'back-up' will also increase. The gross cost of w ind will vary with the price of gas! Gas would have to increase > 4 fold before the cost of on-shore wind is comparable with power from a CCGT plant. {& >9 fold for off-shore]

[*JMT] = Report for John Muir Trust covering period Nov 2008 to Dec 2010

Page 172 Memorandum submitted by Kes Heffer (WIND 60)

Although important, economics is not the critical issue with wind power. I would like to pick up on two points associated with the introductory statements by Tim Yeo MP:

1) Indeed government policy should not be based on political pressure from a small minority; but that includes the minority of activists who have hijacked the Intergovernmental Panel on Climate Change (IPCC)1 to the extent that the scientific content behind its Assessment Reports has been distorted by the small number of green activists controlling the Summaries. A far more balanced analysis of the effect of carbon dioxide emissions on climate was given to the House of Commons’ committee on climate change by Professor Richard Lindzen2, Alfred P. Sloan Professor of Meteorology at the Massachusetts Institute of Technology, on 22nd February 2012. I hope that his submission has not been forgotten. In case it has, the following extract is pertinent to any perceived need to reduce carbon dioxide emissions:

“The evidence is that the increase in CO2 will lead to very little warming, and that the connection of this minimal warming (or even significant warming) to the purported catastrophes is also minimal. The arguments on which the catastrophic claims are made are extremely weak – and commonly acknowledged as such. They are sometimes overtly dishonest.”

Of course there was an immediate scramble to purportedly critique his presentatione.g. 3; that followed by a rebuttal4. Although such arguments continue to rage, there is no doubt that there is a significant body of scientific opinion (as well as published peer-reviewed literature5) that is sceptical of the alarmist claims by green activists about the effect of carbon dioxide emissions on the climate. The IPCC Assessment Reports do not reflect the true weakness of the scientific case for such alarmism and it would be lazy and irresponsible politics to rely on their summaries.

2) “Wind farms are over forty times less polluting than gas burning power stations – per unit of energy produced”. This statement is totally at odds with the analyses of the effect of wind energy on carbon dioxide emissions

1 Donna Laframboise: The Delinquent Teenager Who Was Mistaken for the World's Top Climate Expert, available digitally from amazon.co.uk. 2 R. Lindzen “Reconsidering the Climate Change Act Global Warming: How to approach the science 3 Hoskins, B, Mitchel, J., Palmer, T., Shine, K. & Wolff, E. “A critique of the scientific content of Richard Lindzen’s Seminar in London, 22 February 2012” https://workspace.imperial.ac.uk/climatechange/Public/pdfs/Opinion%20pieces/Critique%20of %20Lindzen's%20lecture.pdf 4 R. Lindzen: “Response To The Critique Of My House Of Commons Lecture”, http://thegwpf.org/the-climate-record/5437-richard-lindzen-response-to-the-critique-of-my- house-of-commons-lecture.html 5 1000+ Peer-Reviewed Papers Supporting Skeptic Arguments Against ACC/AGW Alarm http://www.populartechnology.net/2009/10/peer-reviewed-papers-supporting.html

Page 173 by Dr. C. lePair6 for The Netherlands; and by Dr. F . Udo7 for Ireland. Those analyses rigorously demonstrate that wind developments of various sizes cause extra fuel consumption instead of fuel saving, when compared to electricity production with modern high-efficiency gas turbines only. Factors taken into account are: low thermal efficiency at low power; cycling of back up generators; energy needed to build and to install wind turbines; energy needed for cabling and net adaptation; increase of fuel consumption through partial replacement of efficient generators by low- efficiency, fast reacting Open Cycle Gas Turbines. I have written several times to DECC asking for comments on these analyses without a sensible response. I can only conclude that DECC analyses do not take into account the full set of fac t o r s .

Summary

Not only is there considerable and well-founded doubt about the need to reduce ‘carbon’ emissions to any great extent, wind turbines do not themselves effect any significant reduction.

The financial cost comparison with other forms of power generation is consequently somewhat of a red herring. Windpower requires equivalent back-up by conventional power generation, and saves little, if any, ‘carbon’.

Therefore to sanction the severe actual harm to the environment caused by onshore wind turbines, and by the associated new power lines necessary for both onshore and offshore turbines, would be extreme folly. Some of the most sensitive countryside in Britain, including National Parkland, is at risk of despoilment by these unnecessary constructions. Their sole utility would be to act as ugly monuments to the blinkered infatuation of activists with their cause, and the failure of politicians to make proper assessment of the issues.

June 2012

6 C. lePair: “Wind turbines increase fossil fuel consumption & CO2 emission ”. http://www.clepair.net/windSchiphol.html 7 F. Udo: “Wind e nergy in the Irish power system.” http://www.clepair.net/IerlandUdo.html

Page 174 Memorandum submitted by Alex Henney and Fred Udo (WIND 61)

Memorandum submitted by Alex Henney1 and Fred Udo2

SUMMARY

1. The government assumes that windmills are efficient in reducing CO2 emissions, and proposes that we spend £bns o n increasing wind energy capacity from 6.6GW at April 2010 to about 25GW by 2020.

2. The Danish experience with a high level of wind production provides an example of the law of unintended consequences. In winter the Danish system cannot absorb much electricity produced from wind because nearly all other power plants are combined heat and power systems and they have to run to satisfy the heat demand. In consequence the average level of CO2 emissions of electricity consumed in Denmark has not reduced much over the last decade and about a third to one half of the wind production is exported to Norway and Sweden often at a low price and reimported at a higher price in the summer. Danish customers are subsidizing Norwegian and Swedish customers, which was not part of the plan!

3. Eirgird, the Irish system operator, publishes an estimate of the CO2 emissions from the system operator every 15 minutes. In April 2011 the contribution of wind in the production of electricity was 12% in the Irish system but this wind production saved only 4% CO2 emissions. The reason is that with low hydro the system is regulated by thermal plants. Cycling and running at partial load reduces their thermal efficiency and increases CO2 emissions. Furthemore wind energy production has to be curtailed when the wind is high but demand is low. Currently about 3% is curtailed, but if the Irish government were to achieve its target of tripling wind capacity then 30% of the wind energy produced would be spilled, i.e. wasted.

4. A US study of the Colorado Public Service Company system and of the ERCOT system in Texas, which are both thermal systems with very little hydro, found similar results with thermal plant cycling reducing efficiency as shown by the performance of the Cherokee Unit 4 coal plant, and increasing CO2emissions.

1 Director EEE Ltd; once a director of London Electricity Board; the first person to propose in 1987 a competitive restructuring of the electric industry in England & Wales; advisor on electric systems from Finland to Australia; author of “The British Electric Industry 1990-2010: the rise and demise of competition”. This is a personal submission backed by no vested interest other than a dislike of the visual impact of enormous on- shore windmills and a strong objection to the government incompetently wasting even more of people’s money than it already does. 2 Retired Dutch physicist who worked at CERN Geneva, lately on the Large Hadron Collider.

Page 175 5. The system in Britain is predominantly coal and gas with some nuclear and very little hydro. A comparison with the Irish situation shows that the British system is even less suited to absorb wind energy than the Irish system.

6. The cost of offshore wind is about three times and onshore wind twice the current power price. The implication of these costs and the apparent ineffectiveness of windmills in mitigating

CO2 emissions is that the cost/tonne of CO2 saved could be truly extraordinary. Taking DECC’s central gas scenario for 2015 and assuming wind only mitigates 40% of the avoided emissions, then the cost of abatement per tonne CO2 for onshore wind is somewhat over £300/tonne and for round 2 offshore wind is over £500/tonne. (These figures refer to a high level of wind, not the current low level).

7. We strongly recommend that before spending £ tens of billions more on windmills, DECC should commission a scientific study of how efficient windmills are at mitigating CO2 emissions.

INTRODUCTION

8. Section 3 of the draft Energy Bill 2012 states “Electricity Market Reform will secure the investment needed to deliver a reliable diverse low carbon technology mix” (para 30), and “It is our intention that CfDs are available to low carbon generators from 2014.” (para 59). The intent is clear, and the government takes for granted that windmills are such low carbon generators. Empirical evidence suggests however that in a thermal system the deployment of a significant level of wind as proposed by the government may not significantly reduce the level of CO2 emissions.

9. We start with a brief analysis of the operation of the system in Denmark, which is held up as an exemplar of producing a high level of wind to reduce CO2 emissions. We next look at the system in Ireland for which CO2 emissions are calculated every 15 minutes. We then refer to the study of emissions in Colorado and in Texas. Finally we consider the implications for policy in Britain.

DANISH UNINTENDED CONSEQUENCES

10. In 2011 Denmark produced 33.3TWh of which 9.8TWh (29%) was wind from 3100MW of capacity. This capacity has hardly changed since 2004. In 2011 Denmark imported 4.5TWh and exported 3.2TWh; most of the trading is with Scandinavia. The Danish system is effectively regulated by hydro in Norway and Sweden to follow the variability of wind production. Data from www.energinet.dk (environmental report) shows that although the CO2 emissions per fuel unit used has continually declined since 1990, the emissions per kWh sold in Denmark have more or less leveled since 2003, see exhibit 1.

Exhibit 1 CO2 emissions per fuel unit and per kWh of electricity)

Page 176

11. The reduction from 1990 to 2000 was mainly due to the conversion of power stations to CHP units and the introduction of gas in the fuel mix. The CO2 content in the electricity produced shows a leveling off from 1998 onwards. This is the year large scale wind energy was introduced in the system. The unintended consequence is, that during winter the electricity production is dictated by the demand for heat, so the system cannot accommodate the fluctuating contribution of wind, see exhibit 21.

Page 177

Exhibit 2 Wind exported from Denmark

12. The share of exported wind energy is high during the cold seasons when increased demand for heat entails high electricity production from the CHP plants. The export of wind energy was 3.0TWh in 2011 or 31% of the wind energy production. Consequently, Danish customers pay part of their windmill subsidies twice over, once to produce the power and ship it to Norway for lower or even negative prices3, and again to reimport it often at higher prices2. (Effectively Danish customers are subsidizing Norwegian and Swedish customers). Neither of these factors are what the Danish government intended, when starting the build up of wind power.

IRELAND

13. In 2010 gas produced 66% of Irish electricity; coal 13%; peat 8%; wind 10%; hydro and pumped hydro 2.5%; other 1%. Most of the regulation to respond to variations in wind and output is usually provided by CCGTs and OCGT’s and 3 hydro facilities totaling about 180MW. A pumped storage facility of 270 MW was being rebuilt during 2011.

14. Eirgrid, the system operator, calculates the emissions of CO2 from the system as a whole using “static” heat rates for thermal plants (i.e. assuming they operate at a constant output). This approach overstates their efficiency and understates their CO2 emissions because when gas plant ramp-up and –d own (i.e. “cycle”) their thermal efficiency reduces – hence their CO2 emissions/MWh increase3. The estimated average emissions using static heat rates for the period November 2010 to August 2011 was 451g/kWh while the average CO2 emissions calculated from the carbon input from gas and coal was 528/kWh, which is 17% higher. Part or all of this difference can be attributed to the static approach used in the CO2 calculation of Eirgrid. The CO2 savings for the period

November 2010 to August 2011 were analysed and the “efficiency” of wind in reducing CO2 emissions is defined as4:-

3 The phenomenon of a large production of wind energy has led Nordpool, the Nordic electricity exchange, to lower the floor price from zero to minus 200 euro/MWh.

Page 178 The ratio of the measured reduction in CO2 emissions, to the reduction in CO2 emissions calculated as if every MWh of wind energy produced replaces a MWh of conventional electricity production without change in efficiency of the conventional plants.

The efficiency varies month by month, see exhibit 3.

Exhibit 3 The efficiency of wind in reducing CO2 in Ireland

15. Why the difference from month to month? In particular what happened in April 2011? The answer might be the availability of hydro, see exhibit 4.

Exhibit 4 The influence of hydro power on CO2 saving efficiency

In 2011 the pumped storage facility at Turlough Hill was being renovated; in consequence gas plants had to cycle more and thus produced more CO2. The result was that a 12% wind contribution saved only 4% CO2 emissions.

16. As is well known the wind blows when the wind blows, and it is not correlated with electricity demand. This is a significant feature of wind, which is implicit in the Danish situation of

Page 179 shipping wind to Norway and Sweden because the Danish system cannot absorb the wind. This situation occurs in every power grid as generators cannot be shut down at will. In the absence of export possibilities, such wind will have to be curtailed5. In practice this situation will occur simultaneously all over Western Europe as the wind forces are highly correlated. This implies that in 2020 export will play a minor role in solving this problem, as all countries are erecting windmills by the thousands.

17. In reference 4 the amount of must run capacity in the Irish system of 1300MW is derived from the data. Thus when the demand is low and the wind potential is high, wind energy has to be spilled. This is demonstrated with the aid of a load duration curve is constructed from all the daily load curves put together with the points sorted in order of decreasing demand. (For a complete explanation see the appendix of reference 5). Exhibit 5 shows the load duration curve6 for November 2010 with the associated level of wind; once demand reduces below about 2500MW the wind is increasingly curtailed – In this case about 3% is lost.

Exhibit 5 Wind is uncorrelated with demand so when demand is low it would have to be spilled

18. The Irish government has a target of three times the current level of wind by 2020, which would result in spilling 30% of the wind energy production, see exhibit 6.

Page 180 Exhibit 6 If the government target for wind in 2020 were met, 30% of the wind energy would have to be spilled

The upper limit of the wind contribution follows the demand curve, in such a way, that the must run capacity of 1300 MW can always run. The non-curtailed wind is the same as in exhibit 5, but three times higher. Its upper limit runs now at 4200 MW. It follows, that curtailment now can occur at all times during the day.

COLORADO AND ERCOT

19. Energy Consultant Bentek7 undertook a study of the effect of wind on emissions of SOx,

NOx and CO2 for two systems:-

Page 181

• The system of Colorado Public Service Company (PSCO), with in 2008 3.8GW of coal plant, 3.2GW of gas plant, 0.4GW of hydro and pump storage, and 1.1GW of wind, a nd

• The ERCOT system in Texas, which is a virtually stand alone system that manages about 85% of the capacity in Texas. In 2009 it had 17.5GW of coal plant, with 44.4GW of gas plant, 5.1GW of nuclear, 0.6GW of hydro, and 9.4GW of wind; the system produced 300TWh and met a maximum demand of 63GW. Wind provides between 5% and 8% of the average generation overall, depending on the season, but at night its contribution rises slightly from 6% (summer) to 10% (spring )

Both systems are predominantly thermal with significant wind relative to their size, and little hydro.

20. The studies used publicly available hourly data for boiler specific emissions and production which are provided to the Continuous Emissions Monitoring System of the Environmental Protection Agency and data provided to the Federal Energy Regulatory Commission. ERCOT also publishes wind, coal, nuclear, natural gas and hydro generation data on a 15-minute basis. The PSCO part of the report first examines in detail the impact of cycling for CO2 coal plants over a number of days when there are “wind events”. The avoided generation from coal plants was calculated; the monthly and quarterly “stable day” emission rate was calculated; finally the difference between the actual emissions and the emissions that would have been generated if the avoided generation had been produced with the “stable day” emission rates was calculated.

21. The effect of cycling coal plant is shown by the operation of Cherokee Unit 4 located in Denver. Between 7:00 pm and 9:00 am on March 17 and 18, 2008, see exhibit 7. “Total generation from the plant is shown in blue; the heat rate – defined as the MMBtu of fuel per unit of generation – is shown in red. Between 9:00 pm and 1:00 am, generation from the Cherokee 4 fell from 370 to 260 MW. It then increased to 373 MW by 4:00 am. During the period in which generation fell by 30%, heat rate rose by 38%. Heat rates are directly linked to cycling: as the generation from coal plants falls, the heat rate begins to climb. Initially, the heat rate climbs because generation of the plant is choked back and fewer MW are produced by the same amount of coal. Later in the cycle, the heat rate climbs further because more coal is burned in order to bring the combustion temperature back up to the designed, steady-state rate. Additionally, for many hours after cycling, the heat rate is slightly higher than it was at the same generation level before cycling the plant.”

Page 182 Exhibit 7 Impact of generation decline on heat rate

22. In addition to the micro study of wind events on particular plants, the study also looked at the coal cycling impacts on PSCO’s territory emissions. The conclusion of the study was that:-

“…cycling of coal-fired facilities has increased significantly since 2007 as wind energy generation increased to its current levels…the increased incidence of cycling has lead to emission of greater volumes of SO2, NOx and CO2. In 2008, depending on the method of

calculation, cycling coal plants caused between 1.1 and 10.5 million pounds of SO2 to be

produced that would not have been produced had the plants not been cycled…Cycling’s impact on CO2 is more ambiguous as the range is between creating a saving of 164,000 tons and a penalty of 151,000 tons. In 2009, generation from PSCO’s coal-fired plants fell off by about 20%, but their emissions did not diminish proportionately. Again, cycling appears to be a central factor…between 94,000 and 147,000 pounds of CO2 [was produced] more than would have been generated had the plants been run stably.”

23. The conclusion of the study of ERCOT, which was undertaken in a similar manner to their PSCO analysis, is:-

“Not only does wind generation not allow ERCOT utilities to save SO2, NOx and CO2

emissions, it is directly responsible for creating more SO2 and NOx emissions and CO2 emission savings are minimal at best.”

BRITAIN

24. The system in Britain is predominantly coal and gas with some nuclear and very little hydro, proportionally less than in Ireland. The wind capacity at April 2012 was 6.6GW. National Grid’s Gone Green Scenario, which is consistent with the ambitions of the government, is for about 25GW of wind. The system currently needs about 4GW of regulating capacity available at all times, of which about 1.8GW is provided by pumped storage and the balance by part-loaded CCGT and coal plants. Most, if not all, of the additional 18GW required under the Gone Green scenario for 2020 is likely to be thermal plant. A comparison with the Irish case result in 20% of the wind energy will be spilled and the fuel saving of the remainder will be merely between a third and a half of the anticipated value.

25. The latest levelised cost estimates8 for windmills were prepared in October 2011 for the government by Ove Arup and Partners with assistance from Ernst & Young9. To these costs we have

Page 183 (after crawling through the detailed figures) added the annuitised value of a relevant share of the cost of transmission development proposed in the Electric Network Strategy Group’s recent report10. Thus for a total of 14.4GW of offshore wind we will incur £3.8bn of transmission investment and for 6GW of onshore wind an addit ional £3.9bn. Annuitising the investment we get a charge of about £240m for 14.4GW offshore wind and £240m for 6GW of onshore wind. Suppose the offshore windmills generate with a load factor of 34% and onshore at 25% (which is perhaps a generous estimate given that the actual load factor of windmills in England averaged around 20% across 2010 then we get a charge of about £5/MWh for offshore and £16/MWh for onshore wind. Thus the medium scenarios for wind in 2015 are costs for offshore of £144/MWh (say £145/MWh) for round 2, and £197/MWh (say £200/MWh) for round 3, and £104/MWh(say £105/MWh) for onshore11. By way of comparison the winter 2012 baseload strip is £53/MWh, which indicates the cost of offshore wind is about 3-4 times and onshore wind twice current power price. The implication of these costs and the possible ineffectiveness of windmills in mitigating CO2 emissions we identified above is, that the cost/ton of CO2 saved is above £200, which is truly extraordinary.

26. Assuming DECC’s central case gas price of 62p/therm in 2015 and a thermal efficiency for an older CCGT of 45%, then the marginal cost of displaced gas generation is about £47/MWh and the CO2 reduction from avoided gas gener ation is 0.45tonne/MWh when a plant is operating steadily at our estimated cost for onshore wind of £105/MWh, the additional cost of wind is £58/MWh. For this we would have a notional saving of 0.45tonne/MWh for a plant that operated steadily. But as noted from experience in Ireland and Colorado in a system with a high level of wind where thermal plant bears most of the burden of varying output to offset wind variability, the saving is much less. In the Irish system the saving was reduced to a third when hydro production was low. If we suppose that the saving is 40% (i.e. 0.18tonne/MWh), then the cost of abatement is £320/tonne of CO2 for onshore wind, and in similar manner for offshore round 2 the cost of abatement is £550/tonne of CO2. (Note these figures make no allowance for curtailment and hence wind waste, which would become significant if wind production approached 20% of the total).These costs can be compared with the highest level achieved in the EU Emissions Trading Scheme o f €34.2/tonne of CO2 in April 2006 and the Treasury's carbon target price floor of £30/tonne in 2020 rising to £70 in 2030.

27. There is a story around that the effect of cycling of thermal plant due to wind variability will be mitigated by:-

• Rolling out smart meters which will regulate demand side response when the wind does not blow and thus prices are high • An increase in smart appliances such as fridge/freezers and washing machines which will switch off when prices are high • A major increase in electric vehicles which will have a price signal to charge when wind is blowing and prices are lower and can even feed back into the grid • An increase in heat pumps which will respond to pric e

Page 184 All of these factors may come into play when we have “smart grids” which are designed to not only provide, but also accommodate, the prospective new technology. This future requires not only extensive agreement on standards but also extensive trial and error experimentation to know how to implement the necessary systems and to modify the distribution networks. For at least the next decade – i f not more - w e will have to operate the systems largely as we do at the moment, and thus should assume that windmills may not mitigate CO2 as its proponents have suggested. Rather than splurge out with customer’s money big time on windmills (and uneconomic smart meters12) in the hope of quick structural changes in the behaviour of the operation of the electric system, we should proceed in an evolutionary manner and check reality against political visions – a nd counter the straightforward naked commercial vested interests that masquerade as being concerned with “the public interest”13.

28. We met with Minister Charles Hendry on 16 May and provided him with the empirical data that indicate that in a thermal system windmills do not achieve what they claim on the tin. We most strongly recommend that before spending £ tens of billions more on windmills, DECC should commission an objective and empirical scientific study of how efficient windmills are at 14 mitigating CO2 emissions. We italicize “objective and scientific” to differentiate from some of the glib and clearly politicized Impact Assessments prepared by DECC. We emphasise empirical to differentiate from DECC’s practice of calculating CO2 emissions ratings simplistically and incorrectly from the steady state running of thermal plant, and referring people4 to the note by The Carbon Footprint of Generation prepared by the Parliamentary Office of Science and Technology. The carbon footprints assume steady running5.

June 2012

Notes.

1) Statistical Survey 2011, Paul-Frederik Bach, http://pfbach.dk/firma_pfb/statistical_survey_2011.pdf.

2) Wind Energy, The Case of Danmark, Hugh Sharman CEPOS 2009 www.cepos.dk

3) The topic of the significant loss of thermal efficiency of gas and coal plants cycling is dealt with in detail by Willem Post in “Wind Power and CO2 Emissions”, www.coalitionforenergysolutions.org/research_and_reports.

4 ) Wind energy and CO2 emissions – 2, F. U do, 21 October 2011, www.clepair.net/udo_okt-e.html.

5) Curtailment in the Irish Power system, F. Udo 2012 http://www.clepair.net/Udo- curtail201205.html.

6) Wind turbines as a source of electricity. F. Udo, K de Groot and C. le Pair: http://www.clepair.net/windstroom e.html

4 Letter to Alex Henney form Val Dias, DECC Correspondence Unit, 7/6/2012. 5 E-mail from Steve Allen author of the note.

Page 185

7) How less became more: wind, power and unintended consequences in the Colorado Energy Market, Bentek Energy LLC, 16 April 2010, http://docs.wind-watch.org/BENTEK-How-Less-Became- More.pdf.

8) Note that although it is conventional to calculate and compare levelised cost estimates for different generation technologies, the comparison favours windmills (and solar panels) because unlike nuclear and dispatchable thermal plants there is no guarantee that windmills will be producing at times of system stress. Estimates put the value of wind electricity at half the value of electricity produced by dispatchable sources.

9) Department of Energy and Climate Change, Review of the generation costs and deployment potential of renewable electricity technologies in the UK, Study Report, Arup, October 2011, http://www.decc.gov.uk/assets/decc/11/consultation/ro-banding/3237-cons-ro-banding-arup- report.pdf.

10) ENSG ‘Our Electricity Transmission Network: A Vision For 2020’, 11D/954, February 2012, http://www.decc.gov.uk/assets/decc/11/meeting-energy-demand/future-elec-network/4263- ensgFull.pdf.

11) The calculations are available from “The collapse of the Coalition electricity policies”, available on request from [email protected].

12) See “A critique of the impact assessment (IA) of smart meter roll-out for the domestic sector (GB) 18/07/2011”, Alex Henney, EEE Ltd, March 2012, available www.alexhenney.com.

13) This subject is extensively discussed in a report by Gordon Hughes: Why is wind power so expensive? Global Warming Policy Foundation 2012.

14) While National Grid should be involved in the study, it should not lead it because it has a vested interest in claiming that windmills mitigate CO2 because it wants as many windmills on the system as possible in order to justify bulking up its grids. An example of t he reaction of vested interests is given by the response of Mr. Nick Winser to Mr. Udo’s analysis of Ireland was “Thanks. Interesting. I doubt that your point about part loaded fossil negating the carbon benefits of wind is well founded particularly with our huge advances in wind forecasting accuracy.” There is a basic flaw in his response, namely although the forecasts may be more accurate that per se will not alter the outturn variability – hence cycling of plant

Page 186 Additional memorandum submitted by Alex Henney and Fred Udo (WIND 61A)

The going forward total cost of wind

The conventional manner in which the cost of generation is presented is as a “levelised” cost using low, central, and high estimates and basing the costs on the capital cost of the facility; its availability; its fixed and variable O&M; its fuel cost; and (if significant) its decommissioning cost. DECC is using cost estimates prepared by Ove Arup and Partners with assistance from Ernst & Young as the basis for its review of banding1. Arup’s estimates for the levelised costs of (large) onshore and offshore wind farms of >5MW for 2015 are as follows:-

£/MWh Onshore l ow 72 medium 88 high 105

£/MWh Offshore low 123 medium 139 high 158

£/MWh Offshore round 3low 168 medium 192 high 225

The basic “production” costs are, however, only part of the story when there is a significant level of wind. For a start National Grid estimates the extra system cost required to handle the variability of wind for 2020 at £286m for a wind output of about 70TWh p.a. say an average of £4/MWh2. Next the Electricity Network Strategy Group has just reported “The total estimated cost of the potential reinforcements contained in this report, based on National Grid’s Gone Green 2011 scenario is around £8.8bn”3. The ENSG report assesses the reasons for, need for, and cost of transmission reinforcement in – area s of the country as follows:-

Scotland, which is divided into:-

• SHETL where “The volume of generation…is expected to increase over the coming years due to the growing capacity of renewable generation” and it refers to various wind developments. The Gone Green 2011 (GG2011)scenario refers to 2.2GW offshore; 4.5GW onshor e

1 Department of Energy and Climate Change, Review of the generation costs and deployment potential of renewable electricity technologies in the UK, Study Report, Arup, October 2011, http://www.decc.gov.uk/assets/decc/11/consultation/ro-banding/3237-cons-ro-banding-arup-report.pdf. 2 Operating the Electricity Transmission Networks in 2020 – U pdate June 2011, National Grid. 3 ENSG ‘Our Electricity Transmission Network: A Vision For 2020’, 11D/954, February 2012, http://www.decc.gov.uk/assets/decc/11/meeting-energy-demand/future-elec-network/4263-ensgFull.pdf.

Page 187 • SPT – “The volume of generation…is similarly expected to increase…due to the growing capacity of onshore wind farms…together with the Crown Estate Round 3 offshore wind farm in the .” GG2011 refers to 1GW offshore and 4GW onshore

The estimated cost of reinforcements in Scotland for the GG2011 scenario is £2.5bn.

Scotland-England interface: “A number of potential reinforcements have been identified which have the ability to increase the boundary capacity to meet the increasing transfers from Scotland to England” due to increased generation of 9GW of Scottish Wind (namely the above 11.7GW, minus 2.5GW of existing onshore capacity). The reinforcement includes both the Western HVDC link (around £1bn) for which “The main driver…is the large volume of renewable generation that is expected to connect Scotland to Northern England over the next ten years.” It also includes the East Coast HVDC Link 1 between the North East of Scotland and the North East of England (£1.2bn) for which the “main driver…is the large volume of renewable generation (mainly onshore wind and some offshore wind and tidal) that is expected to connect in the North of Scotland…”. The reinforcement also includes increasing the three Scotland/England onshore boundaries to give a total cost of £3.5bn.

The total “Scottish” cost is £6bn of which (say) a £5.7bn share is due to wind of which there is 3.2GW new offshore wind and 6GW new onshore. Pro-rating according to capacity gives £2.3bn for 3.2GW offshore and £4.4bn for 6GW onshore wind.

North Wales: a net increase of 2.8GW of generation is forecast under the GG2011 scenario because of a nuclear plant at Wylfa of 1.2GW (current nuclear capacity is 1.0GW) and 2.6GW of offshore wind at a cost of £1.1bn, then on a pro-rata basis £0.75bn is for offshore wind.

Mid Wales: “The area has been identified as one that has significant potential for onshore wind generation” and is marked for 0.8GW at a cost of £0.2bn.

South West: GG2011 forecasts “a significant amount of new nuclear (1.6GW) and wind generation” (offshore 1.1GW) at a cost of £0.5bn. Pro-rating credits £0.2bn to 1.1GW of offshore wind.

East Coast and East Anglia: GG2011 foresees a cost of £0.75bn driven by 6GW of offshore wind.

London, and South Coast: GG2011 foresees 1.5GW of offshore wind incurring a cost of £2-400m (say £0.3bn).

Thus for a total of 14.4GW of offshore wind we are incurring £3.8bn of transmission investment and for 6GW of onshore wind a total of £3.9bn. If we annuitise the investment at 6.25% over 40 years we get a charge of about £240m for 14.4GW offshore wind and £240m for 6GW of onshore wind. Suppose the offshore windmills generate with a load factor of 34% and onshore at 25% then we get a charge of about £5/MWh for offshore and £16/MWh for onshore wind.

Thus the medium scenarios for wind in 2015 are costs for offshore of £144/MWh(say £145/MWh) and £197/MWh (say £200/MWh) for round 3, and £104/MWh(say £105/MWh) for onshore.

June 2012

Page 188 Memorandum submitted by Mary Armstrong (WIND 62)

MORATORIUM to release Scotland from RANSOM of TREES & TURBINES

Targets! Renewables! Trees & turbines! Enough of Scottish Ministers cant! Target for Renewable energy of / for our local rural people in a Hillfarmipng Strategy? Scotland’s backbone & groundbase, in respect of Scotland’s past, whilst committed to its future?

On behalf of 11000 members, Mountaineering Council of Scotland can call for Munro turbine ban”. Well done! But who represents the few land custodians left at heather roots level, and core of rural people from time immemorial shepherding the hills of Scotland…..ever for their voice in similar vein, to be heard, gagged under forestry?

Every pound and million of pounds in inestimable cost and debt to Scotland of large scale treeplanting and wind turbines ensures another nail in the coffin for policy and funding to re‐instate hillfarming, rural lifeblood, gene pool of people and grazing animals, archaeology, history and all therefrom,: to regenerate wildlife, landscape and tourism to restore, preserve, protect and project the unique legacy of rural Scotland.

For Scotland’s sake, a MORATORIUM on ALL FORESTRY & WINDPOWER developments (with Sect.65 powers to revoke or modify such Planning Permissions granted within the last years) is a matter of URGENCY…..until those, who fail to represent the interest of Scotland’s rural people,. all those silent conservation bodies, ambivalent MPs, the sit on the fence so‐called statutory Consultees and Stakeholders to Planning Applications; SNH, FC, RSPB, SEPA, SAC et al….are brought to account, to stand up in answer from their corporate enforced silence, in a grand public SUMMIT; not for prolonged procrastination in Mexico, but in Scotland..NOW!

Where is democracy when under cloak of Landuse Strategy, SG targets policy and millions, solely at treeplanting& turbines to lay waste to Scotland’s Hill landscape life, landscape and people? Where is democracy when community Councillors are wooed to windpower hushmoney, conned into “community benefit” projects, AFTER the desecration of land and heritage, and whole cultural communities are ripped apart?

Where does SNH lie, in removing SSSIs last year, to now facilitate windpower applications in these same areas whilst SNH big chiefs pay lip service purportedly consulting “local” views in a whistle‐ stop tour of Scotland at scant urban venues?

Bereft of a proper Land Use Strategy, to whom is a Forestry Strategy accountable? FC withholding vast tracts of hillfarming land, abandoned farmsteads, still desecrating Scotland’s landscape besides and yet another £5M to FC for tourism centres!. What target is this, at Scotland’s debt‐ridden cost, wholly subsidised in millions, for FC treeplanting exploitation and waste, exempt from any constraints cf agriculture, outwith SEPA or planning control, claiming agriculture subsidies then dropping out of agriculture to be exempt from GAEC or gangmaster rules? To compound matters, over and above another 1/4M and the target for 25% more trees, woodland removal within and any infrastructure around any wind farm application areas automatically qualifies for “compensatory planting” in good open hill farming land regardless of the windblow clearfell dereliction left behind.

Page 189 What a travesty if Hillfaming Strategy and Target is lost to trees & turbines as Scotland’s Land Use Strategy is cast to the wind? MVArmstrong The Galloway Hills

27 June 2012 WHERE THE WHAUPS ARE CRYING

Galloway, South‐West Scotland (Wigtownshire, in particular) is being humiliated by wind farm developers (700+turbines) who insist they are saving the environment. They lie; they are here to make a profit. Wind farms produce very little and intermittent electricity. Most of the time they do not work. They serve no local need whatsoever, not even for the farms and homes here where, in 2012, there is still no mains electricity!

How can the blade of a bulldozer ripping up 6,ooo years of beautifully preserved archaeology from the interaction of man and grazing animals in timeless agriculture; 6,000years beautifully preserved by hill grazing due to our unique favourable climate….be saving the environment? How can the massive industrial infrastructure and millions of tons of concrete on ancient peatland aided and abetted in bed with Forestry Clearances and Clearfell serve the few local people left in the culture of agriculture to cherish the iconic landscape where they live and work?

Have we not learned from the “Green Death” of afforestation in Galloway in its destruction of the shepherded hills? Forestry Commission with the advent of deep ploughs… they would give jobs, insisting on changing the environment… still totally subsidised…like wind power… to a wasteland! For tourism? Does SNH or RSPB not care if their brigade for reserves for trees or turbines, scupper the skeins of greylags en route to Wigtown Bay or the curlew (thanks to hill sheep farming) still on Culvennan Fell?

How can the turbine blades smashing a golden eagle to bits be saving the environment? How can the government of Scotland destroy such a prize?

And use public money to do it?

June 2012

Page 190 Memorandum submitted by the Rainbow Trails Project (WIND 63)

Whilst we applaud the work of this committee at looking at the ‘the value for money and carbon reduction elements of these massive wind factories in our countryside’ we feel that the economic impact on the lives, jobs and leisure activities of local communities is not addressed.

Our project is a good example of how a massive economic investment of local people in their own area (‘the big society’) is now to be devastated by big business. Our comments do not consider house blight and tourism blight and those economic effects but the actuality of the loss of a community led initiative.

The Rainbow Trails Project (see www.dyfnanthorses.org.uk) was set up by local people following the devastation by foot and mouth in our rural area in 2001. It was seen as a regeneration project for the area using a local public access resource. The local forest Dyfnant was to be developed as a major equestrian centre of tracks and trails for community use and tourism promotion. At the time it was following the ‘Woodlands for Wales’ strategy and the ‘Saddling up for Success’ Welsh Tourist Board document.

Capital funding was received in partnership with FC Wales from European Objective 2, the Welsh Development Agency, Adwyfio (Rural Recovery for Tourism) and other smaller donations from local people and the Community Council.

A new infrastructure was developed in the forest including two new car parks, coralls and a new community building.

The forest now boasts over 80 km of riding and multi user trails (including a nature trail) and 37 km of carriage routes.

The project has won national acclaim and awards.

The forest is now a centre for equestrian tourists and also hosts major events for other users e.g. husky racing, fell running etc.

Apart from the initial capital finance of over £100,000 thousands of volunteer hours have been utilised to make the project what it is today.

Local people have spent money diversifying into providing equestrian accommodation and there has been an influx of equestrians coming to live in the area.

The economics of horse owning cannot be underestimated in a rural economy supporting local farmers and professionals e.g vets, farriers etc.

Page 191 In 2004/5 without any local consultation or discussion with formal partners FC Wales (under instruction form the Welsh Assembly Government) leased off our forest to Scottish Power Renewables for the development of a wind factory.

35 x 606 feet tall turbines are proposed all over the forest adjacent to the equestrian tracks and even the main car park itself.

This has decimated the ability for the project to move forward with its strategic development.

External funding and local sponsorship has dried up due to the uncertainty of the project.

Despite numerous meetings and discussions with Scottish Power they have offered, to date, no mitigation since they see ‘no conflict of interest’ even though the forest will be closed to the public for up to three years during construction should this development go ahead.

The area will be a no go area for any form of tourism which is the life blood of this part of Wales.

The morale of the 1500 ‘Friends of the Forest’ is low.

The impact on local communities in real economic terms cannot and should not be excluded from your deliberations.

The Rainbow Trails Project fully support the actions of Conserve Upland Powys (CUP) and National Opposition to Windfarms (NOW).

June 2012

Page 192 Memorandum submitted by GE Energy (WIND 64)

Key Points

• GE manufactures wind turbines and solutions tha t optimise wind turbine energy production and we see significant potential for growth arising from the UK wind sector. • Onshore wind is presently the cheapest form of renewable ene r gy. • Projects are often constrained by the UK planning process resulting in less optimised projects (lower hub heights & smaller rotors) and costly delays (project refusals & planning inquires). In addition to lost power generation we estimate the costs to amount to around £500,000 a project. • A more streamlined permitting system (with enforced deadlines and clearer success criteria) could reduce costs and allow developers to take advantage of technology efficiency gains of up to 20%. • In our experience, Germany could be benchmarked as an example of best practice approaches to permitting. • The cost of finance and introduction of new technology for onshore and offshore wind projects are also being impacted by uncertainty over the future regulatory framewo r k.

The costs of wind and potential for cost‐reductions Since 2002, GE has grown its renewable energy business from around $500m to €6bn turnover. GE has developed the ability to manufacture wind turbines from 10 per week to 13 per day and has driven this growth through design optimisation and supply chain management on a global scale. This volume has enabled GE to maintain a viable economic business model in an economic climate where a number of other manufacturers are struggling to maintain a profitable manufacturing business.

Onshore wind is presently the least costly form of generating electricity from renewable sources. Whilst we recognise the need to minimise costs to the consumer we have been concerned at the prospect of further reductions in renewable support levels as this would render many projects economically unviable.

GE is aware that the Government must avoid artificially fixed, high electricity costs to retain and attract industrial electricity consumers, and the employment they provide. Renewing long‐term confidence in UK renewable energy targets and providing a stable regulatory framework will reduce uncertainty and risk relating to the return on long‐term capital investment which in itself raises the levelised cost of electricity.

GE is lowering costs to increase wind output and helping to increase wind power in more efficient and economical ways. We have a global team from across four R&D facilities working on several key technology fronts. In wind, we are focused on advanced blade development to improve wind capture; new controls and software to enhance power reliability; and sophisticated simulation and modeling techniques to optimize the placement of turbines on a wind farm site. We are also developing more intelligent grid management technologies to seamlessly integrate both into the electrical grid.

Page 193

Project lifecycles Wind energy (as with other renewable technologies) requires an extensive project development process. Onshore wind projects in the UK have a development cycle ranging from 2‐6 years. Offshore wind projects have typically taken 6‐8 years from concept to site mobilization. In addition to the lost benefits of early power generation, delays to project permitting decisions can be both lengthy and very costly. For example, a two‐year delay can result in steep increases in security payments to the grid‐connection company and internal development costs plus external consultants to support an appeal process. This can amount to as much as £500,000 a project.

A key activity during the project development process is site planning and layout optimisation. GE works with customers to maximise energy captured from the site – within planning constraints such as noise and visual impacts. The developer has to optimise an area based on technical restrictions (for example turbulence intensity, wind speed, etc.) as well as on regulations for emissions (shadow, sound, etc.) while minimising and or eliminating external effects on the local environment. All these aspects should be taken into account within the rules and regulations of a permitting regime, which is tailored to better optimize wind energy projects.

Inflexibility of Permitting and deployment of technology As a manufacturer we experience difficulties amending the dimensions of turbines which have been used in countries with inflexible permitting schemes. Given the fast pace of developments in wind energy, ‘technology freeze’ owing to inflexible permitting schemes has a major impact on the deployment of optimal technology ‐ more efficient turbines with higher energy yields. These could be deployed if minor amendments to permits were possible.

As such, sub‐optimal technology can often be deployed at a premium price as the permitting process does not encourage the most competitive solution. On our 2.5 wind turbine platform we are seeing efficiency increases of up to 20% on a 3‐4 year time horizon. The current planning scheme in the UK does not often allow our customers to take advantage of these technology advancements.

By way of comparison, Germany in practice has established p lanning procedures which does meet the goals of having a fast, transparent and reliable process for the applicant, which includes binding deadlines to accept or reject a n appli cation.

About GE • GE Energy is one of the world's leading suppliers of power generation and energy delivery technologies. • The businesses that comprise GE Energy ‐ GE Power & Water, GE Energy Management and GE Oil & Gas ‐ work together to provide a broad portfolio of product and service solutions in all areas of the energy industry. • GE is committed to the development of renewable energy and is a technology leader in both on and offshore wind technologies with over 17,000 installed onshore turbines globally. • GE Energy is part of General Electric, a global infrastructure, finance and media company. GE is proud of its presence in the UK since the 1930s where we employ over 18,000 people and have invested £14bn since 2000. In the UK, GE’s installed technology meets 18% of UK electricit y needs.

June 2012

Page 194 Memorandum submitted by to the Falck Renewables Wind Limited (WIND 65)

1. We are grateful for this opportunity to submit evidence to the Energy and Climate Change Committee for the proposed public evidence session on the Economics of Wind Power on Tuesday 10 July. In our submission we have focussed on the following three areas:

• Economics of onshore wind and ROC re-banding from 1 April 2013. • Intermittent nature of wind and the requirement for back up capacity. • Making onshore wind more acceptable to communities that host t h e m.

Falck Renewables Wind Limited is one of the UK’s largest wind developers. We currently have 680MW of operating wind farms in the UK, Italy, France and Spain. The wind business has its corporate headquarters in London, its operational headquarters in and 273MW of our operating capacity in the UK. To date over £500m has been invested in our UK wind farms. We have a pipeline of approximately 750MW of onshore wind projects in the UK of which 81MW is consented and waiting to be constructed.

Economics of onshore wind

2. The Renewables Obligation re-banding consultation at the end of 2011 indicated that with the support level for onshore wind cut to 0.9 ROCs the re would be a reduction in the number of onshore wind projects in development of approximately 10%. The consensus view was t hi s was a fair compromise b etween delivery of capacity and cost to co nsumers, and that it was a proposal supported by the evidence available. Our response to this consultation was to review our own development portfolio and to stop development of the lower wind speed sites where a reduction in ROC support would be critical to the economics of the project. Any reduction below 0.9 ROCs will have a much more serious affect on our development portfolio and w i l l cau se us to cease development of many of our projects including at least one project which is fully consented and ready to start construction. Our projects typically cost about £700,000 to develop to the point of obtaining planning permission and we are very concerned that years of work and large amounts of development money will have been wasted if the onshore RO support levels are reduced be l ow 0.9.

3. We can see no economic rationale in the suggested reduction in RO support. A reduction to 0.75 or 0.8 ROCs will seriously impact the growth of onshore wind in the UK and it will lead to increased costs for the UK to meet its renewable energy targets. Onshore wind is the lowest cost form of renewable energy so if the UK’ s targets for growth of renewable ene rgy are to be achieved then the contribution from other more expensive renewable energy technologies such as offshore wind, wave & tidal, and solar will need to increase, with a consequent increase in the cost to the consumer. At a time when there’s so much concern about rising costs of electricity and the likely burden on consumers of paying for the cost of a new generation of nuclear plant it seems perverse to curtail the growth of the lowest cost form of renewable energy.

4. We note that while we have recently seen some reduction in the market price of onshore wind turbines f ollowing rises at the end of last decade. Conversely we have seen other costs rising in the same period. Op eration and maintenance costs have risen dramatically negating turbine price reductions and grid connection costs have increased because of escalating copper prices. Financing costs have also risen significantly over the past 2 years through a combination of higher lending margins, reduced debt to equity ratios and reduced debt tenor. This problem is likely to be further exacerbated by the inevitable loss of lender co nfidence arising from a reduction in ROC levels. Other operating costs including lan d costs, leases, rates, and community benefits payment s are all increasing, some at double digit rates. Taken as a whole, our experience has been that the overall through life costs of onshore wind farms are not dimini shing and there is no economic evidence to justify the reduction of R OC support for onshore wi n d.

Wind Intermittency and Back-up requirement s

Page 195 5. There is a constant requirement to match generation output with customer demand on a real time basis. Since the output of wind farms is difficult to accurately forecast then there is a need to operate flexible plant to cover differences between supply and generation in the short ter m. The cost we typically see for balancing intermittent wind generation is about £5/MWh. This is a typical charge that UK Supply Companies have historically charged wind farms through Power Purchase Agreements and is considered to be higher than other European countries where charges of around £3/MWh are seen. We believe that there is scope to reduce the balancing charges incurred by wind generation by improving the competitive market for long term Power Purchase Agreements. This is an area that independent generators have highlighted in consultations on the Electricity Market Reform.

6. Aside from dealing with short term fluctuations in output there is a requirement for back up capacity to generate at times of low wind speeds. At present this can be comfortably accommodated because of the high generating capacity margin within the UK’s fully integrated grid network. Looking forward studies have shown that quite high levels of intermittent generation can be accommodated on the system and can be balanced by a variety of mechanism s i ncluding smarter grids, interconnectors, energy storage, demand side measures as well as flexible generation plant and pumped storage plant s.

Making onshore wind farms more acceptable to com m unites

7. Falck has pioneered a number of community ownership initiatives to make wind farms more acceptable. W e have two different community ownership programmes for our projects in Scotland. These schemes are supplemental to the community benefit payments which we in common with the majority of onshore wind farm developers provide.

8. In the first community ownership model we offer people the chance to own a share in their local wind farm through a series of local cooperatives. Working in partnership with a not for profit entity, Energy4All Limited, a co-operative is established which purchases a share in the wind farm. Local people are able to join the co-op, buying shares worth between £250 and £20,000. Profits from the sale of green electricity produced by the wind farm are distributed to members through an annual dividend. Through this scheme we have seen over 2,500 people investing nearly £6m in four of our wind farms.

9. The second scheme is our community turbine scheme which we have implemented at our Earlsburn Project and plan to implement on other projects. In this arrangement we agreed to finance, construct an d operate a turbine, on behalf of the local community, in an arrangement with Fintry Renewable Energy Enterprise (FREE). The FREE turbine has provided funding for a number of community energy efficiency schemes and has been a focal point in the village community for increased awareness of renewable energy, energy efficiency and tackling climate change. We believe that these schemes help b r in g a sen se of local ownership and involvement which helps improve the acceptance of wind farms by communities.

June 2012

Page 196

Memorandum submitted by CATS – Communities Against Turbines Scotland (WIND 66)

1. This submission is made on behalf of Communities Against Turbines Scotland and alongside the submission from NOW. We are willing to give oral evidence to the committee and will be available.

2. Rural Scotland is being beseiged by wind farms and individual, double and triple turbines are having a huge negative impact on the environment and therefore the economy.

3. Whilst CATS appreciates membership of this committee should be familiar with its remit, to choose the President of the Renewable Energy Association as Chair does not inspire confidence in its impartiality.

4. We are shocked, given the access available to Government and Parliament, to see that those responsible for formulating the country’s energy policy should know so little about it. It is worrying to say the least that a public consultation has been called when in‐depth discussion and consultation with scientists engineers and economists is what is required.

5. CATS is aware of the submissions made by NOW, REF and The Wales and Borders Alliance, and commends their responses to you. In the light of the depth and quality of these responses, CATS wishes simply to address the Economic Impact of Wind Energy on the consumer and to this end some practical examples are appended.

6. CATS has contact every day with those suffering from the impact of turbines. The mere proposal of a wind power development can destroy a once harmonious rural community. There is an immediate division between those who expect to benefit financially and those who see only the destruction of their amenity, their rising electricity costs, and the probable loss of value in their homes.

7. Most of the public do not understand that wind energy is a significant contributory cause to their bills rising at an alarming rate or how DECC are deeply misleading the public about future energy costs attributed to wind. I refer to REF’s John Constable and Colin Gibson full study:

http://www.ref.org.uk/ref‐ltd‐publications/257‐shortfall‐rebound‐backfire

8. The following Appendix cites a few examples of costs attributable to the Renewables Obligation and Feed in Tariffs which are effectively concealed from the consumer.

9. In particular it should be noted that it has never been openly explained to the consumer that the good fortune enjoyed by those well enough off to invest in FITS attracting renewable technology is directly funded by those who cannot afford to invest in it.

APPENDIX RENEWABLE OBLIGATIONS CERTIFICATES

The total RO‐supported renewable electricity subsidy cost in the calendar year 2011was £1.5 billion, of which wind power received £818 million, with onshore wind taking £509 million. (Renewable Energy Foundation)

10. In this rough calculation, the wind power capacity metered by National Grid is assumed to be pro‐rata to the total ROCs‐earning windpower capacity connected, and therefore the total ROCs earned will increase at the same rate as the metered wind capacity reported on the NETA website.

Page 197

Calendar year 2011 11. In June 2011 metered connected capacity was: Onshore wind ‐ 2199MW, Off‐shore wind ‐ 1203MW. 2011 Year end RO cost was £1.5bn comprising Other ‐ £682M, Onshore wind ‐ £509M, Offshore wind ‐ £309M.

Calendar year 2012 12. In June 2012 metered connected capacity was: Onshore wind ‐ 2863MW, Offshore wind ‐ 1823MW. Allowing a 60% increase in ROCS earned by offshore due to the introduction of Double ROCs, the comparable figure for offshore would be 2917MW.

13. Assuming the Other Rocs earnings stayed static and that Rocs earned by onshore and offshore rose in the proportions of 2863:2199 and 2917:1203, the total RO subsidy for the calendar year is likely to be in the order of: Other £682M Onshore £663M Offshore £749M TOTAL £2094M

14. Although domestic household’s electricity bills only account for around 40% of the total annual cost of electricity, all electricity consumers carry a share of the Renewables Obligation. All industrial, commercial, financial and government etc organisations pass on the cost of their electricity to their customers and clients and ultimately, the consumer pays for the whole cost of the Renewables Obligation. In 2011 £1.5bn was paid by 66M people ‐ £22.73 per man, woman and child, or £54.55 per household. In 2012 £2.1bn is likely to be paid by 66M people ‐ £31.81 per head or £76.34 per household. In 2012 the cost of the Renewables Obligation attributable to wind generation alone is likely to be in the region of £1,000,000,000. Nothing has been allowed for the cost of infrastructure reinforcement.

FEED IN TARIFFS (Proposed reduced banding) 15. Sample calculations A 15kw wind turbine operating at 25% load factor and returning 50% of its output to the grid will earn over one year £6899 in FITS and sell £739 worth of electricity to his supplier. The turbine owner will receive £7638 and free electricity. A 500kw wind turbine operating at 25% load factor and returning 50% of its output to the grid will earn over one year £191625 in FITS and sell £24638 worth of electricity to his supplier. The turbine owner will receive £216263 and free electricity. In both cases, the FITS earnings will be shared by the supplier across the electricity bills of all its other consumers, without their permission to do so.

Worked Example 16. A recent study in Caithness, a county of only 26,000 people, showed the following: In the FITS Tariff band of 1.5 to 100kw there are 37 turbines operational or consented totalling 599kw and 37 turbines in planning totalling 1163kw. Assuming 75% of those in planning will be approved, there is a total of 74 turbines with 1471kw total capacity in the band which earns FITS at 21p per kwh. 17. In the FITS Tariff band of 101 to 500kw there is 1 turbine approved with a capacity of 225kw, and 8 in planning totalling 2075kw. Assuming 75% of those in planning will be approved, there is a total of 9 turbines with 1881kw total capacity in the band which earns FITS at 17.5p per kwh. 18. Considering the FITS element of these bands in isolation, the total value of FITS earned at 25% load factor per annum is: 1.5 to 100kw band £675,513. 101 to 500kw band £720,893. TOTAL P/A £1,396,406 19. This sum is guaranteed inflation‐proof for 20 years. At today’s rates this will amount to £27,928,120. Equivalent to over £1000 per head of population in Caithness. END Page 198 June 2012

Page 199 Memorandum submitted by Renewable UK (WIND 67)

Introduction 1) Wind power offers huge benefits, including meeting 2020 targets and creating jobs right here in the . RenewableUK as the largest trade association in this sector welcomes the opportunity to respond with this written response. In addition, we are keen to expand upon what we have responded to in this written response by presenting e vidence in person on Tuesday 10 July. What do the latest assessments tell us about the costs of generating electricity from wind power compared to other methods of generating electricity? 2) Onshore wind is the least expensive form of renewable energy that can be produced at scale. In addition, it is without the risk of constant f ue l p rice fluctuation. Since the UK is committed to legally binding 2020 targets, it is imperative onshore wind continues to receive support to increase its volume i n the market and thus stabilise prices for consumers while mi nimising the cost of meting targets. It is worth noting that total wind costs are particularly sensitive to finance costs, arising from wind’s high capital/low marginal cost characteristic. Various pieces of analysis conducted by Arup, Mott MacDonald, and the Committee on Climate Change have correctly identified onshore wind as the most affordable renewable technology at scale in addition to the huge potential of mass wind generation offshore. Offsho re wind is currently more expensive, but offers a huge amount of potential without some of the concerns, su ch as planning, faci ng onshore wind. Recent work by The Crown Estate affirmed that attaining £100/MWh for offshore wind by 2020 is possible.1 Earlier analysis conducted by UK Energy Research Centre (UKERC) in 2010 predicts that in a good case scenario costs could decrease from £145/MWh t o £95/MWh.2 How do the costs of onshore wind compare to offshore wind? 3) Capital costs for offshore wind are around 30-50% higher than onshore, mainly due to foundations and the costs of transporting and installing at sea. This is partially offset by higher energy yields – a s much as 30% higher. However, as has happened with onshore, the levelised cost of energy is expected to fall due to technological innovation. In addition, scale a nd efficiencies can be obtained as m ore experience is gained. Cost reduction for offshore wind is a huge challenge, but one the industry has recently announced its commitment to deliver with the publication of the Offshore Wind Cost Reduction Task Force Report. In the report, t he step s required by industry and Government to reduce costs by 30% are outlined. That would put the levelised cost of offshore wind at £100/MWh by 2020.3 Committee on Climate Change analysis conducted by Mott MacDonald i ndicates the current levelised costs for onshore wind ranges from £83-£90/MWh compared to £169/MWh for offshore wind.4 What are the costs of building new transmission links to wind farms in remote areas and how are these accounted for in cost assessments of wind power? 4) There is a trade-off between locating any generation source close to the existing grid and seeking more favourable sites further from the existing grid. There is a similar trade-off between locating generation close to the major demand in the South East and the cost and availability of generation sites. These trade-offs are exacerbated for many renewables as resources like wind are generally better the further away from the existing demand and grid. According to the Electricity Network Strategy Group, the total cost of generation-based onshore grid reinforcements in Great Britain to 2020 is around £8.8bn5, which connects 23GW of wind in a total of 38.5GW of new generation. There are additional costs for the offshore connections. The total cost of onshore transmission is under negotiation under the price control RIIO-T16 but is likely to be in the order of £30bn u p to 2021 for all works including ENSG investments, and refurbishment of aging assets, most of which were built in the 1960s. 5) The cost to the average domestic customer of transmission is currently 4% of their bill (£17/year) and the Scottish Companies’ R IIO-T1 proposals would increase this by 35p per annum.7 National Grid’s price control has yet to be agreed. The charges to any generator connecting to the transmission network are based on cost reflective pricing. That mean s that generators pay around 85% of the cost of any local grid extension, be that onshore or offshore. In addition, charges for use of the backbone transmission network reflect north-south flows so that a nnual transmission charges in the North West of Scotland are £22.05/kW compared to a subsidy, or neg ative charge, o f £-13.35/kW in Central London. Some changes to charges are imminent under Ofgem’s project ‘TransmiT’. We hope that changes will eventually recognise the shared use of transmission by renewables and fossil fuels, and will treat new HVDC technology in a similar way to existing AC technology; these changes should limit cost increases for renewables i n the north of GB. From this it should be clear that wind power pays its full share of the cost of the

1 The Crown Estate (TCE). 2012. Offshore Wind Cost Reduction Pathways Study. 2 UK Energy Research Centre (UKERC), 2010. Great Expectations: The cost of offshore wind in UK waters – understanding the past and projecting the future. 3 Offshore Wind Cost Reduction Task Force, 2012. Offshore Wind Cost Reduction Task Force Report. 4 Committee on Climate Change (CCC), 2011. Costs of low-carbon generation technologies. 5 Electricity Networks Strategy Group (ENSG), 2012. Our Electricity Transmission Network: A Vision for 2020. 6 Ofgem, 2012. RIIO-T1 (first transmission price control review under the RIIO model). 7 Ofgem, 2012. Initial Proposals for Transmission Price Control SPT and SHETL for the next transmission price control – Impact Assessment.

Page 200 network, including the investment to extend the grid to areas of renewable resource. Given that wind is the first major new resource to be developed since the privatisation of the electricity industry in the UK, it is the first technology to have to pay for grid extension rather than have the cost socialised across all users. How much support does wind power receive compared with other forms of renewable energy? 6) Currently Onshore wind receives 1ROC/MWh and offshore wind 2ROC/MWh. The most recent Renewables Obligation statistics indicate that in 2010/11 onshore wind received 7,678,727 ROCS and offshore wind received 5,016,832 respectively, together accounting for just over half of the total ROCs issued in the year.8 A total of 12,189,049 ROCs were issued to other technologies such as biomass, landfill gas and hydro. With the value of a ROC being £51.34 (the buyout price of £36.99 plus recycle value of £14.35), overall the RO cost £1.3bn in 2010/11, delivering 23.2TWh, around 7% of total electricity demandi 9 Therefore , o nshore wind received £400m in 2010/11 and offshore wind £260m. 7) The development of onshore wind and the support provided under the RO has provided a platform for developers to move to other technologies such as offshore wind and marine. The UK is currently pressing ahead with construction of the Round 2 Offshore developments. Costs for offshore wind are considerably higher than onshore wind given the challenges it presents – offshore construction environment, environmental considerations, offshore grid infrastructure – resulting in the current requirement for 2ROC/MWh. The Round 3 programme will bring further challenges in terms of the scale and location of construction further offshore in deeper waters. We acknowledge that there are cheaper renewable technologies, requiring l ower levels of support than onshore wind, however, they have either reached their full potential (eg landfill gas) or face other challenges. For example, the co- firing of biomass depends on station running regimes and biomass availability, preventing significant scale of deployment. What lessons can be learned from other countries? 8) The cost basis in the UK is considerably different compared to other nations, ma king it difficult to draw strong comparisons between it and other European countries. We do know that strong support attracts manufacturing and that uncertainty undermines confidence, p ushing up costs. The UK should aim to attain similar balancing, network and planni ng costs to other countries. For instance, other countries tend to have much lower costs of short term balancing because the UK’s current market system makes the provision of balancing and administrative services expensive. Furthermore, there are additional development risks for offshore wind in the UK, where sites are allocated without consent (unlike, for instance in Denmark), and without grid connections paid for (unlike in Germany). 9) RenewableUK has begun investigating the possible existence in the UK of the Merit Order Effect (MOE), where high levels of wind generation result in lower market prices for electricity. The MOE exists because wind generation displaces power from generators with higher marginal costs. The MOE has been identified in countries such as Germany and Denmark (areas of high wind penetration) where it has often reduced the wholesale price of energy for consumers. We have seen harsh cuts in renewable support and retrospective action taken in other countries. These actions send messages to investors not just in renewables but also wider industry in relation to policy intervention. As we move to a new support mechanism under Electricity Market Reform it is essential that investors have confidence in UK policy. What methods could be used to make onshore wind more acceptable to communities that host them? 10) It is important to note the huge benefits of wind development, such as providing direct and supply chain employment to thousands across the UK. Analysis shows that the vast majority of jobs created in development and operations and maintenance are within the region of wind farms. In addition to jobs, other b enefits such as community ownership, including investment in wind energy projects, and community benefit funds supporting local infrastructure p rojects and facilities can be achieved. Community ownership involves wind farms generating income for local shareholders, which can help to improve community cohesion and provide funds to invest in further area economic and social development. There are a wide range of models for community benefit funding, where the owner of the wind farm distributes funding to be used for community projects. Community benefit funds improve quality of life by supporting investment in community projects, and cre ate jobs relating to the administration of the income and as a result of the projects themselves.10

June 2012

8 Department of Energy and Climate Change (DECC), 2012. Renewables Obligation: statistics. 9 Ofgem, 2012. Renewables Obligation annual report 2010-11. 10 RenewableUK and DECC, 2012. Onshore Wind: Direct & Wider Economic Impacts.

Page 201 Memorandum from EDF (WIND 68)

Executive Summary EDF Energy believes that the UK needs a diverse mix of technologies to deliver affordable, secure and low carbon power. Wind has a role to play in such a mix. EDF Energy supports the idea that as the cost of wind power falls, so should the level of taxpayer support. This process must however take place in a transparent and open way that maintains investor confidence.

EDF Energy’s response

About EDF Energy 1. EDF Energy is one of the UK’s largest energy companies and the largest producer of low- carbon electricity, producing around one-sixth of the nation's electricity from its nuclear power stations, wind farms, coal and gas power stations, a nd combined heat and power plants.

2. EDF Energy fully supports a diverse energy mix in the UK. Through EDF Energy Renewable s we are making considerable investments in renewables projects ourselves. By mid 2013 we are on target to have around 460MW of onshore wind capacity in operation. We will increase this in future. In addition, we are set to complete construction of our first offshore wind project at Teesside at the end of the year, adding 62MW of capacity. W e have also recently announced our entry into a joint venture to deliver the , a Round 3 project that will deliver 900-1200MW off the coast of the .

3. Our investment in renewables sits alongside our portfolio of nuclear, coal a n d ga s generation assets, and our plans to invest in new nuclear power stations. The company also supplies gas and electricity to more than 5.5 million business and residential customer accounts and is the biggest supplier of electricity by volume in Great Britain.

The role of wind in a diverse energy mix 4. The UK needs a substantial programme of investment in n e w l ow carbon generation to replace the 40% of plant that is expected to close by 2025, t o ensure we do not become increasingly reliant on imported gas, and to support progress towards the UK’s carbon dioxide reduction targets. Currently 40 - 50% of electricity is generated from gas; just over half of the UK’s gas is imported and imports are expected to rise to 80% by 2030 (Source: National Grid’s 2011 Ten Year Stateme n t).

5. The Committee on Climate Change (CCC) ad vise w e sho uld see k t o dec a r b o nise electricit y generation almost completely by 2030. To do this, wind ene r gy w ill have to play a major role in the generati on mix, a longside nuclear power and fossil fuel with carbon capture and storage (CCS).

6. The UK has abundant wind resources, supporti ng the ra tionale for wind to play an important role in the UK’s energy mix.

7. The average cost s for wind generation are generally quoted around £90/MWh for onshore and around £145/MWh for Round 2 offshore (Source: Arup / E&Y study for DECC, June 20 11 - infl ated to 2011 money). In addition, consumers will also face the other costs associated with the intermittent nature of wind generation. While these levels are above current wholesale market prices, onshore wind is amongst the lowest cost of the renewable energy technologies. Offshore costs may decrease in future, particularly as

Page 202 investment is ‘scaled up’. The scale of the investments made is likely to impact on the rate of cost reduction.

8. Onshore wind therefore has an important role to play. Its contribution to the energy mix is limited mainly by the number of suitable and acceptable sites ra ther than other factors. Onshore wind represents around 3% of electricity generated today, and whi le e stimates regarding its total potential m ay vary, it is feasible that 10% of ou r electricity needs could come from onshore wind.

9. Given that onshore wind i s o ne of the lower cost renewable technologies, t he UK should seek to maximise its deployment within the bounds of public acceptability. Any move to reduce support for onshore projects too quickly may prove to be a false economy a s it may well force the UK to support investment in more expensive technol o gies t o meet its 2020 renewable energy targets. T hus whilst we agree that support for renewable technologies should decrease as their costs come down, t his must be done in a way that maintains investor confidence and the credibility of support mechanisms.

10. EDF Energy is supportive of the analytical work DECC is undertaking to decide the right level of support and we believe that decisions should be based on clear analysis that allows for transparency and send s clear messages to investors. W e are aware of recent speculation that the level for onshore wind ROC support may be cut further from 0.9 to 0.75. Such a cut, made just eight months before the implementatio n date, w ould undoubtedly damage investor confidence. We do, however, recognise th e need for the level of support to be reviewed and we would support a further interim review of support levels if there was evidence that the costs of projects had fallen sufficiently. However any such review would have to be evidence-based and ensure that it did not undermine confidence in the support arrangements.

11. EDF Energy also recognises the on going challenge associated with making sure that wind projects are acceptable to local communities. While the silent majority might support a project, a vocal minority can quickly delay or stop the development of viable projects. We therefore recognise the importance of local engagement and inclusi o n, and specifically the delivery of community benefits from each project. EDF Energy supports the proposal that local authorities hosting renewa b le proj ects should be able to retain some of the business rates paid by developers. Indeed, E DF Energy believes that this principle should be applied more generally to allow local authorities to retain some part of business rates revenues from all new low carbon electricity generation projects.

12. Offshore wind has a greater volume potential than onshore, and should in our view be encouraged and developed. However, EDF Energy agrees with the CCC’s co nclusions in its May 2011 Renewable Energy Review, t hat the level of ambition for offshore wind could be moderated if evidence emerges that the UK could meet its 2020 renewables target by increasing the contribution of other more cost effective sources. We also acknowledge the recent reports from Crown Estates and the Offshore Wind Cost Reduction Task Force on the steps towards a £100/MWh levelised cost for offshore wind.

13. Intermittency of wind generation has to be managed within the overa ll energy system. This adds cost which arise f rom: ( a) providing backup if peak demand occurs during periods of low wind availability, (b) reinforcing the transmission network to cope with intermittent power flo w s, and (c) reduced utilisation of generation capacity at times of high winds and low demand (eg windy summer nights). A maximum share of the overall

Page 203 energy mix of around 20 – 25% for wind power, in line with the level currently seen in Denmark, would in our view avoid the worst cost impacts of intermittency.

The need for market reform 14. Intermittency means that much fossil generation will have to run at lower load factors than has been the case. This challenges the econo mics of foss il fuel pl ants which will be important for meeting peak demand, particularly when the wind does not blow. We therefore support the Government’s proposal to introduce a market-wide capacity mechanism to make sure we have adequate generation capacity available to maintain secure electricity supplies.

15. The contracts for difference (C fD ) me chanism proposed under the Government’s Electricity Market Reform plan s will reduce risk fo r wind projects, reduce cost of capital and reduce costs to customers. In particular, the CfD mechanism will protect wind generators from the reduction in the value of their output that will arise in future because market prices will tend to be depressed at windy times.

June 2012

Page 204 Memorandum submitted by Prof. P Bullough (WIND 69)

The economics of wind power

Executive summary

Wind power in the UK cannot currently be subjected to an accurate cost-benefit analysis because the level of emissions savings is unknown. Estimates of emissions savings from government are not scientifically rigorous. Operational data from the UK electricity sector should be made publicly available for rigorous empirical analysis. In the absence of this, studies from other countries suggest that emissions savings from wind energy are very much lower than commonly supposed. ------

1. Cost benefit analyses depend on accurate scientific determination of carbon emissions savings from wind power in the UK.

While the carbon emission at source from wind power is zero, the net carbon emission through integration of wind into an electricity network is not zero. I refer the reader to reference [1] for a detailed explanation of this. In order to determine the cost-benefit ratio of wind energy we need to know the carbon cost per unit of electricity consumed. These data are not publicly available in the UK.

2. Government figures for emissions savings are theoretical only.

These figures are generally based on the assumption that one unit of wind-generated electricity displaces one unit that would otherwise be generated from the fossil fuel/nuclear mix with a pro rata savings in carbon emissions. The reality is not so simple in a complex network with many variables on the demand and supply side; these can be hard to predict [1]. Oswald et al. [6] concluded that increased use of wind in the UK would likely cause utilities to invest in lower- efficiency gas-fired generators that would be switched on and off frequently, cutting their energy efficiency and increasing their emissions. It was concluded that “neither these extra costs nor the increased carbon production are being taken into account in the government figures for wind power.”

3. The reduction in carbon emissions through wind energy deployed in the UK must be measured empirically, not just guessed

Since it cannot be assumed that one unit of wind completely replaces one unit of fossil fuel, the only way to know how much carbon is being saved is to measure it. However, publicly available estimates of the emissions savings from wind in the UK appear to be little more than a guess; these do not in my view meet rigorous scientific standards. In correspondence in 2010 with DECC I requested data for the measured emissions savings from wind energy in the UK. I was told that these data were not centrally held by government; this is an extraordinary admission and it means that we simply do not know if current energy policy in the UK is delivering any emissions reductions at all.

4. International attempts at empirical determinations of carbon emissions reductions raise severe doubts about the cost effectiveness of w i nd

Measurement of the effect of wind on emissions from entire networks is not straightforward. However, a number of international studies have attempted to address this issue [e.g. 2, 3]. In two cases, detailed operational data have been available and analysed: the Bentek report on wind in Colorado and Texas [4] and Udo's analysis of the Irish network, EirGrid [5]. The conclusion of the Bentek report [4] is that wind does not save fuel and does not reduce emissions in Colorado and Texas. While the UK situation is not the same as that in Colorado and Texas, this report should nevertheless be of the utmost concern. Wind conditions in the UK are likely to be similar to those in

Page 205 Eire. Udo's review of the Irish system concluded that despite a massive investment in wind energy only a 5% saving in fuel had been achieved [5]. Moreover, le Pair et al. [1] note that a number of factors were not taken into account in this analysis and so the emissions savings may be even less than estimated.

5. Countries with very high wind penetration do not have markedly lower carbon emissions

In a report from 2007 [7] it was noted that carbon dioxide emissions in the electricity sector (tonnes per capita) were low for nuclear intensive systems such as France (0.6) and Sweden (0.8) whereas countries with a very high wind power capacity had very high emissions, notably Denmark (4.3) and Germany (3.7). At the very least these data suggest that a high penetration of wind does not necessarily lead to a dramatic decrease in carbon emissions. Again this should raise concerns about the cost effectiveness of wind energy in the UK.

6. Conclusions

For a scientifically valid assessment o f the cost-benefit ratio of wind energy in the UK context it is essential that the emissions savings from wind be measured empirically using the highest standards of scientific rigour. Unless this is done, the cost effectiveness of the UK wind energy programme will remain unquantifiable.

7. References

[1] C. le Pair, F. Udo and K. de Groot, ‘Wind turbines as yet unsuitable as electricity providers’, (2012) Europhysics News 43:22-25. http://dx.doi.org/10.1051/epn/2012204

[2] K. Hawkins, ‘Wind integration’, MasterResource Nov. 2009 http://www.masterresource.org/2009/11/wind-integration-incremental-emissions-from-back-up- generation-cycling-part-i-a-framework-and-calculator/

[3] W. Boone, ‘OVERBLOWN: Windpower on the Firing Line’, MasterResource Sept 2010, http://www.masterresource.org/2010/09/windpower-overblown-part-1/

[4] ‘How less became more: Wind, Power and unintended consequences in the Colorado Energy Market’, 2010 http://www.bentekenergy.com/WindCoalandGasStudy.aspx

[5] F. Udo: http://www.clepair.net/IerlandUdo.html

[6] J. Oswald, M. Raine, H. Ashraf-Ball ‘Will British weather provide reliable electricity?’ Energy Policy (2008) 36:3212– 3 225 .

[7] Oxford Institute for Energy Studies, ‘Nuclear Power in the UK: is it necessary? is it viable?’, October 2007 Oxford Energy Comment.

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My interest in wind energy is purely as a private concerned individual, albeit a scientifically literate one. I have a background in the physical sciences, qualified up to Ph.D. level. I have no professional interest in wind energy and the views expressed herein do not represent those of any institution or professional body with which I may be associated.

June 2012

Page 206 Memorandum submitted The Crown Estate (WIND 70)

1. The Crown Estate is pleased to submit evidence to this inquiry on the economics of wind power – in our role as programme managers of UK offshore wind. A representative from The Crown Estate would be availab le to provide oral evidence to the committee on July 10th.

Summary: • Offshore win d has the potential to be a cost-competitive form of low carbon energy and make a significant contribution towards the achievement of the 2020 renewables targets. • Offshore wind has the potential to generate significant economic ben e fi ts in the form of UK based green jobs. • Official evidence suggests that the impact of renewables subsidies on energy bills is small. • Investment in this sector relies on certainty; which can be undermined if government p o l ic y is arrived at as a result of political pressure rather than robust evidence. • There are issues with the established evidence ba se for the costs of offshore wind, which need to be addressed going forward - particularly if, as suggested in the draft Energy Bill, a similar approach is to be used in the setting of CfD strike prices.

The need for evidence-based policymaking

2. We agree with the sentiment of the call for evidence – that government energy policy should be based on sound evidence, rather than political pressure. 3. The Renewables Obligation Banding consultation (October 2011) outlined a series of proposals which would see the banding for both onshore wind and offshore wind reduce slightly over the period 2013-2017. The proposals were generally understood and accepted by the wind industry, and provide a sufficient level of support and rate of return in order to make most projects viable. 4. Recent rumours of a reduction in the ROC banding for onshore wind appears to have damaged confidence in the market, and led to a hiatus in investment – both by developers and also the supply chain, and across both the onshore wind and offshore wind markets (due to the close integration of the two). There are several offshore wind turbine manufacturers at advanced stages of considering investment into UK-based manufacturing sites. In order to finalise their investments (which could typically be around £200m for a turbine plant), they require reasonable certainty and visibility of their future market for a period of say 10-15 years. The uncertainty created by the rumoured changes to ROC bandings appears to have damaged their confidence in this market and led to a hiatus in investment. 5. We support the use of evidence of costs of technologies to determine ROC Bandings and future CfD strike prices – however this evidence needs to be robust and credible in order to arrive at the correct decisions. This paper provides a critique of the existing evidence base on the cost of offshore wind energy (see Appendix for a summary of key recent studies), including the Arup (2011) report which formed the evidence base for the RO Banding review in October 2011. Cost of offshore wind power (including transmission connections)

6. Over the last few years there has been a considerable amount of research into the cost of low carbon technologies including wind. In our opinion, some of this is useful, but there is also a fair degree of misinformation surrounding the costs of offshore wind energy – particularly the likely cost of future (Round 3) projects. 7. It is often difficult to establish the tr ue cost of energy, since there is limited transparency in contract prices; and energy yields, reliability, and operations and maintenance costs can only be known ex-post once a plant has been up and running for a number of years. It is also difficult to compare costs across techn ologies, as there are differences in the costs they face and the profile of expenditure and returns. The metric often used by policymakers to compare across technologies is the ‘Levelised Cost of Energy’ (LCOE) which provides an estimate of the lifetime cost per unit of energy. We support the use of this for policymaking, although it should be noted that developers take a slightly different approach in assessing project viability – assessing lifetime costs and revenues, and comparing the corresponding return against their ‘hurdle rate’. Therefo re we recommend that this inquiry considers a range of metrics for the cost of energy (i.e. not just LCOE). 8. The Crown Estate (2012) recently undertook a signifi cant piece of research to identify cost reduction pathways for offshore wind – providing evidence to the Cost Reduction Taskforce. This work was based on consultation, data, and validation from just over 100 companies across the entire offshore wind value chain. As part of this work, we Page 207 estimated a baseline LCOE at around £140-144/MWh for the types of offshore wind projects currently being deployed (i.e. relatively close to shore and with a water depth of up to 30-40m). This figure includes all costs faced by the developer/g enerator, including transmission charges associated with the offshore connection and wider transmission co sts, plus the seabed rent charged by The Crown Estate. It does not include system balancing charges as these are not faced by the generator directl y – rather they are ‘smeared’ across all generators. 9. The report provides four scenarios or pathways for the future cost of offshore wind energy. It demonstrates that provided there is a market of 17-18GW+ operating capacity in the UK by 2020,i and provided there is commitment from government and industry, the cost of offshore wind could reduce to £100/MWh or below by 2020ii. This would make offshore wind cost-competitive with other large scale forms of low carbon energy such as nucleariii and CCS.iv 10. One of the interesting findings from this work is that there is relatively little variation in LCOE between different site types (i.e. defined by water depth and distance to shore). Previous studies on cost including the Arup (2011 ) report, have concluded that the cost of Round 3 projects, in deeper water and further from shore, would be m uch higher than current projects. Our work shows that whilst the move to more challenging sites may increase capital and operating costs, this is balanced by higher wind speeds which result in a higher ‘capacity factor’. This means that in LCOE terms, Round 3 sites are broadly equivalent in cost to current pro j ects. 11. Related to this, our research demonstrates that one of the main sources of future improvements in LCOE will be due to improvements in capacity factor. The capacity factor for all existing operating offshore wind plant currently stands at around 31%v. We estimate that projects being deployed today could achieve a capacity factor of around 40-42%, increasing to up to 50% by 2020; due to the progressive move to windi er sites, combined with improvements in technology (including larger turbines) and reliability. In contrast to this, previous studies have assumed lower capacity factors, for example the Arup (2011) report assumes a flat 38% load factor for all sites, both today and into the future. This is one of the principal reasons why, in our view, p revious studies have over- estimated the LCOE for offshore wind (especially for Round 3 sites). 12. Whilst we cannot comment in detail on system balancing costs and backup capacity, it is interesting to note that a 50% capacity factor for future offshore wind would be higher than that of existing coal stations (46%), challenging the notion that offshore wind is significantly less ‘reliable’ than other forms of energy. This is one area where offshore wind differs markedly to onsho re wind – which currently has a much lower capacity factor of 26%.vi 13. A nother key consideration in calculating the cost of energy is the cost of capital. Our analysis shows that up front capital expe nditure accounts for around 70% of the LCOE of an offshore wind farm, and a one percentage point change in the co st of capital results in around a 6% change in LCOE. We estimate the cost of capital at 9.2% (pre- tax real basis) - a result which has been validated by PWC through both a bottom up assessment of risk and through benchmarking with industry. By comparison, previous studies have used much a much higher cost of capital – for example the Arup (2011) study estimates the cost of capital at 11.6% for Round 2 sites (or 13.2% for Round 3 sites) – which all else being equal results in LCOE values around 1 0 - 15% higher than The Crown E s tate analysis. 14. Overall our conclusions on the cost of offshore wind are somewhat different to previous stud ies, a nd this requires further consideration in order to achieve a robust and credible evidence-based for policyma k ing; p a rticul arly if as suggested in the draft Energy Bill, the setting of CfD strike prices will follow a similar methodology to the RO. Support provided to offshore wind versus other renewables, and the impact on energy bills

15. The support currently available to offshore wind (i.e. 2 ROCs per MWh) is commensurate with the costs involved and the returns required by investors. Assuming a modest cost reduction to 2017, as outlined in our recen t re port, the ROC bandings proposed in the October 2011 consultation are sufficient to maintain the viability of most projects. On this basis, offshore wind is towards the top end in terms of the support received by other renewables – however as demonstrated in the RO Banding Impact A s s e s sment, this is what is required in order to maintain progress towards the 2020 renewables targets. Our recent research shows that beyond 2017 it may be possible to reduce the level of support as the LCOE of offshore wind reduces. 16. The public debate on the impact of renewables on energy bills is complex and multi-face ted. DECC (2011) estimates that public policies (including subsidies to renewables) comprised 7% of consumer bills in 2011. The Committee on Climate Change (2011) predicts that the average househol d electricity bill could increase by 33% by 2020; with around two-thirds of this increase due to increasing fossil fuel prices, and the remaining third due to subsidies to all renewables. Thus whilst support to renewables clearly contributes to energy bills and energy bill increases, it is not the main cause. Page 208 17. These official estimates of impact have done little to quell a tide of criticism by the media and several think tanks on the high costs of renewables subsidies. However, as highlighted by Gross (2011), the public discourse around policies and consumer bill impacts is often poorly substantiated and misleading. Wider economic benefits of offshore wind

18. In addition to considering w i n d power e c onomics at a project level, it is important to consider some of the wider economic and societal benefits. There have been many attempts to quantify the socio-economic benefits of offshore wind. Re ne wa bl e UK (2011) estimate s that by 2022, the UK offshore wind industry could generate £60 billion of Gross Value Added, supporting up to 45,000 jobs. More recently, CEBR (2012) identified that by 2020 the UK offshore wind sector could support 0.4% of UK GDP and employ 97,000 people. 19. Clearly, the achievement of these benefits depen ds on the level of UK content in offshore wind projects. In order to maximise this, UK businesses need to increase their capabilities to compete in this sector, and the UK must attract inward investment for production to be established in the UK. Relating this back to earlier comments, it is clear that the extent of inward investment (and therefore the level of UK content) is dependent on the confidence in the UK market; which in turn requir e s pr e d icta bl e and evidence-based policy-making.

Page 209 Appendix: Comparison of Offshore Wind cost estimates from recent studies

Estimates of current costs (for projects reaching Final Investment Decision at or around 2010) Study Date of costings LCOE (£/MWh) CAPEX (£m/MW) OPEX (£000s/MW Net Capacity Factor Weighted Average Cost of p.a.) Capital (pre-tax, real, %) The Crown Estate (2012) FID 2011 140-144 2.6 - 2.9 164-167 40-42% 9.2% (ex transmission) (inc transmission) Arup (2011) FID 2010 – 169 2.7 166 38% 11.6% Round 1/2/STW (range 149-191) (ex transmission, (inc transmission, project range 2.3 - 3.2) range 117 – 18 4 ) Ernst & Young (2009) FID Jan 2009 144 3.2 79 38% 12% (inc transmission) (ex transmission) Committee on Climate Change (2011) FID 2010 169 3.1 110 37% 12% / Mott MacDonald (2011) (range 140-180) (inc transmission, (ex transmission, (range 34%-41%) (range 10% - 14%) range 2.4 - 3.4) range 97-121)

Estimates of future costs ( for projects reaching Final Investment Decision in 2020 or beyond) Study Date of costings LCOE (£/MWh) CAPEX (£m/MW) OPEX (£000s/MW Net Capacity Factor Weighted Average Cost of p.a.) Capital (pre-tax, real, %) The Crown Estate (2012) FID 2020 – 94 vii 2.1 142 46% 7.9% Round 1/2/STW (range 81 -113) (ex transmission, (inc transmission, (range 42% - 51%) (range 7.8 – 8. 5%) project range 1.9 – 2.6) range 128-151) FID 2020 – 97 2.2 196 50% 8.4% Round 3 project (range 93 -124) (ex transmission, (inc transmission, (range 46% - 52%) (range 8.3 – 8.6%) range 2.0 – 2.6) range 131-213) Arup (2011) FID 2020 – 107 2.1 148 38% 9.6% Round 1/2/STW (range 95 -121) (ex transmission, (inc transmission, project range 1.8 – 2.4) range 104 – 17 5) FID 202 0 – 145 2.2 132 38% 9.6% Round 3 project (range 127-170) (ex transmission, (inc transmission, range 1.8 - 2.9) range 81 – 185) UKERC (2010) 2025 116 2.8 87 43% 12% (range 95 -185) (inc transmission, (ex transmission, (range 35%-45%) range 2.4 – 3.8) range 59 - 99) Committee on Climate Change (2011) 2020 103-114 2.6 106 39% 10.5% / Mott MacDonald (2011) (inc transmission, (ex transmission, (range 35%-43%) (range 7.3%-14%) range 2.0 - 3.0) range 93-117)

Notes: Transmission can be treated either as CAPEX or OPEX in an LCOE model. The baseline costing from The Crown Estate (2012) report is a CAPEX of £550,000/MW, which equates to an OPEX charge of £63,000 per annum over the lifetime of the asset. STW = Scottish Territorial Waters.

Page 210 Bibliography

Arup (2011) Review of the generation costs and deployment potential of renewable electricity technologies in the UK

CEBR (2012) The macroeconomic benefits of investment in offshore wind

Committee on Climate Change (2011) Renewable Energy Review

DECC (Oct 2011) Estimated Impacts of energy and climate change policies on energy prices and bills

Ernst & Young (2009) Cost of and financial support for offshore wind

Gross, R (2012) Nonsense on stilts? Investigating the discourse around policies and consumer bills

Mott MacDonald (2011) Costs of low carbon generation technologies

Renewable UK (2011) Offshore Wind: Forecasts of future costs and benefits

The Crown Estate (2012) Offshore Wind Cost Reduction Pathways Study. Available from: http://www.thecrownestate.co.uk/energy/offshore-wind-energy/working-with-us/strategic-workstreams/cost- reduction-study/

UKERC (2010) Great Expectations: The cost of offshore wind in UK waters

June 2012

Footnotes:

i Also assumes a similar size of market in the rest of Europe ii This represents the cost of the ‘average’ project reaching Final Investment Decision in 2020. iii Recent cost estimates of £14bn for the Hinkley C nuclear project equate to a LCOE of around £166/MWh (Source: Reuters, 8th May 2012 – q uote from Peter Atherton of Citibank). iv Cost of CCS in 2020 is estimated at £60-150/MWh (Source: Committee on Climate Change, 2011, ‘Renewable Energy Review’). v DECC (2011) Digest of UK Energy Statistics. Average load factor over the period 2006-2010. vi Capacity factors for all technologies from UK Digest of Energy Statistics (2011). Average for the period 2006-2010. vii Central case figures relate to Scenario 3 – Supply Chain Efficiency.

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Memorandum submitted by RWE (WIND 71)

RWE has the largest installed renewable energy capacity in the UK1. This includes 470MW of onshore wind and 150MW of offshore. We have a further 125MW and 598MW respectively in construction and a wind development pipeline totalling 4.6GW. In the last 2 years alone, we have invested £1bn in renewables the UK, predominantly wind, resulting in contracts worth over £700m being placed with companies in the UK. In 2011, RWE employed 700 staff in connection with our UK renewable activities, plus over 700 contractors and many more subcontractors.

What do cost benefit analyses tell us about onshore and offshore wind compared with other measures to cut carbon?

The Mott MacDonald2 report for D ECC and a study by KPMG3 compares the levelised costs of different generation technologies:

Mott MacDonald KPMG Nuclear (FOAK)ii £99/MWh £60-80/MWh Nuclear (NOAK) ii £67/MWh Onshore wind £94/MWh Offshore wind £157-£186/MWh (FOAK) Offshore 2025 £110-125/MWh £110/MWh (NOAK) CCGT £80/MWh Coal without CCS £104.5/MWh Fossil with CCS £112-145/MWh (FOAK) £100- Fossil with CCS £105 - £115/MWh 150/MWh (NOAK) NB. FOAK = First of a Kind. NOAK = nth of a Kind. . i. KPMG (June 2010 draft) Securing investment in nuclear in the context of low carbon generation.

By comparison the cost of solar PV is £282MWh as quoted in the ARUP4 report produced for the recent ROC Rebanding analysis

In terms of ensuring cost efficient decarbonisation of UK electricity generation, RWE advocates pursuing a diverse, low carbon energy mix which includes onshore and offshore wind alongside efficient gas, nuclear, and biomass technolo gies. We believe that delivering a diverse energy mix while levelling the playing field for all low carbon alternatives, maintaining open and competitive energy markets and encouraging the uptake of energy efficiency and demand side measures will ensure the lowest cost for customers.

How much support does wind power receive compared with other forms of renewable energy? Is it possible to estimate how much consumers pay towards supporting wind power in the UK? (i.e. separating out from other renewables)

Ofgem monitor the number of ROCs issued by technology. In 2010-11, onshore wind received some 30% of the certificates issued under the Renewables Obligation, offshore wind 20%, biomass technologies 20%, landfill gas 20%, and hydropower some 7%. Ofgem has calculated that the Renewables Obligation currently adds £21pa to the average household electricity bill6. The cost of wind therefore equates to £10.50 p.a. or 2.9p per day. The cost of the Feed in Tariff including the high take up to date under the old regime also needs to be factored into the costs.

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What lessons can be learned from other countries?

Other European countries, such as Germany and Demark, have been at the forefront of wind development. Their early investment has given them a supply chain advantage comparable to the UK. To stimulate a domestic supply chain government must ensure strong support for wind and remove uncertainties that could undermine investor confidence.

The other lesson to be learned from Germany is how subsidies must reflect market costs and not political preference. Subsidies that disproportionately favour one technology, such as their support for solar PV, create a market distortion which is detrimental to the grid network and creates both direct and indirect additional cost to consumers.

What methods could be used to make onshore wind more acceptable to communities that host them?

RWE engages in early, open and transparent consultation with local communities and genuinely listens to them. We have many examples where projects have been amended in light of feedback. We undertake supply chain events, in advance of planning consent to enhance the opportunities for local businesses. Our community funds for wind projects will contribute about £1.8m pa to local communities on completion of the projects currently under construction. These funds are administered by the local communities themselves, who are best place to determine their appropriate use. We also welcome current proposals that local communities should retain the business rates from our projects.

1 Bloomberg New Energy Finance Report April 2012). 2 Mott MacDonald (9 June 2010) UK Generation Costs Update, commissioned by DECC 3 KPMG (June 2010 draft) Securing investment in nuclear in the context of low carbon generation 4 ARUP Review of the generation cost and deployment potential of renewables electricity technologies in the UK 5Offshore Wind Cost Reduction Task Force, 2012. Offshore Wind Cost Reduction Task Force 6 Ofgem Fact sheet 97, Updated Household electricity bills explained 7DECC Energy Trends table 6.1. published 29th March 2012

June 2012

Page 213 Memorandum submitted by Theodor Oostindie (WIND 72)

Summary 1. The ‘Wind Debate’ has until now been fuelled mainly by emotions, to the extent that claims rather than facts have dominated the discussion. Statements like ‘x tonnes of CO2 displaced’ and ‘enough green energy generated to supply 150,000 homes’ are bandied about by proponents of wind without substantiation. 2. Energy output and emissions associated with wind‐powered electricity are measurable quantities. A meaningful cost/benefit analysis must contain all contributory factors and be based on measured data or mathematical models. 3. No cost evaluations have so far allowed for the effect of short‐period (<1 hr) power fluctuations on the grid and the need for balancing power. Available cost/benefit analyses therefore do not reflect the real cost of balancing power.( Note that this is different from ‘when the wind isn’t blowing’ and the requirement for stand‐by reserve.) 4. More frequent and detailed generating data must be made available by the National Grid (NG) so that the impact of short‐period variability can be quantified.

The urgent need for reviewing the cost of wind 5. Wind energy has matured over 4000 years in the form of stand‐alone generators. Until recently all the energy thus created has been used instantaneously. In this configuration wind is obviously very green in terms of life‐cycle emissions. 6. When wind generators are connected to a grid any fluctuations in their output must be compensated for by conventional generators. Until now only long‐term fluctuations (>day, ‘when the wind isn’t blowing’) have been accounted for in cost assessments (lack of capacity credit). Namely the need for additional generating margin (stand‐by reserve). 7. Short‐period fluctuations require continual balancing corrections from fast‐reacting conventional plant (in the UK mostly CCGT). This incurs not only a fossil fuel penalty but also increased maintenance cost due to thermal stress fatigue. This has thus far not been considered. 8. That such an effect should exist or be significant seems still to be largely ignored by the wind industry and energy planners. Yet it is an inescapable thermodynamic fact that fossil fuelled generators are running less efficiently when operating off‐design‐point (rated power) and that additional fuel is burned while accelerating and decelerating. 9. The following formula (Ref.1) is useful to form an idea of the possible impact of an effect like this on an energy system whose efficiency is affected by an external source. It calculates the turning point at which the induced loss of efficiency is so great that an amount of energy equivalent tot hat fed into the system by the external source is consumed within the system having through having to counteract the disturbance. If ηth is the thermal efficiency of the conventional generating mix and ∆ηth the efficiency loss due to the variable generator with penetration a (here: wind contribution), then ∆ηth= a ηth. Note that this a general statement and is valid for any system that can be modeled in this way. Ex. Using rough UK National Grid data for 2010: 6GW of wind capacity at a capacity factor (CF) of 25%, annual wind energy generation is just over 13 TWh. On a grid that generates 380 TWh penetration a = 3.46%. Overall grid efficiency ηth = 47%, hence ∆ηth = 1.63%. 10. This means that if the variable source at the given penetration would cause a greater drop of overall grid efficiency than 1.63%, then all of its energy would be absorbed by increased fuel consumption.(The is not the value of ∆ηth actually experienced, but the maximum efficiency loss that can be absorbed before no further CO2 is saved at the given penetration a ). Although the balancing and load‐following tasks on the UK grid fall mostly to CCGT which operates at extremely high ηth. in base‐load (up to 60%), that level of efficiency cannot be achieved below rated power. Additional fuel burn results from ramping up and down. 11. The impact of this phenomenon on the UK grid has yet to be adequately demonstrated through data taken from the operation of the grid. 12. Qualitative results have been obtained for the Irish, Dutch and Colorado grid which confirm the effect. (Ref.8, 1 and 6).

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Conclusion 13. The implications of an unbridled dash for wind have not been sufficiently recognized. The wind industry, confident in the knowledge of guaranteed subsidies and protected by the icon of green energy, the ubiquitous wind turbine, has got away with wiping any study or article critical of wind off the table as ‘misinformation’ and as ‘coming from the anti‐wind lobby’. On the other hand no scientific papers have been produced to substantiate such denials. 14. The National Grid’s projected share of wind on the 2020 grid is 26.8 GW (of 100.5 GW total capacity, Ref.4). Whether so much wind electricity can be absorbed by the grid is not in doubt. But at what cost? We are often asked to believe that ‘novel’ technologies are about to solve any problems with variability. At present pumped hydro and flow batteries are in use on the grid. Round trip efficiency of the former is 70‐85%, flow batteries (for the latest technology, vanadium) 65‐75%, i.e. 15‐35% of energy is lost in each storage cycle. Then there is hydrogen, synthetic fuels and numerous other means of storing energy. Also demand management, the Super Grid, interconnectors and various others. None will become available at utility scale in the next two decades. Worse, all come with very significant energy losses. 15. Even without further study it can be stated as fact that the assumption that wind energy displaces CO2 emissions as if each MWh of wind electricity displaces one MWh of fuel equivalent and therefore its associated CO2 emission (430kg/MWh being most often used)is false. It is always less. Exactly by how much should be determined before any further large scale expansion of wind power is allowed to go ahead. 16. To this end the National Grid should make available ¼ hourly generation data including momentary fossil fuel burn. If fuel burn figures cannot be provided in the short term, accurate power/efficiency data for at least CCGT and OCGT plant could be used in the interim to derive fuel burn information.

References

1. Le Pair & de Groot 2010 The impact of wind generated electricity on fossil fuel consumption. www.clepair.net/windefficiency.html 2. ETSAP 2010 Gas‐Fired Power www.etsap.org 3. Oswald 2008 Will British weather provide reliable electricity? www.elsevier.com/locate/enpol 4. National Grid 2011 Operating the Electricity Transmission Networks in 2020 http://www.nationalgrid.com/NR/rdonlyres/DF928C19‐9210‐ 4629‐AB78‐ BBAA7AD8B89D/47178/Operatingin2020_finalversion0806_final.pdf 5. Lefton et al 1997 The relationship between base‐load generation, start‐up costs and generation cycling. http://www.usaee.org/usaee2008/submissions/OnlineProceedings/Final%20Paper.pdf 6. Bentek 2010 How less became more http://docs.wind‐watch.org/BENTEK‐How‐Less‐Became‐More.pdf 7. Denny, A A cost benefit analysis of wind power http://erc.ucd.ie/files/theses/Eleanor%20Denny%20‐%20A%20Cost‐ Benefit%20Analysis%20of%20Wind%20Power.pdf 8. Udo, F. Wind energy in the Irish power system http://www.clepair.net/IerlandUdo.html

June 2012

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Memorandum submitted by Carbon Trust and Partnerships for Renewables (WIND 73)

Please note that the Carbon Trust owns a significant minority stake in Partnerships for Renewables (PfR), a UK developer of onshore wind projects that the Carbon Trust set up in 2006. PfR has contributed to the information about onshore wind in this submission.

1. Onshore wind pre­construction development costs 1.1. A significant share of the costs of developing an onshore wind farm is related to upfront costs for identifying suitable sites, getting planning consent, and getting an electrical connection. The process includes the following steps and costs. 1.2. A range of potential sites must first be screened to identify sites that do not lie in an inappropriate landscape designated ar ea, do not have an unacceptable visual impact on the area, do not have an unacceptably high cost to connect to the local grid, and are acceptable to the other statutory consultees such as the RSPB, Natural England, National En Route Radar and the MOD. 1.3. Once such a suitable site is identified, a planning application is developed and submitted. The Environmental Impact Statement associated with the planning application involves one to two years of bird and bat monitoring and has to be done by a reputable independent third party in order to give the planning authority an independent view. The cost of the entire planning application is a minimum of £300,000 to £400,000 for a small project (5‐20MW) and £500,000 to £1,000,000 for a large project (20‐200MW) . 1.4. Electrical connection costs are also important. For very small projects of 1.5‐10MW, the project economics can only bear the costs of a local electrical connection, with costs typically on the order of £100,000/MW, but with a minimum cost of £327,000. Larger projects can sometimes bear higher connection costs of the order of £300,000 /MW. 1.5. All the costs associated with connecting PfR sites to date have been borne by the site including any required network upgrade. Socialised costs are only involved in the unusual cases when upgrading the transmission grid for an area is required such as the recent Beauly Denny line in Sc o t la nd. 1.6. Larger projects might also have to bear several millions of pounds in costs to install new radars for neighbouring airports. 1.7. Critically, only around one in four planning applications gain planning consent in England. Therefore, the revenues earned from any successfully consented site have to cover the costs of other failed planning applications. 1.8. There are increasing examples of cheap wind power supplying local companies and helping employment. A good consented but as yet unbuilt example of this is PfRs Oakdale site on an old coal tip in Wales. Electricity is cheaper as it avoids grid charges by being a direct connection to the user

2. Limits on onshore turbine tip height 2.1. Concerns around visual impacts and radar have restricted maximum tip heights of onshore wind turbines in the UK. However, these concerns need to be balanced with the fact that lower turbine tip heights in the UK compared to other countries reduce the amount of electricity produced per turbine, increasing the number of turbines required to meet renewable energy production goals. 2.2. The increase in tip height over time in this country has been slow compared to the continent. In Germany, for example, turbine hub heights are comparable to turbine tip heights in the UK. An increase in tip heights in the UK to around 130‐150m would allow onshore wind to be more cost‐effective and reduce the number of turbines needed to meet renewable energy production targets.

3. Levels of support through ROCs and feed­in tariffs 3.1. The economics of onshore wind farms are highly sensitive to changes in the level of support from ROCs or feed‐ in‐tariffs. PfR estimates that a reduction of 25% in current support levels would reduce the number of viable projects in its portfolio by around 80%. Page 216 4. Offshore wind costs and cost reduction potential 4.1. Innovation has the potential to drive down the costs of offshore wind by up to 25% by 2020 and 60% by 2050. Together with savings in the supply chain and financing, this could reduce the cost of energy from £140‐ 160/MWh to about £100/MWh by 2020 and £60/MWh by 2050. Such improvements would enable large deployment potential, and greatly reduce energy system costs. Successfully implementing this innovation would save the UK in the range of £18–89b n to 2050. However, achieving this level of cost reduction requires a clear signal from Government to industry to show that the market is sufficiently large and attractive to justify their investments in new technologies. New demonstration sites are also urgently required to ensure that new turbines and foundation designs can be tested and proven in time for the development of Round 3 projects in the UK. 4.2. 29GW of offshore wind (which is commensurate with The Crown Estate’s Round 3 and more than DECC’s central scenario of 18GW by 2020) would require a total of £8bn in grid connections – £6.1bn offshore and £2bn onshore. The offshore cost is incorporated into the levelised cost of £140‐160/MWh above, the onshore cost is additional. 4.3. In addition the onshore grid transmission network would need to be upgraded unless existing generators share grid capacity. This could require a submarine connection to the south of England at a cost of £2bn.

5. Load­factor and balancing costs of onshore and offshore wind 5.1. The electricity generation system will operate with a reduced load factor of conventional generation and increased need for balancing services, equivalent to a cost of £2/MWh and £1.7/MWh for on‐ and off‐shore wind respectively when spread across all UK electricity generation. (This is for a scenario of 40GW offshore and onshore wind – equivalent to 31% wind penetration.) These costs could be reduced through increased interconnection.

6. Export potential and lessons learned from other countries? 6.1. The UK could become one of the leaders in a global offshore wind market, with a 5‐10% share of a market with potential cumulative gross value‐added of between £200 ‐ 1,000bn up to 2050. If the UK successfully competes in a global market to achieve this market share, then the offshore wind industry could contribute £7 ‐ 35bn to UK GDP up to 2050 (cumulative). Offshore wind has the potential to create up to 70,000 jobs in the UK by 2020, and up to 225,000 jobs by 2050.

6.2. Other countries are already seeing significant economic benefit from offshore wind in terms of jobs and export revenues – for example, Denmark. This is typically achieved by building a strong home market to build the necessary capabilities, and requires

‐ fast and predictable planning and consen ting ‐ a volume commitment to provide certainty to supply chain ‐ predictable long‐term support mechanism to provide certainty to developers These policies allow the supply chain and ca p a b i lit y to be developed, allowing the domestic players to address export markets. It should be noted that the planning and consenting processes takes longer in UK than other countries and is less predictable, EMR has no volume commitment, the value of incent i ves is uncertain beyond 2014, which is hindering development in UK. Other countries are also successful at developing an export market without a domestic market by focusing on industries with competitive advantage applicable to offshore wind. For example, Norwegian companies are building on their oil and gas, maritime and renewable generation capabilities to enter the European offshore wind market as developers, vessel suppliers, installers, fabricators, and operations and maintenance providers.

7. South Korea and Japan appear to be adopting a similar strategy based on developing applicable competitive advantage – in this case turbines, vessels and installation – and applying it to domestic and export markets.Key sources 7.1. Offshore wind Technology Innovation Needs Assessment (TINA) (Low Carbon Innovation Coordination Group, 2012)

7.2. Offshore wind power: Big challenge, big opportunity (Carbon Trust, 2008) Page 217 June 2012

Page 218 Memorandum submitted by Judith Stretton (WIND 74)

I would like to make a submission for the public evidence session on the economics of wind power.

1. I am a resident of an area in Mid Wales facing an environmental disaster if plans go ahead to site another 600 (or more) wind turbines in an area that is also the water catchment for the Rivers Severn, Wye and Dyfi. Pouring 183,000 to 186,000 cubic metres of concrete on to this area would also have far reaching effects over the border into England too, as well as causing irreversible damage to its vital function as carbon sink. (See UK National Ecosystem Assessment. ‘Around 40% of UK soil carbon is found within mountain, moorland and heath habitats.’ And ‘each year, flooding in Wales costs homes and businesses £200 million.’) 2. Figures for the quantity of concrete above are extrapolated from the approximate quantity required for each turbine as stated in the Environmental Assessments for three different wind farm proposals for the County of Montgomeryshire. This equates to 30,492 mixer truck loads (most common truck capacity is 6.1 cubic metres). However, this is only the quantity required for the turbine bases and does not take into account the many ancillary buildings, grid connection infrastructure and extensive road works necessary, as well as hundreds of miles of other impermeable surfaces such as access tracks, crane pads, etc. 3. Current road infrastructure here is totally inadequate for proposed traffic and would require massive upgrading to cope with 1,000 lorry movements per turbine (wind industry figures), without taking into account the abnormal loads required for ever larger turbines, which are already proving to be problematic. 4. Documents recently available on-line, published by the National Grid and Government, indicate that new electricity land transmission infrastructure (pylons etc) is required over many hugely sensitive areas of Britain to link remote renewable projects, mostly wind farms, to the grid and the costs will be at least £8.8 billion over the next eight years alone. (Almost double previous estimates.) 5. Other parts of the world are also increasingly worried about the many impacts of large wind farms, Including Australia and USA, and even countries such as Denmark, who embraced wind energy on a large scale. Danish electricity is the most expensive in Europe, because of wind and subsidies, and the country faces further huge bills as the foundations of about 1,000 of their offshore turbines are crumbling away.

Page 219 Memorandum submitted by Anglesey Against Wind (WIND 75)

Anglesey has a long history of onshore wind power. The earliest recorded windmill dates from 1303 a nd a l ist of the remains of 34 wind and water mills was compiled in 1929 to remember the invaluable role wind technology played in the island’s economy. T hese stone towers with ‘sails’ generated power in situ for milling the grain grow n in Ynys Mon - the bread basket of Wales. They were an integral part of t he agrarian scene of fertile green pastures, pre-Cambrian rocky outcrops and oceanic climate. As an island of abundant natural resources, prominently located on the ancient sea-trading routes around the Irish Sea, Anglesey has been exploited from ancient times through Roman occupation and into the modern age.

In the early 21st century as mankind evaluates the effects of the industrial revolution and looks at how to manage and harness natural resources Anglesey is once again a focus of Europe-wide attention as UK subsidy for wind energy is perceived as a lucrative cash crop.

Food production from farming and fishing remain crucial to the island’s economy. And as befits one of the most beautiful parts of western Europe tourism, recreation and sport have steadily grown over the last century to be probably the most important sector of the economy. More recently energy generation has become the third most important driver of the local economy, both metaphorically and actually.

Anglesey’s economy has benefitted over the last 50 or so years from being host to Wylfa nuclear power station. And possibly the largest section of the island’s population want to see new generation nuclear plant b uilt to secure around 80 0 permanent jobs including highly skilled professional, engineering and scientific employment. In a population of less than 70,000 this is a significant number of new jobs. With a further 2000 or so during the construction phase this would be v ery welcome in a period when other industrial sectors on the island have contracted with the loss of some 1000 jobs since 2009.

While off-shore wind developments are likely to bring some work to Holyhead Port t he number of temporary and permanent jobs will be a fraction of those Wylfa B could provide. Onshore wind developments provide few if any permanent jobs on the island. We have only identified two permanent local employees. The energy companies o perating the existing 3 wind farms c lustered in the north of the island a t Rhyd y Groes, near Amlwch and Cemaes; L lyn Alaw near Mynydd Mechell and Llanbabo; and Trysglwyn, near Rhosybol can no doubt give details. There are 72 turb ines in these l ocales that have been in operation since the mid-1990s. So Anglesey has experience of modern wind technology as well as its forerunners.

It’s notable that when considering these large ener gy developments in 1992 Anglesey County C ouncil’s Supplementary Planning Guidance states t hat “ the Secretary of State for Energy is empowered to make orders requiring the Regional Electricity Companies to take a proportion of their supply from non-fossil sources...and a financial subsidy for the development of renewables is provided through a . However, a deadline of 1998 has been set for t he establishment of renewable energy schemes by means of NFFO support, and after this date the projects are expected to become commercially competitive.” We are still waiting for onshore wind to become commercially competitive and unreliant on subsidy. Meanwhile the local residents have yet to see much t angible benefit from these developments, and indeed the residents, shops a nd businesses, in for example, Cemaes high street complain of frequent power cuts. T here is a £ 24,000 p.a. and a £5,000 p.a. index linked local Benefit Fund which is f rankly derisory. A few farming enterprises have benefitted from rental income.

In 2011 some 4000 people were employed in tourism and leisure on Anglesey and the sector generated some £233 million a year into the local economy. The sector has grown in recent years and is now the largest employment sector on the island. A study in 2005 for Tourism Partnership North Wales found that Snowdonia and Anglesey was a ‘key iconic destination’ due to the quality of the natural environment and beauty of the landscape. However tourism businesses in the north of the island in the vicinity of the existing wind f arms that have turbines sized around 40 metr es high do not appear to have flourished and long-established businesses have closed.

Successful tourism businesses in the rest of the island such as Anglesey Sea Zoo and those represented by Beaumaris & District Chamber of Trade and Tourism are concerned that the threatened proliferation of onshore wind turbines at new sites near and far from their businesses w ill inevitably damage their businesses. Mod ern turbines sized up to 145 metres will dominate t he relatively flat topography of the island and be visible from all parts of it. The smaller s ized existing turbines have a wide visual impact. If additional developments spill out of the existing wind farms to other parts of the island then these will further detract from the island’s natural beauty to the point where they will destroy its unique character and the attraction of its natural landscape.

Graphics presented by DECC’s Chief Scientific Advisor D avid MacKay at the Hay Festival d emonstrate the huge land area that would be required if onshore wind was to provide a significant percentage of UK energy. Tourism and all other f orms of economic activity on Anglesey, including farming, a re i n danger of being crowded out if the implications of this huge demand for land are not realised. T he existing Anglesey wind farms claim to produce the equivalent of about 70% of the island’s household electricity. T he 2 RWE farms cover an area of 400

Page 220 hectares. The impact on land use compared with Wylfa’s output, which generates t he equivalent of nearly half the electricity Wales needs, is stark.

The other main consequential costs arising from the expansion of onshore wind developments c oncern the health, well-being and property values of affected residents and homeowners. W e have evidence that Anglesey properties for sale near existing turbines take longer to sell and sell for less than comparable properties situated in turbine free areas. W e are aware of local property sales that have fallen through once the purchasers learned of potential turbine developments and we have evidence t hat local estate agents are informing potential clients that their properties may be devalued by as much as 20% following a j udges ruling concerning compensation to purchasers who claimed the vendors did not disclose information about a potential development which did proceed and did devalue the property because of noise pollution, light flicker and damage to visual amenity.

The Davis case in about the impact on health and property values of a nearby windfarm, t hough settled out of court, demonstrates the financial and health implications of certain developments on households. There is also considerable evidence that wind turbines cause serious health problems for nearby residents. A useful compilation can be found in an article published by Carl V. Phillips, PhD in Bulletin of Science, Technology and Society titled ‘Properly Interpreting the Epidemiologic Evidence about the Health Effects of Industrial Wind Turbines on Nearby Residents’.

Anglesey Against Wind Turbines is working with Dr Craig Young from the School of Science and the Environment, Manchester Metropolitan University to plot the potential economic impact on properties near to actual and proposed ons hore wind developments on Anglesey. Research will be undertaken in the coming months and is unlikely to be available before this Committee deliberates but depending on the date we may have some further information to present.

June 2012

Page 221 Memorandum submitted by Mark Blackwell (WIND 76)

1What do we mean by economic efficiency? [1] forms an interesting argument that economic efficiency should be measured using the Happy Planet Index - “t he world has limited resources, but people have unlimited wants and needs. Economics as a discipline is concerned about the systems used by society to solve this problem: how to take these scarce resources, and organise them (through production, distribution and consumption) in order to best meet human wants and needs.” In the context of energy, the world has limited fossil fuels but, within reasonable timescales, has unlimited renewable power. It makes sense to meet peoples unlimited needs and wants with an unlimited energy source.

2Fossil fuels have reached their peak in terms of efficiency and affordability, whereas renewables (especially offshore wind) are less mature and haven’t reached their peak. Recent reports from [2] and [3] state that a 30% cost reduction (£140/MWh to £100/MWh) in offshore wind is possible by 2020 (the current cost of onshore w ind is a pproximately £90/MWh [5]). It is generally expected that most other energy sources will not see such cost reductions, therefore offshore wind will become very competitive by 2020. Additionally, o ffshore wind is much lower risk than fossil fuels in terms of fuel cost (fixed at £0!) and susceptibility to external influences ( war, political unrest etc).

3The aspects of offshore wind that can contribute to cost reduction include the cost of generation and transmission, supply chain management, innovations*, contractual standards, planning and consenting procedures, finances, investment and grid improvements*. One particular exciting area is the floating turbine* concept that will aid in accessing higher and more consistent winds, and reduce maintenance / installation costs [7].

4Smart grids are another area that can significantly improve energy efficiency a nd save money in the long term [8]. Because of the power load variation associated with wind power, the manner in which the wind industry integrates with the smart grid is critical. As more responsibility falls onto the user, it is likely that innovation pockets will occur in communities where residents will work to improve their energy systems and share with others. Using wind power effectively (ie. charging things when peak wind power available) will further reduce costs. Visualising these opportunities for cheaper energy and automating some procedures is critical. The Isle of Wight eco island* could be a flagship project for these type of innovations. Returning to the definition of economic efficiency in [1], the ultimate measure of economic efficiency is one which shows how effectively an economy can turns its scarce environmental resources into what people want and need. There is an argument that smart grids engage people; help them understand their surroundings better; and fulfil a need to feel in control of their energy environment. Economic efficiency is not 100% money dependant and the use of the Happy Planet Index may be a useful way of showing this in terms of energy systems.

5Onshore wind is now competitive with fossil fuels but the Chancellor cutting subsidies for onshore wind could be a good thing for two reasons. Firstly, the anti-wind movement in the UK isn’t going to go away. It is very successful at creating negative press for the wind industry and the problem is that the general public tend not to distinguish between onshore and offshore and the heated debates surrounding onshore protests cloud the hard economic facts. Cutting the subsidies may ease the protests against onshore development as their will likely be less of them. However, further support needs to be given to offshore wind development to counteract the reduction in onshore wind – the quicker the technological developments, the quicker consumers can receive energy from offshore wind at a competitive price. These cost reduction estimates have been outlined in [2] and [3].

Page 222 6The second reason is the vast offshore potential (compared to onshore) in the UK (figure from ref [11]):

7The UK currently consumes approximately 2 000 TWh and figure 3.5 indicates a potential of over 4000 TWh in UK seas. This opens up a hugh potential export market (in terms of energy and technological expertise).

8Ref [6] gives an indication of the levels of subsidies for fossil fuels and renewables in the UK and internationally: “O ECD figures show that coal, oil and gas in the UK were subsidised to the tune of £3.63bn in 2010, while onshore and offshore wind received only £700m in the year to April 2011. All renewables in the UK benefited from £1.4bn in that period, according to the Department of Energy and Climate Change. In the 37 countries that the International Energy Agency analysed, coal, oil and gas received $409bn in 2010, compared with $66bn for renewables”

9There are a number of lessons that can be learnt from overseas. Recently the Vestas CEO has voiced concerned about the United States’ lack of commitment to renew the wind tax credits [ 9]. This could potentially discourage investors and have a negative impact on the industries supply chain (with the knock on effect of significantly increasing the overall cost of wind energy). With a number of large turbine manufacturers considering opening manufacturing plants in the UK, it is critical that the government doesn’t a ct in ways to put them off. A thorough analysis of the US wind industry is critical as it is a very large potential offshore export market [10] and is vital to the pace of technological development and scales of economy that lead to cost savings.

10To summarise, onshore wind is currently competitive with other energy sources but suffers from the high risk associated with planning permission and local objections. Offshore wind is currently too expensive but evidence has been shown that dramatic decreases in cost are achievable.

All accessed 27th June 2012 : [1] http://www.neweconomics.org/blog/2012/06/22/why-the-happy-planet-index-is-the-ultimate-measure-of-economic-efficiency [2] http://www.decc.gov.uk/en/content/cms/news/pn12_074/pn12_074.aspx [3] http://www.thecrownestate.co.uk/news-media/news/2012/reducing-the-lifetime-costs-of-offshore-wind-pathways-to-success/ [4] http://www.vestas.com/en/about-vestas/strategy/political-affairs/g20/more-about-the-g20/green-growth-task-force.aspx [5] http://www.cccep.ac.uk/Publications/Policy/docs/PB-onshore-wind-energy-in-the-UK.pdf [6] http://www.rechargenews.com/energy/wind/article315027.ece?lots=site [7] http://www.guardian.co.uk/environment/2012/apr/23/us-uk-floating-wind-turbines?intcmp=122 [8] http://www.greenwisebusiness.co.uk/news/smart-grid-could-save-19bn-to-uks-electricity-infrastructure-upgrade-3256.aspx [9] http://www.reuters.com/article/2012/06/10/vestas-us-market-idUSL5E8HA2SO20120610 [10] http://www.mitpressjournals.org/doi/pdf/10.1162/DAED_a_00143 [11] http://www.eea.europa.eu/publications/europes-onshore-and-offshore-wind-energy-potential/

Page 223 Memorandum submitted by RES (WIND 77) 1 RES is one of the leading renewable energy developers in the UK, and has developed over 6.5GWs of onshore wind projects globally, in addition to offshore, biomass and PV. RES is presenting on behalf of Fred.Olsen Renewables and Infinis. 1.1 Onshore wind is the most cost‐effective low carbon generation deployable on a large scale. At 0.9 ROCs, with each ROC valued at £42.37/MWh1, given that wind with a low short run marginal cost will displace either coal or gas generation the 2,3 costs per tonne of CO2 saved is between £53/tCO2 and £67/tCO2 for displacing coal and natural gas respectively. For offshore wind the equivalent costs are £117.8/tCO2 and £149.8/tCO2. In comparison:

1.1.1 Switching to Gas. As gas (and wind) is cheaper as new generating capacity than new coal plant with CCS at current market prices, it gives an emissions saving and a financial benefit. But, if market logic alone dictates investment then all new generation would be gas CCGT, creating an electricity industry that is dependent on a single source of energy and as a result, very exposed to supply side shocks4 price volatility and increasing gas prices (which have trebled over the last ten years5). By investing in low carbon generation now, we can mitigate these risks. 1.1.2 Switching to Nuclear. With current uncertainty on nuclear costs and rates of return required to bring forward investors, we believe current estimates significantly understate the outturn cost for a private company. 6 1.1.3 Energy Efficiency. Estimates for abatement outs ide of the energy sect or suggests that approximately 80mtCO2 could be saved at no cost ; 40mtCO2/yr could be saved at cost up to £50/tCO2; 30mtCO2/yr at a cost up to £150/tCO2 and a further 50mtCO2/yr at a cost less than £250/tCO2. However, the fact that there is a large potential for cost effective measures highlights the importance of non‐economic barriers and potential difficulty realising these savin g s . 1.2 Measuring the cost effectiveness of carbon saving involves high‐level approximation for energy‐efficiency and renewable measures an d will depend on the end user’s behaviour patterns, system interactions, income and substitution effects. However, this does not detract from the high level lessons: 1) there is a large potential for cost‐effective savings which appear difficult to reach; 2) the costs of energy saving increases sharply after the first tranche; 3) to achieve the 4th carbon budget targets energy supply needs to be addressed; 4) gas, under current prices, has associated savings but risks over‐ dependency and future price uncertainty 5) onshore wind is mid‐way along the curve and is one of the cheapest technologies to diversify the energy mix, cut emissions, and can be deployed at scale; 6) Offshore wind is more expensive, but has the potential for cost reductions, and broader economic and industrial benefits.

1.3 Some reports claim that wind turbines emit more CO2 in their production than they save through generation. This is incorrect. A review of the ratio of energy delivered to energy cost for 119 turbines 7 concluded that the ratio was between 25:1 and 20:1; a V80‐2.0MW turbine is expected to generate 28 times more energy than consumed over its life cycle8. 9,10,11 Other reports claim that wind power can increase CO2 emissions , however, the underlying reports base their results on overly simplistic that are not representative of complex electricity systems12,13. National Grid’s14 forecasts build out of wind is one factor contributing to the reduction in the carbon intensity of electricity falling from 500g CO2/kWh at present 15 to 222g CO2/kWh in 2020 and 48g CO2/kWh in 2030. This finding was also replicated by Poyry’s study into intermittency . 2 Levelised costs from Arup and Mott McDonald shows that onshore wind is the cheapest generation tec h nolo gy at £90‐ £94/MWh apart from gas without CCS at £77‐£80/MWh. Levelised costs provide a cost comparison between technologies. Of the reports shown the Arup report is the most widely reviewed and scrutinised for renewables.

Mott Parsons £/MWh at consistent 10% discount rate ARUP16 MacDonald17 Brinckerhoff18 Onshore > 5MW 90.2 93.9 Low Carbon & Low Uncertainty Onshore < 5MW 104.9 ‐ Good understanding of capita l costs Offshore wind Round 2 121.6 160.9 ‐ Good understanding of fuel Cost Solar 314.3 Dedicated Biomass < 50MW 127.6 116.0 Low Carbon & High Uncertainty Dedicated Biomass > 50MW 144.6 93.2 ‐ Either uncertain capital costs Offshore Wind R3 147.5 190.5 ‐ Or uncertain fuel Cost Nuclear 99.0 74.1* 19 Low Carbon & Very High Uncertainty Coal ASC+ CCS 142.1 104.8 ‐ Uncertain capita l costs Coal IGCC + CCS 147.6 134.8 ‐ And Uncertai n Fuel Costs Gas CCGT + CCS 112.5 104.8 High carbon & High Uncertainty Coal ASC 104.5 95.4 ‐ Good understanding of capita l costs Coal IGCC 134.6 126.2 ‐ Uncert ai n fuel Cost Gas (CCGT) 80.3 76.6 2.1 To be clear, these costs cover: development, construction and grid connection costs (to the local substation), and annual operating costs which include payments to Network Operators to cover broader system costs. Some detractors use this complexity (or simply don’t understand) to make exaggerated claims of additional costs that have actually already been counted. Civitas9 makes bogus claims of an additional £60/MWh to be added onto the cost of wind due to unallocated costs in a reference that traces back through a Renewable Energy Foundation Paper20 to a paper by Gibson21 that allocates additional "Extra System Operation Costs", "Capital Charges for extra Planning Reserve", and "Total Capital

Page 224 Charges for Required Transmission". The authors “overlook” the fact that the Parson's Brinkerhoff Report22 used to define the first Gibson Cost "Extra System Operation Costs" already includes the two other Gibson Costs23. 3 Offshore wind is approximately £30/MWh more expensive than onshore wind for a Round 2 project. This figure does not take into account the work being undertaken by the Offshore Wind Cost Reduction Task Force24 which sets out key actions to cut the cost of generating offshore electricity by 30% to £100 per MWh by 2020. This is a challenging target, our ability to achieve it and realise the wider benefits depends on investor confidence in the Government’s renewable ener gy policy. 4.1 The direct costs of building new transmission infrastructure is directly taken into account in the cost assessment of onshore wind, there are low network costs that are currently not included. Reports such as ARUP include the majority of grid related costs; the cost of onsite infrastructure and site connections to local substations are included in the capital cost estimate, whilst wider transmission development and maintenance costs in the local distribution25 or national transmission network26 are recovered through annual operating costs. There are costs associated with increased wind penetration that are not directly attributed to the site and are therefore outside the scope of these cost assessme n ts, including; 4.1. 1 Balancing Costs. Large windfarms directly incur balancing use of system charges of around £2/MWh. This may be realised as a ‘benefit’ for smaller onshore wind generators that are embedded in the network. 4.1. 2 Transmission Use of System Charges Passed onto the Consumer. Under current charging methodology, transmission company allowable revenues are recovered from generator and consumers on a 27% to 73% split. National Grid’s business plan27 allocates an additional charge to consumers of £10 per household in 2027 (approximately £3/MWh) due to factors including the connection of renewable and conventional generation, smart grid roll‐out, new systems, and asset replacement (often dating back to the 1950’s). 4. 1. 3 Constraint Payments28. Payments to wind generation spiked from £176k in 2010 to £12.7m in 2011 (compared with over £700m balancing services spend as a whole) in a one‐off spike due to a number of largely unrelated issues combined to create unique circumstances29. This is unlikely to be repeated with the implementation of improved practices for wind farm owners, National Grid’s improved operating procedures and new transmission investment. 4.2 Complex grid charging arrangements enables misinformation to be propagated through un‐reviewed papers presented as fact. The second Gibson Cost21 that fed into Civitas’s9 additional £60/MWh was transmission connection. Gibson’s explanation in summary is30; "The extra cost for Transmission ….is based on the latest costs for the Beauly‐Denny Line …..This would result in an additional £15.5/MWh of levelised cost…. The distance from Denny to this notional point is some four times the distance …. A large assumption is made by simply doubling the levelised cost of Beauly‐Denny to £31/MWhr." This is a "large assumption" as it is double counting costs already included in the levelised cost calculation, assumes all windfarms are in North Scotland, that a large electrical infrastructure project is a representative of cost, and ignores the existing grid Infr astructure. 5 Detailed analysis suggests that the curre n t cost associated with providing back up capacity is around £2/MWh and this could increase to £4/MWh in 2020. More back‐up capacity is required regardless due to new nuclear. The cost of backup can be divided into the cost of frequency response31, short term operating reserve requireme nt32 and longer term capacity adequacy. The impacts of increasing wind generation on the first two are addressed by National Grid 33, who estimate that short term operating reserve requirements will increase from £2.1/MWh now to £4 .06/MWh in 202134, due to increases in both wind and nuclear capacity. Longer term capacity adequacy is additional to this and the Government's Impact Assessment estimated at a cost £300‐£350m/yr in 202535. If this was all directly attributed to wind it would indicate a cost in 2025 of £3.6/MWh. Combining these costs gives current reserve costs of £2.1/MWh, increasing to £4/MWh in 2020 and potentially £7.6/MWh in 2025. 5.1 Detractors of wind generation, misrepresent the back‐up capacity, citing the fact that wind does not generate at full load 100% of the time. Civitas reported a third Gibson Cost of £24/MWh based on a MW of wind needing to be matched with a corresponding MWs of dispatchable plant (or close to it). This logic is flawed. No plant can be relied upon to generate 100% and wind plant’s investment decision is the based on a capacity factor is consistently around 30%, not 100%. 6 Onshore wind receives support of £42/MWh (£38/MWh after banding) whilst offshore receives £85/MWh which will be reduced to £76/MWh in 2016/17. This is based on the current allocation of ROCs to each technology. The only technologies that receive less support than onshore wind are landfill gas (0.25 ROCs), sewage gas (0.5 ROCs) and co‐firing (0.5 ROCs). However the potential to expand the renewable capacity from these sectors is limited. 7 Consumers currently pay £4.6/hhld for onshore wind and £3.06/hhld for offsho re, a total of £7.7/hhld36. This total cost of support for all renewables is expected to increase from £20/hhld to around £95/hhld in 2020 37.Organisations such as Policy Exchange have multiplied this to give a cost of £400/hhld38 in 2020 through some dubious economics39. Between 2004 and 2010 rising gas prices has increased consumer bills by £290 40 applying Policy Exchange’s logic this should have been an increase of over £830/hh ld. 8 If common practice in Sweden and the USA was adopted in the UK then the cost s would be reduced, common practice includes a simpl er planning process, higher hub‐heights and larger rotor diameter s. 9 We actively engage with local communities at all stages of the planning, construction and operation processes for our wind farms. In addition to our existing Community Benefit Funds we are committed to exploring new and innovative ways in which our wind farms can bring tangible benefits to the local communities hosting them.

Page 225 ANNEX

1 E‐ROC Auctions, http://www.e‐roc.co.uk/trackrecord.htm. The average price achieved per ROC at the monthly e‐ROC auction on the 24th May was £42.37/MWh. 2 DEFRA, Greenhouse gas conversion factors for company reporting, http://www.defra.gov.uk/publications/files/pb13773‐ghg‐ conversionfactors‐2012.pdf, 2012 Guidelines. Using the grid rolling average direct greenhouse gas emission factor for electricity before transmission losses of 0.482kgCO2/KWh (Annex 3, Table 3a) and Natural Gas and Coal have emission factor of 0.205 and 0.3436 on a Net Calorific Value (Annex 1, Table 1d, total direct greenhouse gas column). A very conservative approach which does not take into account the existing low carbon generation, the cost per tonne of carbon saved is £87.9/MWh. 3 Digest of UK Energy Statistics (DUKES) 2011, http://www.decc.gov.uk/en/content/cms/statistics/publications/dukes/dukes.aspx, Table 5.10 Plant Loads, Demand and Efficiency. ‐ This gives an average generating efficiency of 47.6% and 36.1% for coal and natural gas CCGT in 2010. This is conservative as it is likely to be older less efficient plant that is displaced. 4 The Impact of Import Dependency and Wind Generation on UK Gas Demand and Security of Supply in 2025, Howard Rogers, Oxford Institute for Energy Studies, August 2011, http://www.oxfordenergy.org/wpcms/wp‐content/uploads/2011/08/NG‐54.pdf. 5 DECC Energy Price Statistics, http://www.decc.gov.uk/en/content/cms/statistics/energy_stats/prices/prices.aspx, Retail prices: ‘DECC ‐ Monthly Tables ‐ Retail Prices Index ‐ Fuel Components ‐ April 2012’‐ This shows an index of 224.2 for the fourth quarter of 2011 and is compared with an index of 72.5 for the fourth quarter of 2000 (a multiple of 3.05); or an index of 75.8 for the fourth quarter 4 of year 2001 (a multiple of 2.96). Industrial prices: ‘DECC ‐ Quarterly Tables ‐ Prices of fuels purchased by manufacturing industry p‐kwh ‐March 2012’ ‐ For the average industrial customer, gas prices in the fourth quarter of 2011 were 2.330p per kWh , compared to a price in quarter 4 of year 2000 ‐ of 0.764p per kWh ‐ a multiple of 3.05. For the fourth quarter of 2011 the price was 0.834p per kWh – a multiple of 2.79. 6 DECC, Fourth Carbon Budget, Dec 2011, (Annex B, Chart B8, Pg 165). http://www.decc.gov.uk/assets/decc/11/tackling‐climate‐ change/carbon‐plan/3749‐carbon‐plan‐annex‐b‐dec‐2011.pdf 7 Renewable Energy, Volume 35, Issue 1, January 2010, Meta‐analysis of net energy return for wind power systems, Ida Kubiszewski, Cutler J. Cleveland and Peter K Endres, http://www.sciencedirect.com/science/article/pii/S096014810900055X. 8 Life Cycle Assessment of Electricity Production from a V80‐2.0 mw Gridstreamer Wind Plant, Vestas, Peter Garrett & Klaus Rønde, Decemebr 2011, http://www.vestas.com/en/about‐vestas/sustainability/sustainable‐products/life‐cycle‐assessment/available‐life‐cycle‐ assesments.aspx. 9Wind power is expensive and ineffective at cutting CO2 say Civitas, Telegraph, 2012, http://www.telegraph.co.uk/earth/earthnews/9000760/Wind‐power‐is‐expensive‐and‐ineffective‐at‐cutting‐CO2‐say‐Civitas.html 10 Policy Exchange (2011) Climate Policy – Time for Plan B, http://www.policyexchange.org.uk/images/publications/climate%20change%20policy%20‐%20time%20for%20plan%20b%20‐ %20jun%2011.pdf. 11 Why is Wind Power so Expensive, An Economic Analysis, Gordon Hughes, The Global Warming Policy Foundation, 2012, http://thegwpf.org/images/stories/gwpf‐reports/hughes‐windpower.pdf. 12 C (Kees) le Pair, “Electricity in the Netherlands: wind turbines increase fossil fuel consumption & CO2 emissions”, October 2011, http://www.clepair.net/windSchiphol.html. In the paper the main model used to generate the findings are based on a simplified system with one large wind farm, one large gas fired CCGT and an OCGT. The lack of smaller units which are geographically dispersed magnifies the volatility in wind output, the single CCGT units exaggerates the impact of ramping, this then further exaggerated by the lack of any interconnection, whilst the lack of demand variation overlooks the reserves that are required to maintain system stability under normal conditions. 13 Joskow, P.L. (2010) “Comparing the costs of intermittent and dispatchable electricity generating technologies”, Working Paper 10‐013, Center for Energy and Environmental Policy Research, MIT. His critique of the levelised cost methodology is primarily based on the time of day of generation in the context on the UK wind output is typically correlated with peak periods, which is a beneficial impact. 14 National Grid, Gone Green 2011 Key Facts and Figures ‐ Gone Green Scenario with wind installed increasing to 26 GW in 2020 and 47 GW in 2030 (Page 2, electricity generation and carbon intensity), http://www.nationalgrid.com/NR/rdonlyres/F6FA7970‐5FEA‐4918‐ 8EE2‐2A8E6B9626FF/50214/10312_1_NG_Futureenergyscenarios_factsheet_V2_st3.pdf. 15 The implications of significant wind build out on load factors and therefore the returns to investment of thermal plant was highlighted in the Poyry study on the Implications of Intermittency which RES participated in as a core sponsor. Press Release to Private Study,. 16 DECC, Review of Generation Costs and Deployment Potential of Renewable Electricity Technologies in the UK, Arup ( 2011), http://www.decc.gov.uk/assets/decc/11/consultation/ro‐banding/3237‐cons‐ro‐banding‐arup‐report.pdf. 17 Mott MacDonald (June 2010) "UK Electricity Generation Costs Update", http://www.decc.gov.uk/assets/decc/statistics/projections/71‐ uk‐electricity‐generation‐costs‐update‐.pdf. 18 Parsons Brinckerhoff (August 2011), Electricity Generation Cost Model ‐ 2011 Update, http://www.pbworld.com/pdfs/regional/uk_europe/decc_2153‐electricity‐generation‐cost‐model‐2011.pdf. 19 PB Nuclear costs have significantly more favourable assumptions compared to the ARUP report ‐ higher efficiency, availability and load factors on the operating parameters and lower capital cost and operating costs. Analyst reports from Citigroup suggest that levelised costs could be doubled from these levels. http://uk.reuters.com/article/2012/05/08/uk‐nuclear‐britain‐edf‐idUKBRE8470XC20120508 20 Renewable Energy Foundation "Energy Policy and Consumer Hardship" (2011), http://www.ref.org.uk/attachments/article/243/REF%20on%20Fuel%20Poverty.pdf. 21 Colin Gibson, A probabilistic Approach to Levelised Cost Calculations For Various Types of Electricity Generation, (2011) 22 Parsons Brinkerhoff, Powering the Nation, A Review of the Costs of Generating Electricity, (2006), http://www.pbworld.com/pdfs/regional/uk_europe/pb_ptn_report2006.pdf. 23 This was debated at length when we challenged these figures on the Full‐Fact Website. Civitas’s response was that it was acceptable to use them because they were draft and there was no better information available. When we challenged them on this and presented better and more up‐to‐date evidence they were unable to respond http://fullfact.org/blog/figures_civitas_wind_power_report_res‐ 3251 and http://fullfact.org/blog/figures_civitas_wind_power_report_res‐3290 . 24 Offshore Wind Cost Reduction Task Force Report, June 2012, http://www.decc.gov.uk/assets/decc/11/meeting‐energy‐ demand/wind/5584‐offshore‐wind‐cost‐reduction‐task‐force‐report.pdf. 25 The Local Distribution System upgrades beyond the local substation are covered by GDUoS charges and an upfront capital cost contribution.

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26 The Transmission distribution charges vary by location, from £21.9/KW for areas furthest from demand to negative value for sites connected in central London (subject to Ofgem’s review of transmission charging, Project TransmiT). As an approximation, the higher windspeeds to the north correlate with the higher connection charges. 27 National Grid Electricity Transmission's RIIO‐T1 Business Plan headlines (July 2011). Forecasts that costs charged through to households will increase from £17/hhld/yr to £27/hhld/yr (Page 12). http://www.nationalgrid.com/NR/rdonlyres/A7691393‐6DCB‐4849‐8C0D‐ DCACEB2004A9/48221/NGET_Headlines.pdf. 28 Hansard, 17th Jan 2012, Charles Hendry Response to Glyn Davies, http://www.publications.parliament.uk/pa/cm201212/cmhansrd/cm120117/text/120117w0003.htm 29 These constraint payments were caused by a particular period of high wind output, which coincided with the outage of significant specific transmission assets. Wind operators had systems in place to respond, but due to not having called on them before these were not appropriately calibrated for up‐to‐date market conditions. The Wind Industry has now responded to ensure appropriate procedures are in place and become more engaged with balancing market participation. Furthermore, National Grid’s development of forecasting and system operation practices together with new transmission investment reduces the need for balancing market actions associated with extraordinary wind and transmission outage events. 30Colin Gibson, A probabilistic Approach to Levelised Cost Calculations For Various Types of Electricity Generation, (2011), The Institution of Engineers and Shipbuilders in Scotland (IESIS). Version 22.10.2011 Pages 5‐6, section 3.1.8. "The extra cost for Transmission to connect generation in the north of Scotland to the main load centres in the south of England is based on the latest costs for the Beauly‐Denny line of some £600m. The Public Inquiry was based on 2100 MW of generation in the North West. This would result in an additional £15.5/MWh of levelised cost. However this power has to be transferred to a notional point on the transmission system just north of London and aggravates existing limitations to the general flow or power north to south. The distance from Denny to this notional point is some four times the distance from Beauly to Denny. A large assumption is made by simply doubling the levelised cost of Beauly‐Denny to £31/MWhr." 31 National Grid, Operating the Electricity Transmission Networks in 2020, pg 40 (June 2011) Para 7.11 ‐ Frequency response is short term adjustments to control for the second‐by‐second balance between generation and demand. http://www.nationalgrid.com/NR/rdonlyres/DF928C19‐9210‐4629‐AB78‐ BBAA7AD8B89D/47178/Operatingin2020_finalversion0806_final.pdf 32 National Grid, Operating the Electricity Transmission Networks in 2020, pg 21 (June 2011) Short reserve (operating reserve) is capacity held to manage the uncertainties between generation output and demand fluctuation. 33 National Grid, Operating the Electricity Transmission Networks in 2020, Table on pg 74 (June 2011) 34 National Grid don’t come to a firm conclusion with regards frequency response requirements. For short term operating reserves, the cost is increase due to wind's capacity increasing from 38GWs to 26.7GWs such that Wind's Reserve Requirement will increase from 0.83 TWh to 5.86 TWh in 2020/21. Expressed as unit of output of wind, the cost is expected to. increase from £2.1/MWh now to £4.06 in 2021. 35 DECC, Electricity Market Reform – Capacity Mechanism, Impact Assessment, December 2011 ‐ (Para 5.16 ‐ 5.17), http://www.decc.gov.uk/assets/decc/11/consultation/cap‐mech/3883‐capacity‐mechanism‐consultation‐impact‐assessment.pdf. 36 OFGEM, Renewables Obligation Annual Report 2010‐11, http://www.ofgem.gov.uk/Sustainability/Environment/RenewablObl/Documents1/Renewables%20Obligation%20Annual%20Report%2 02010‐11.pdf, (2012) this based on the latest figures generated by OFGEM of total cost of the RO of £1.28bn with approximately 50% awarded to wind. There are then some additional projects commissioned under either NFFO or the small scale Feed‐in‐Tariffs, however the number of MWs actually consented was relatively small with only 391 MWs constructed under NFFO (UK Renewable Energy Policy Since Privatisation, Michael G. Pollitt, January 2010, http://www.eprg.group.cam.ac.uk/wp‐ content/uploads/2010/01/PollittCombined2EPRG1002.pdf) and 18.9MWs under FITs (Feed‐in Tariff (FIT): Annual report 2010 – 2011, Ofgem, December 2011, http://www.ofgem.gov.uk/Sustainability/Environment/fits/Documents1/FITs%20Annual%20Report%202010%202011.pdf). 37 DECC, Estimate Impacts of Energy and Climate Change Policies on Energy Prices and Bills, http://www.decc.gov.uk/assets/decc/11/about‐us/economics‐social‐research/3593‐estimated‐impacts‐of‐our‐policies‐on‐energy‐ prices.pdf, Nov 2011, Appendix Table F2. The total cost of renewables is around £20/hhld of which around half, £10/hhld, is accounted for by wind power. This increases by around £95 by 2020 (RO at £48 + FiTs at 6 + EMR at £41). This compares with whilst the Climate Change Committee estimate an additional £110/household in 2020 (Committee on Climate Change, Household Energy Bills – Impacts of meeting carbon Budgets, http://downloads.theccc.org.uk.s3.amazonaws.com/Household%20Energy%20Bills/CCC_Energy%20Note%20Bill_bookmarked_1.pdf, (Dec 2011) 38 The Policy Exchange (2012) “The Full Cost to Households of Renewable Energy Policies.” 18 January 2012. Author: Simon Less, http://www.policyexchange.org.uk/images/publications/the%20full%20cost%20to%20households%20of%20renewable%20energy%20p olicies%20‐%20jan%2012.pdf (Page 2 and 6). Policy Exchange calculate the additional cost of £400/hhld by 2020, by taking the DECC estimates of £100/hhld and adding three additional costs, £185 passed through from additional costs of energy that businesses pay as a result of RO/EMR, additional grid costs of £75/hhld, and additional RHI cost of £55/yr. The additional grid costs has already been discussed, and the RHI is outside of the scope of this call for evidence. The additional £185 cost pass is calculated by arguing that the average UK domestic consumer consumes 30% of the UK electricity therefore the total cost per household is £333. Of that £233 that is charged to the UK business Policy Exchange then estimate that 80% of the cost is passed back to the domestic consumer again to give you the £185 additional cost. 39 Nonsense on stilts? Investigating the discourse around policies and consumer bills: A case study on the Policy Exchange research note on the full cost of renewable energy policy, ICEPT (Imperial College Centre for Energy Policy and Technology) Discussion Paper, February 2012 40 Committee on Climate Change, Household Energy Bills – Impacts of meeting carbon Budgets, http://downloads.theccc.org.uk.s3.amazonaws.com/Household%20Energy%20Bills/CCC_Energy%20Note%20Bill_bookmarked_1.pdf, (Dec 2011). The additional calculation is our own based on CCC’s figures and applying Policy Exchange’s logic. The impact of rising gas prices on household electricity bills is £290/hhld, therefore the total cost per household equivalent is 290/0.3 = 966; so the cost to business incurred per household equivalent is 966 *0.7=676. Of this 80% is recirculated in the economy and passed back to households: 676*0.8=540; As a result the total cost of gas increases to the UK household from 2004 is £290+£540 which equals 830/Hhld

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June 2012

Page 228 Memorandum submitted by Banks Group (WIND 78)

1 Introduction

1.1 The Banks Group is a family owned business, located in the north east, with interests in surface mining, property and onshore wind development. As a company we have always been committed to the concept of sustainable development. We develop sites that are acceptable to local communities and planning authorities. We have a pipeline of development projects, and are looking to secure 300MW of consented capacity by 2015. This will require substantial investment totalling £450m to build out, with up to £65m of investment exposed in high risk up front capital required to navigate through the UK Planning system.

2 Executive Summary

The key points that the Banks Group wish to make are:

2.1 Energy Policy needs to deliver secure low carbon energy in the most socially acceptab l e form

2.2 This requires a long term investment framework to deliver sufficient certainty for inve s tors

2.3 Onshore Wind is the lowest cost low carbon form of indigenous zero carbon energy and is likely to always be so, even taking into account planned offshore wind cost reductions

2.4 The level of additional subsidy required for Offshore Wind (relative to onshore wind) and the offshore capacity planning targets outlined by DECC represent a huge additional burden on the UK Elect o r a te

2.5 Governments should be considering ways to make onshore wind more socially acceptable to local communities affected by their deployment, if this can enable displacing higher cost offshore wind capacity.

3 Cost Analysis ( Q1,2,3)

3.1 We can confirm that for the sites we have completed financial close, the long run costs to develop onshore Wind Farms are within the DECC range of £75 -£127 / MWh. This is consistent with various consultant reports provided to DECC.

3.2 DECC roadmap estimates that the additional cost of offshore wind relative to onshore wind farms is currently £70/MWh. If consumers are asked to fund 18GW offshore build (DECC target) - with no reductions to offshore build cost - this represents a cost t o the consumer of £4.5bn per annum.

3.3 We also estimate that CCGT with CCS is only competitive with onshore wind at low levels of gas prices (based on consultants reports submitted to DECC).

3.4 See graphs 1 and 2 below for more explanation of the cost aspects of different technologies.

4 Methods to make onshore wind more acceptable to communities ( Q9)

4.1 The first is to ensure that communities are more thoroughly engaged during the planning application phases (from individuals through to elected politicians), and build a level of trust with the communities that enables them to feel more ‘comfortable’ with a wind farm in their community. We have used this effectively in other forms of controversial developments, such as mining and waste management projects. It is therefore important to use the objectives and provisions of Localism to ensure that engagement is as effective as possible.

4.2 The second area is the benefits that a community can expect to obtain from a wind farm, be that financial or other. These should be specificPage 229 and targeted to suit the needs of the community in question, and not just focus on the quantum of the offer. Developing a targeted community offer based on specific community needs is very important.

4.3 The third is based around the potential for additional financial incentives for affected communities. Onshore wind is the lowest cost from of large-scale renewable generation, receiving 1ROC support compared to the 2ROC for offshore wind. UK policy should seek the deployment of the lowest cost form first, subject to it being acceptable in planning and EIA terms. The ROC banding could be widened to incentivise communities by providing higher ROC for onshore wind- eg 1.25ROC, with a percentage, say 0.25ROC, being directed to the local community. This would generate a net saving over offshore deployment of 0.75ROC reducing the public’s energy bills accordingly.

Graph 1 (para 3.4)

Graph 2 (para 3.4)

DECC Roadmap – mid point assumed in graphs above

Page 230 Memorandum submitted by Energy UK (WIND 79)

1. Energy UK has been formed by merging the Association of Electricity Producers, the Energy Retail Association and the UK Business Council for Sustainable Energy. With over 70 members we cover the broad spectrum of the energy industry and include companies of all sizes working in electricity generation, energy networks and gas and electricity supply, as well as a number of businesses that provide equipment and services to the industry. Our members generate more than 90% of UK electricity, supply up to 26 million homes and last year invested £11 billion into the economy.

What do cost benefit analyses tell us about onshore and offshore wind compared with other measures to cut carbon? 2. A full range of carbon reduction measures will need to be deployed to meet the UK’s long‐term carbon targets. The deployment of renewable energy technologies will be a key part of decarbonising the electricity sector. Wind energy, although more expensive than some other generating technologies at present, not only has no direct carbon emissions, but also reduces reliance on imported fuels, exploits the UK’s abundant wind resource and helps ensure diversity in the energy mix. The renewables sector brings wide economic benefits to the UK. For example, RenewableUK estimates that the direct and the supply chain impacts of onshore wind currently amounts to 8,600 jobs and £548 million in GVA across the UK1.

What do the latest assessments tell us about the costs of generating electricity from wind power compared to other methods of generating electricity? How do the costs of onshore wind compare to offshore wind? 3. Energy UK does not maintain its own data on the costs of generating electricity from different technologies. Estimates of the levelised costs of different technologies are available from a number of sources, including analysis undertaken by DECC2 and the Committee on Climate Change3. However, it is important to note that the economics of every project are different and that these analyses rely on a number of assumptions and some of the underlying data used may be out of date. Furthermore, levelised costs do not necessarily allow for a fair comparison of the true economics of different technologies as they do not take into account the balancing costs faced by wind generators or the actual power price that wind farms are able to capture at the times they are generating.

4. The available studies suggest that onshore wind is currently one of the lower cost low carbon generation options that can be deployed at scale. However, the economics of onshore wind developments in the UK remain challenging. Maximising deployment of onshore wind is likely to be key to meeting the UK’s 2020 renewable energy targets and longer term carbon reduction ambitions and it is therefore important that support for onshore wind is sufficient to achieve this.

1 RenewableUK, Onshore Wind: Direct & Wider Economic Impacts, May 2012 2 http://www.decc.gov.uk/en/content/cms/about/ec_social_res/analytic_projs/gen_costs/gen_costs.aspx 3 Committee on Climate Change, Renewable Energy Review, May 2011

Page 231 5. The costs of offshore wind are currently considerably higher than onshore, reflecting the fact that this technology is relatively immature and subject to additional technology, construction and servicing challenges in a marine environment. However, the industry is committed to cutting substantially the costs of offshore wind and a recent study has established a number of actions that could credibly reduce the costs of the technology by a third over the next decade, from £149‐191/MWh today to £100/MWh for projects commissioned in 20204. Further cost reductions can be expected in the following decade.

What are the costs of building new transmission links to wind farms in remote areas and how are these accounted for in cost assessments of wind power? 6. Cost assessments for wind power often include the direct costs of connection to the transmission or distribution network. The increase in renewable and other low carbon generation will also require significant reinforcements to the electricity transmission network to ensure that it can accommodate new sources of generation in different places. The Electricity Networks Strategy Group has estimated that the cost of these potential reinforcements could amount to £8.8 billion. The resulting network would be able to accommodate a further 38.5 GW of new generation, of which 23 GW could be a combination of onshore and offshore wind5.

What are the costs associated with providing back up capacity for when the wind isn’t blowing, and how are these accounted for in cost assessments of wind power? 7. At present, levels of wind penetration are sufficiently low that the system is able to cope with low wind periods. As the amount of variable wind generation on the system increases, it is likely that conventional generation plant will have to operate more flexibly. Back up generation capacity is, however, not the only tool available to ensure that the system has sufficient flexibility to cope with variable wind output – demand side response, interconnection and storage could also have a role to play in future. Analysis by the Committee on Climate Change suggests that the additional cost of managing wind variability could be low, potentially 1 p/kWh to incorporate large volumes of renewable generation in 2030 and 20506.

How much support does wind power receive compared with other forms of renewable energy? Is it possible to estimate how much consumers pay towards supporting wind power in the UK? (i.e. separating out from other renewables) 8. Under the Renewables Obligation, support is differentiated by technology. A larger number of Renewables Obligation certificat es is issued per unit of output to more expensive technologies. The exact value that a renewable generator receives for selling these certificates is determined by the market. Offshore wind currently receives twice as many certificates as onshore wind ‐ a table comparing the number of certificates given to each renewable technology can be found on the DECC website7. These bands are currently being reviewed, with the outcome expected shortly.

4 RenewableUK, Offshore Wind Cost Reduction Task Force Report, June 2012; Crown Estate, Offshore Wind Cost Reduction Pathways Study, June 2012 5 ENSG, Our Electricity Transmission Network: A Vision for 2020, February 2012 6 Committee on Climate Change, Renewable Energy Review, May 2011 7 http://www.decc.gov.uk/en/content/cms/meeting_energy/renewable_ener/renew_obs/ro_support/ro_support.aspx

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9. In 2010‐11, onshore wind received some 30% of the certificates issued under the Renewables Obligation, offshore wind 20%, biomass technologies 20%, landfill gas 20%, and hydropower some 7%8. DECC estimates that the Renewables Obligation currently adds £20 to the average household electricity bill9. It is predicted that this figure will rise over the next decade as renewables deployment increases.

What lessons can be learned from other countries? 10. A number of countries in Europe already operate their markets with significant levels of wind generation. The UK electricity industry engages in dialogue with these countries, including through the European association, EURELECTRIC, to share lessons learnt.

What methods could be used to make onshore wind more acceptable to communities that host them? 11. Companies involved in onshore wind already undertake a number of programmes to ensure that communities that might be affected by wind farms can have their say on proposals and receive appropriate benefits for hosting wind developments10.

June 2012

8 Data from Ofgem, Renewables Obligation Annual Report 2010‐11, March 2012 9 http://www.decc.gov.uk/en/content/cms/meeting_energy/renewable_ener/renew_obs/ro_funding/ro_funding.aspx 10 See, for example, RenewableUK’s Community Benefit Protocol.

Page 233

Memorandum submitted by Ecotricity (WIND 80)

1) Introd u cti o n

1.1 Ecotricity is an independent renewable energy supplier and generator, with over 60,000 customers across the UK. Ecotricity was founded in 1995 and we built our first windmill in 1996. We were the first company in the UK to offer green electricity. We own and operate 53 windmills and the country’s first large scale sun park. One in nineteen of all the onshore windmills in England are Ecotricity’s. W e already have 19 windmills with planning approval, waiting to be built - and a further 78 windmills for which we are seeking planning approval. In our wind energy development we undertake every step ourselves, from site selection, through planning and construction to the long term operation and maintenance of our own win d mil l s.

1.2 We were the first company in the UK to use a permanent magnetic generator enabling more efficient generation from variable wind speeds.

1.3 In addition to this we were the first company to offer our pioneering Merchant Wind Power scheme. This inv olve s building wind mills on industrial and commercial sites, powering household names an d giving them real environmental and economic advantages.

2) Cost of wind compared to other low carbon technologies

2.1 Our expertise is in onshore wind so we have concentrated on this. We believe that other parties will be better qualified to give evidence about the costs of other technologies.

2.2 Based on data for a prospective project , our modelling shows that for a 20.7 MW wind farm, made up of 9 turbines the total CAPEX would be £19.5M. This makes the CAPEX per MW £1M.

2.3 With an estimated average capacity factor of 24.35% annual generation would be 44,100 MWh, and the project lifetime generation would be 1.1025 TWh. Lifetime maintenance costs would be £0.5M per MW in s t alled.

2.4 Please note that 90% of the time, actual capacity factor will exceed our estimates.

3) Transmission Links

3.1 We include the cost of transmission links in our CAPEX.

4) Back-up Capacity

4.1 The costs of back up capacity are difficult to quantify. National Grid considers a market capacity margin of 15% to be optimum and the base l oad and peak plant is considered necessary backup for renewable generation. There is currently no need to build additional generation capacity but grid upgrades are needed.

Page 234 5) Subsidies fo r Wind

5.1 Most support for large scale wind comes from Renewable Obligation Certifica t e s (ROCs), which renewable energy generators receive and pass on to suppliers when they sell their power. Suppliers are required to purchase an increasing number of ROCs y ear on year.

5.2 Installations of less than 5MW are able to apply for Feed-in-Tariffs (FiT). This is also currently subject to a review by DECC and it is therefore difficult to give an accurate figure until this is known.

5.3 According to DECC’s Annual Energy Statement 20 11, gr een polici e s such as the Renewables Obligation add £20 to the average domestic fuel bill each year. Our figures show that of this, £10 goes to wind power, £5 of which supports on shore wind.

6) Examples from other Countries

6.1 Germany’s FITs system, which has been running since 2010 provides an example of stability, which the UK Government should mirror. Unlike the experience of the renewable energy industry in the UK, which has been marked by unpredictability in Government support; the German FITs scheme has been stable and enabled a flourishing renewable energy industry. Around 20% of Germany’s electricity is produced by renewable sources, 3% of which is solar; compared to just 9.5% for all renewables for the UK. This has also resulted in around 130,000 jobs created in the last decade. Reductions in German FITs tariff levels have been much more predictable and followed longer periods of stability in the scheme.

6.2 We would like to highlight the consistency of the German system, which has had the same subsidy scheme for over a decade, compared to the lack of predictability in UK, in which subsidy schemes have continuously been superseded from NFFO to ROCs, to FITs and CfD FITs as proposed under the Electricity Market Reform.

7) Making wind power more acceptable to host countries

7.1 We contest the notion that wind power is unpopular. Over the last 10 years various surveys have found consistent enthusiasm for wind power with the latest survey in 2012 by Ipsos Mori and YouGov finding between 60% and 70% of the public supporting an increase in wind power. Furthermore, despite protestations from a minority of the population that object to wind power, there is no evidence to support the hypothesis that wind farms reduce house prices in normal circumstances1.

7.2 It is not clear why windmills are perceived as less acceptable to local communities than other forms of generation such as coal or nuclear.

1(Centre for Sustainable Energy, 2011)

Page 235 Memorandum submitted by Tata Steel (WIND 81)

1. Tata Steel Context

1.1. Tata Steel is one of the world’s top ten steel producers. The combined group has an aggregate crude steel capacity of more than 28 million tonnes and approximately 80,000 employees across four continents .

1.2. The European operations of Tata Steel (formerly known as Corus) comprise Europe's second largest steel producer. With main steelmaking operations in the UK and the Netherlands, they supply steel and related services to the construction, automotive, packaging, material handling and other demanding markets worldwide.

1.3. Tata Steel’s UK operations directly employ 20,000 people and indirectly support more than 100,000 jobs nationally. In many cases it is the largest local private sector employer and the development of its activities have been, and continue to be, integral to surrounding local communities.

1.4. Steel is vital for a low carbon and energy secure economy, whether it’s foundations for wind turbine towers, PV installations, undersea pipes, generation and transmission infrastructure, or lighter weight vehicles. Tata Steel is a global leader in these applications and we want to see the necessary capabilities, skills and jobs further developed in the UK. There are a number of factors that will support this aim, but underlying all of these is the need for the right operating and investment environment for manufacturers.

2. The Importance of Local Supply Chains

2.1. Any supply chain is vulnerable to disturbance or disruption by both external factors, s u c h a s war, strikes and terrorist attacks, and also the impact of changes in the business model, such as the adoption of lean practices, the move to outsourcing and a general tendency to reduce the size of the supplier base. The greater the vulnerab ility of the supply chain is to disruption the greater the risk to the project overall and therefore greater costs will be incurred.

2.2. At least one offshore windfarm experienced problems with foundations purchased in Asia that required rectification on arrival in th e UK.

2.3. Local supply chains, particularly those for the large components such as towers, offshore foundations and large castings, would mitigate much of this risk because of reduced lead times, greater supply chain efficiency, reduced likelihood of items being damaged in transit and ea sier cooperation along the supply chain.

2.4. We believe a well invested local supply chain should lead to the lowest cost solution for manufacturing offshore wind components in th e UK

2.5. Benefits to the local economy from local supply chains

2.6. An often cited complaint about wind farms, both on-shore and off-shore, is that because none of the turbine manufacturers are UK companies there is little local content and therefore few benefits to the local economy.

Page 236

2.7. Wind farms will have much greater acceptability if they are benefitting the local community and the targets of obtaining greater than 50% UK content in offshore projects is to be applauded. The benefit must be throughout the supply chain, including material supply, and not just tier1/tier 2 contract values.

3. Tata Steel Investment to improve efficienc y of wind tower and offshore foundation supply chains

3.1. Tata Steel has recognised that continuing growth in the renewable energy market will put heavy demands on wind tower manufacturers and we have therefore invested in a dedicated wind tower hub at our Scunthorpe manufacturing facility. This facility, an integrated processing and distribution service, cuts plate to shape and prepares it for welding in readiness for tower fabrication by our custome r s.

3.2. At Hartlepool a similar facility is being developed for the supply of tubular components to the manufacturers of jacket foundations for offshore windf arms.

3.3. In both cases this ensures that our customers within the wind supply chain are able to minimise stock levels and increase their throughput rates and improve traceability in an integrated supply chain from plate right through to finished componen t .

4. Requirements from Gove r n me nt

4.1. In order for the UK supply chain to respond to the need for investment there needs to be a clear timetable of projects, both on-shore and off-shore. This requires u na mbiguou s s upport and commitment from the Government and clarity on what the future strike price will be for contract for difference contracts so that developers can make their investment decisions as soon as possible. Thereby allowing the supply chain to make its own necessary investment decisions in a timely manner.

4.2. Develo pment o f supply chain clusters should be strongly encouraged to facilitate the development of robust and resilient supply chains. The government needs to provide continued support to the recently formed LEPs and CORES to encourage this to happen.

4.3. Now is the time to galvanise the supply chain to action so that it works in a coordinated and efficient manner at all levels from material supply to turbine manufacturer. The Government should seek to secure the investment of as many turbine manufacturers a s p ossible to meet Round 3 timetables. Support should be made available to help companies manufacturing key tier 1 or 2 supply chain components.

4.4. The government should seek to de-risk newly installed plant/facilities to allow entry to the market for supply chain participants.

Page 237 Memorandum submitted by the John Muir Trust (WIND 82)

The John Muir Trust is a wild land conservation charity concerned about the significant impacts of energy projects on wild land and natural landscape areas. The Trust works extensively alongside energy experts on strategic energy and transmission issues because of the impacts energy developments are having on wild land – see Trust response to ECC Committee on the impact of potential Scottish independence on energy and climate change.

The Trust welcomes this Inquiry as it is critical that the total costs of energy systems, including transmission, are considered when strategic policy decisions are made. The current subsidy mechanisms encourage developments which will certainly be profitable, if subsidies are continued, for the developer and landowner. However, total systems cost analysis would show many are not a good deal for electricity consumers and the people of the U.K.. This is the case in narrow economic terms even before many of the costs to environmental assets are considered.

Total systems cost analysis

The Trust backs the Institute of Engineering and Shipbuilding In Scotland in their recent letter to Professor David Mackay and the Department of Energy and Climate Change calling for Total systems cost analysis, and welcomes Professor Mackay’s agreement that such a system is needed. The Trust refers the Committee to Renewable Energy Foundation’s submission and supports John Constable of REF’s request to speak to the Committee.

Much of the detailed economic evidence in the public domain suggests that the costs of integrating a large percentage of wind generation into the electricity grid is significantly underestimated by DECC and Ofgem - often because the costs assessments do not include all costs to the consumer and UK citizen, merely the cost to the generator. Under current mechanisms, there is a major difference between these.

Inclusion of transmission costs in assessment of desirability of any specific wind development

Total systems cost analysis would address the fact that the costs of transmission from remote areas of UK to the major population centres are not currently fully met by the developers so developments where land is cheap are attractive. If these developments were fully commercial, then that might not be so significant but is this the best use of public funds – i.e. Renewable Obligations subsidy?

The Royal Society of Edinburgh’s Committee of Inquiry had this to say:

“We have grave doubts about the overall economic rationale for large-scale wind turbine installations in locations remote from the consumer…. Remotely-located wind turbine installations will require costly new or substantially upgraded grid connections, resulting in greater transmission loss of electricity from the source to the consumer compared with more centrally-located installations..…. The existence of a source of energy does not guarantee that it can be delivered economically to the market.”

Cost of proposed transmission to islands (Western Isles and )

The Royal Society of Edinburgh’s concerns were looked at in more detail in the following example.

Page 238 The John Muir Trust brought forward evidence on the cost of transmission at a Public Local Inquiry into a major wind development, Muaitheabhal, which is in south Lewis, Western Isles. Professor Andrew Bain, Emeritus Professor of Economics, calculated whether the increased wind efficiency in Lewis, compared to that on the Scottish mainland, offset the increased costs to the UK of that development’s “share” of the required new sub-sea inter-connector. Professor Bain found that:

“Taking figures from the TNEI consultants’ report sponsored by Highlands and Islands Enterprise and the Western Isles Council, the cost of providing Muaitheabhal’s s hare of a transmission line to Beauly will add at least 40% to the capital cost of a wind farm – and that doesn’t allow anything for transmission or other losses along the way.

Of course the wind conditions in Lewis are good, so a wind farm here will be more productive than one in, for example, central Scotland – though not necessarily much better than one on the mainland in the Highlands. But the difference isn’t nearly enough to compensate for the additional costs. If a wind farm in Lewis can operate with a 35% load f actor, that is only 15-20% better than elsewhere in mainland Scotland, and about a third of that margin disappears as heat loss during transmission between Stornoway and Beauly. So while the wind conditions on Lewis are good, they are not good enough to compensate for the additional transmission costs – 1 0-15% more productive, but with costs that are going to be at least 40% higher.”

These figures led Professor Bain to conclude:

“The cost of transmitting electricity from remote wind farms to their markets is so high as to make wind farms in the Western Isles, if they are dependent on a new interconnector to the UK mainland, uneconomic.”

The Scottish grid expansion - I s Ofgem’s preferred scheme justified?

Ofgem recently announced their preferred option of a £7 billion spend on Scotland’s transmission grid – when they said, “Fast-tracking’ of SP Transmission Ltd (SPTL) and Transmission Ltd (SHETL) cuts red tape and enables a focus on delivering efficient services for consumers”. This, unfortunately, puts the cart before the horse by assuming the results of the consultation that they were just starting!

The Trust does not believe over-engineering the grid will achieve an efficient and economic electricity system and it will excessively burden the country. The government relies too much on the industry for advice . The Trust welcomes this Inquiry into whether Ofgem and DECC are looking after consumer and taxpayers’ interests in energy policy.

June 2012

Page 239

Memorandum submitted by Engineering The Future (WIND 83)

This response has been developed by:

• The Institution of Engineering and Technology

The response is supported by

• The Institution of Civil Engineers • The Institution of Mechanical Engineers

Engineering the Future is a broad alliance of engineering institutions and bodies which represent the UK’s 450,000 professional engineers.

We provide independent expert advice and promote understanding of the contribution that engineering makes to the economy, society and to the development and delivery of national policy.

What do cost benefit analyses tell us about onshore and offshore wind compared with other measures to cut carbon?

1. From an engineering perspective there are a wide range of measures to save carbon by using less energy and using energy more efficiently that are lower cost/tonne of carbon saved than wind energy. However these require widespread action by large groups of consumers and have struggled to find widespread adoption. For electricity production, at the moment onshore wind is broadly comparable in cost to nuclear energy and to fossil energy with carbon capture and storage, as far as the costs of these technologies can be predicted. However unlike onshore wind, the outturn commercial costs of nuclear and especially CCS are subject to large uncertainties, including technical. Offshore wind is rather more costly than onshore as it is still a fairly new technology with significant engineering and logistical complexities. The industry is targeting significant cost reductionsi as it reaches technical maturity but it will remain relatively high cost. However, unlike onshore wind, it can be deployed at large scale without significant landscape and visual impact.

What do the latest assessments tell us about the costs of generating electricity from wind power compared to other methods of generating electricity?

2. Costs of electricity generation comprise the costs of servicing debt and providing a return, fuel costs, costs of providing and maintaining grid connections, the costs of operation and maintenance, an allowance for future decommissioning costs, and any costs associated with carbon emissions, and any costs to deal with generation intermittency. All these carry uncertainty and change over time, for example gas is traded globally and prices have historically been volatile.

3. As of today, onshore wind’s cost of 8-9 p/kWh compares to a cost for a new gas fired plant at today’s fuel prices of around 8 p/kWh (assuming high load factor and current carbon prices). Technologies such as wind and nuclear that have low fuel costs arguably provide greater cost certainty in the future, as the gas-fired plant will be exposed to future global swings in gas prices. In addition off-shore wind can reasonably be expected to follow a learning curve resulting in lower costs as deployment volumes increase. A summary is provided in the Table 1 appended.

4. A further complexity is that the above costs make implicit assumptions about load factors of plant, and in the case of nuclear and wind assume the plant runs as much as possible. Should the power system evolve to include large amounts of wind (over 20% penetration), for example as predicted by the Climate Change Committee, there will be surplus wind capacity during the summer that will not be used, which would increase the cost of generation/kWh, although several studies have shown this to be a low cost in likely energy technology mixes.

How do the costs of onshore wind compare to offshore wind?

5. Onshore wind in the UK from recent projects costs around 8-9 p/kWh to generate, measured at the station gate and excluding costs of transmission. Offshore wind from recent projects costs around 14-15 p/kWh to generate, measured at the onshore substation. The cost of variability is not included in the above and is currently very small, but will rise as the percentage of wind on the system increases beyond around 20%, and/or flexibility in the plant mix decreases, for example with more nuclear or CCS.

What are the costs of building new transmission links to wind farms in remote areas and how are these accounted for in cost assessments of wind power?

6. Costs of transmission are explored in a recent IET-endorsed report to Governmentii. Wind projects have to pay for the direct costs of connection to the grid and these costs are included in cost assessments, but the indirect costs of wider grid reinforcements are socialised and it is

difficult to attribute them to specific projects. Other developments such as new nuclear power stations, and growth in demand (for example for electric vehicle charging), also incur the need for wider grid reinforcement.

What are the costs associated with providing back up capacity for when the wind isn’t blowing, and how are these accounted for in cost assessments of wind power?

7. All power plant requires back-up in the event of its unavailability e.g. for maintenance, and the system has always been provided with reserve for this purpose. Thus when the amount of wind on the system is modest (less than 20%) no significant additional reserve provision is needed. However above this more reserve, storage, and/or the ability to manage demand is needed, and this is thought to increase rapidly above 40% wind on the system. Some of this is low cost (e.g. time shifting some demand), whilst others require significant investment. At present, because the cost is currently low, it is not factored into wind power costings, but this will become much more significant as we approach 20% wind and 40% wind. Studies have been undertaken to quantify the extent of this reserve but understanding in this area is still developing, as are some of the technologies required.

How much support does wind power receive compared with other forms of renewable energy?

8. We leave an analysis of the support regimes to others, but would comment that the Committee needs to distinguish between “flow” renewables that generate when the resource is available, such as wind, and “dispatchable” renewables that can be controlled at will, such as biomass. Dispatchable renewables have greater value to the electricity system, which although hard to quantify at present (see above) needs to be offset against their support when making comparisons. 'We note here that electricity storage appears to hold considerable potential for off-setting the variability of wind generation; however while wind receives government incentives, electricity storage does not.

Is it possible to estimate how much consumers pay towards supporting wind power in the UK? (i.e. separating out from other renewables)

9. Current subsidies are an aggregation of legacy support regimes, which were set according to the politics and costs of the times. Developing a total estimate would be possible, but is probably not useful. More useful would be to calculate effective subsidies under the ROC or proposed feed-in tariff regime assuming projects were built at today’s costs. We would be pleased to provide some outline calculations on request. This subsidy can be seen as a proxy for carbon saved – an alternative view would be that fossil fuel energy enjoys a large subsidy from the global environment because its emissions are under-priced. Other forms of subsidy, for

example for research and development, are not included in the above, but these are arguably targeted more towards building industrial capacity and know-how, which would provide a wider set of economic benefits to the UK.

What lessons can be learned from other countries?

10. With regard to wind power, it is worth noting that the global wind power capacity in 2011 was 237,669 MW, the UK had 6,633 MW of this. China has developed 62,000 MW in recent years. All developed countries have a wind portfolio as part of an appropriate mix of low-carbon generation in respect of fossil fuel depletion and climate change. There is much to learn from other countries’ experience, we can discuss more on request.

What methods could be used to make onshore wind more acceptable to communities that host them?

11. Not answered.

June 2012

Appendix (re to paragraph 3)

Table 1: Costs for new low carbon fossil power, renewable and nuclear plant in £/MWh

Data Source and Date PB Power 2010iii Mott MacDonald 2010iv

Offshore Wind 210–150 190–135

Onshore Wind 110–80 95–85

OCGT (Standby) 180–100

PCoal + CCS + FGD 160–100 143–115

IGCC + CCS Coal 147–110

Gas CCGT + CCS 140–60 115–103

Biomass Systems 120–60

Nuclear (Generation III) 90–60 98–67

Notes:

1 CCS=carbon capture and storage; FGD=flue gas desulphurisation; IGCC=integrated gasification combined cycle; OCGT=open cycle gas turbine; CCGT=combined cycle gas turbine; PCoal=pulverised coal. 2 The reports assume a discount factor of 10%, levelised costs for electricity as delivered at the HV grid connection; and contributions to the nuclear fund to cover plant decommissioning and contribution to the disposal facility for nuclear waste. 3 This table is derived from a policy statement “UK Electricity Generation: Cost Effective Management” published by the Institution of Mechanical Engineers in April 2011.

References

i Offshore Wind Cost Reduction Task Force report, June 2012 http://www.renewableuk.com/pdf/publications/Offshore_Task_Force_Report.pdf ii Electricity Transmission Costing Study, Parsons Brinckerhoff and associates for DECC, Jan 2012. http://www.theiet.org/factfiles/transmission.cfm iii Powering the Nation Update 2010, Parsons Brinckerhoff http://www.pbworld.com/pdfs/regional/uk_europe/pb_ptn_update2010.pdf iv UK Electricity Generation Costs Update, Mott MacDonald, June 2010 http://www.decc.gov.uk/assets/decc/statistics/projections/71-uk-electricity-generation-costs-update-.pdf

June 2012

Memorandum submitted by Mainstream Renewable Power (WIND 84)

1.1 Mainstream Renewable Power is a global developer of wind and solar plant. We know, from real experience gained in this sector over the last 15 years, and from evidence gathered from global markets, that the lasting benefits to electricity consumers or taxpayers delivered by wind and solar energy outweigh the costs. At Mainstream we refer to these benefits as the “Value of Wind”.

1.2 This short paper illustrates one benefit of the Value of Wind. Operators of electricity systems are familiar with the “Merit Order effect”, the standard operating method of all utilities to satisfy consumer demand by utilising plant with the lowest marginal cost of generation. Wind and solar plant – with zero fuel cost – are zero marginal cost plant and sit at the top of the merit order. The most efficient thermal plant is next to be brought on line, and as customer demand increases towards peak the least efficient, and most expensive fossil plant gets used. The “merit order effect” is the term used to describe the displacement of more expensive marginal cost thermal plant by wind or solar which has zero marginal cost.1

1.3 In March 2012 the Illinois Power Agency published its annual report on the costs and benefits of renewable resource procurement.2 In Illinois, common to many other markets, consumers pay through their bills for a support mechanism to incentivise renewable energy. Critics of renewable energy would argue that this was a “cost” to consumers showing that renewables were uneconomic. They would expect that this “cost” would put up the cost of electricity and people’s bills. However, the IPA’s conclusion for 2011 is that the merit order effect lowered the wholesale price by $1.30/MWh for a total saving of over $176m for Illinois electricity consumers. Or, as the Report put it: ...when the sun is shining or the wind is blowing, the combined output of renewable generators benefits all customers by bringing down the market price of electric energy for all resources operating at that time.

1.4 In Europe, where there is a longer history of wind generation, there is an accepted body of evidence supporting the merit order effect. In February 2011, the Irish grid operator Eirgrid and the Sustainable Energy Authority of Ireland published a joint study demonstrating the price lowering effects of wind.3 It showed that the generation of electricity by wind plant on the Irish system in 2011 lowered total wholesale costs by €74m. Not only was this more than enough to offset the cost of the support scheme for wind (€50m) but it was also sufficient to offset the additional constraint costs associated with increased wind on the system, delivering an overall net benefit to the Irish consumer. In a direct rebuttal of critics of wind energy, the study concluded that wind was not contributing to higher wholesale electricity prices in Ireland.

1.5 There have been numerous studies across Europe on the “Value of Wind” and the conclusion is always the same ‐ that wind lowers electricity prices. The 2010 EWEA publication “Wind Energy and Electricity Prices” summarises the literature and shows that estimates of the magnitude of the effect varies from €3/MWh to €23/MWh depending on the study and country.4 The effect can be seen most clearly in countries with the greatest penetration of wind energy such as Germany, Spain and Denmark. This month a

1 Krohn, S. Morthorst, P. Awerbuch S. (2009): The Economics of Wind Energy. European Wind Energy Association 2 Annual Report on the Costs and Benefits of Renewable Resource Procurement in Illinois under the Illinois Power Agency and Illinois Public Utilities Acts. (2012) Illinois Power Authority. 3 Clifford, E. (EirGrid), Clancy, M. (SEAI). (2011): Impact of Wind Generation on Wholesale Electricity Costs in 2011. Sustainable Energy Authority of Ireland, Eirgrid. See also Cleantech Ireland: An assessment of the sector and the impact on the national economy. (2012) Ernst & Young and Oxford Economics. 4 Wind Energy and Electricity Prices: Exploring the Merit Order Effect. (2010) Poyry for the European Wind Energy Association

Page 245

report showed that the introduction of wind and solar energy in Germany has so reduced the price of electricity that it may be necessary to redesign the country’s electricity market.5

1.6 This phenomenon helps explain why fixed price tariffs are necessary to make sure that wind and solar plant are built. Wind always brings down the average price the customer pays. If wind plant owners were relying on an electricity market price, they would always be under rewarded because they cause the price to fall.

1.7 What about the UK? The British electricity market is opaque. It is very difficult to observe the merit order effect when the utilities, which dominate the market, mainly supply to themselves, and savings due to increased renewables penetration are internalised. However, the current market reforms proposed by the UK Government and by Ofgem should help to increase transparency and we will be able to more clearly observe the positive price impact of renewables.

1.8 The risk free nature of wind generation has other positive economic impacts, which there is not space in this Report to elaborate. However, we would draw the Committee’s attention to the recent report by the Centre for Economic and Business Research (Cebr) on the economic impact of offshore wind to the UK economy.6

1.9 Cebr looked at the economic impact of the planned investment in UK offshore wind out to 2030. They used DECC and National Grid models for deployment. Their Report clearly illustrates the value of the investment in, and support for, offshore wind to the UK economy. The summary findings of the value of offshore wind are that this investment will lead:

• By 2015 to an increase in UK GDP of 0.2%, and the creation of over 45,000 full time jobs, delivering employment and economic growth through the remainder of this Parliament. • By 2020, to a doubling of GDP contribut ion to 0.4% , and the number of people employed to over 97,000. • By 2030 to a tripling in GDP contribution to 0.6%, and the creation of 173,000 jobs. These benefits will accrue from pursuing current build out rates of offshore wind. A more aggressive, but achievable, approach could see an annual 1% uplift to GDP, and the creation of up to 215,000 jobs. In addition, the sector could deliver an increase in net exports of £22.5bn, sufficient to almost entirely plug the UK’s current balance of trade deficit.

1.10 The Cebr show that the net economic benefit to UK plc from investment in offshore wind, both in terms of contribution to GDP, and to the country’s balance of trade is considerable.

1.11 We have embarked on a once off transition from fossil fuels towards a low carbon economy. All forms of renewable energy, from solar energy to tidal energy, will contribute to delivering this transition in the UK. Wind energy provides this country with a clear global comparative advantage, and will assist in providing affordable electricity to consumers and enhancing the country’s energy security.

June 2012

5 http://www.bloomberg.com/news/2012‐06‐26/renewables‐make‐german‐power‐market‐design‐defunct‐utility‐says.html 6 O Hogan and others “The Macroeconomic benefits of offshore wind” Cebr 2012: http://www.cebr.com/?p=911

Page 246

Memorandum submitted by Bruce McIntosh (WIND 85)

Why is Wind Power so different? Of all the major power technologies open to the U.K. only Wind i s ‘out of control’. All other ways of producing electricity can be predicted and controlled to match varying demand, while in the case of Wind you have to try to accommodate what is delivered, second by second, by running other parts of your capacity less efficiently than would otherwise be the case. Wind distorts the operation of a balanced Grid. When Wind represented only a very small percentage of the average power available this was not too disruptive, but as it moves to an average of 2.5% as now, delivering at any one time between 0% and 10% of our requirement, inefficiencies start to develop. This will get progressively worse, and many believe Wind will need to be capped at about 5%, (delivering between 0% and 20%) or costs will run out of control (see Ref 1.) Wind generated electricity is a very long way from being a stand alone technology, as separating out cost elements ‘A’ to ‘F’ below illustrates. It is also by far the most widely dispersed of all technologies which also brings many n ew issues. It is t he iceberg effect – y ou see cost ‘A’, but you’re in for costs ‘A’ to ‘F’!

Elements Who Pays? A – Direct Costs For any development 1.Turbines Developer/Consumer. 2.Installations/access roads “ “

B – Indirect Costs For large developments New Pylon Runs/Connections Grid Co./Consumer

C – Essential Operating Cover 1.Continuous Balance Power (from OCGas plants) Power Co./Consumer 2 Complete Back Up Cover (from any power source) “

D – Environmental Costs 1. L ittle or no savings in CO2 The Planet. 2. Visual/Sound Pollution from Turbines The Public 3. Visual Pollution from new P ylon Runs “ “

E – Land/House Depreciation Loss of adjacent land/house values Property owners.

F – Energy Storage Costs To minimise the need for ‘C’, Construction of new high reservoirs N ot allocated , and achieve carbon savings. for extensive Pumped Storage. (Ref 2. pp190-194)

1. Quoted costs for wind power normally only covers ’A’ - 400£m/annum vi a R O Cs. 2. This figure will probably double as ‘B’ and ‘C’ are taken into account. 3. The b iggest cost issue is howeve r ‘ F ’. This will be e ssential to make Wind, a reliable, clean source of electricity.

Page 247 So what’s the problem? – It’s our British weather again! We are often being told that the U.K. has ‘ideal wind resources’, but in terms of generating useful Grid electricity this is very far from true. We are generally exposed to alternating periods of near anticyclonic calm, and turbulent south west Atlantic fronts passing quickly through the country. Ideally steady predictable ‘trade wind’ conditions would be better. We do not have these. We are also too small a country for low wind in one region often to be balanced by high wind in another. Surges and slumps of power coming from many turbines acting more or less together is the norm. ( see Ref 2. pp186-189) Actual wind speed data converted to power outputs day by day for a month are shown in the hand drawn graph below. This is what our weather delivered one November. Sketched in is probably what most advocates for wind power would believe happens. Reality compared to wishful thinking!

A short C.V. to conclude.

As an independent physicist and keen environmentalist I have no particular axe to grind in relation to seeking the least polluting and cheapest way forward f or U.K. power. As a young scientist I worked briefly at nuclear power station, and have also designed and built wind turbines; but have spent most of my career as an ‘ideas man’ working in the industrial fibres business globally - for the last 15 years a s a consultant. My father was for many years Scotland’s leading meteorologist – Head of Department at Edinburgh University – and I have used data from some of his former colleagues to help me investigate the validity of some o f the claims being made about Wind Power. I would be prepared to present information and answer questions at your meeting.

July 2012

Ref 1.”Why U.K. wind power should not exceed 10GW.” by Hugh Sharman Proceedings of ICE Civil Engineering 158 Nov.2005 Ref 2. “Sustainable Energy without the Hot Air” b y Professor David MacKay. UIT Cambridge Ltd. 2009.

Page 248 Memorandum submitted by Vestas Wind Systems (WIND 86)

What do cost benefit analyses tell us about onshore and offshore wind compared with other measures to cut carbon? Cost benefit analysis can explore the relative benefits derived from wind comp ared to other forms of power. A cost benefit analysis looking at the whole system cost for wind would need to include the following c osts capital costs, operating costs and any back up costs required over existing levels. An analysis would also need to include the following benefits; output of electricity, contribution towards energy independence and security, social cost of carbon avoided, community benefits generated, value of reduced long term power price volatility, value of avoided health impacts. Some costs such as the cost of developing new transmission lines would need to take account of the comparative benefit that existing capacity has realised from the historic design o f the transmission system. Analyses looking at total economy impacts would also need to include the benefits of job creation and investment and the impact this has on local communities.

What do the latest assessments tell us about the costs of generating electricity from wind power compared to other methods of generating electricity? There are various assessments of the financial cost of generating electricity from wind compared to other methods. The costs of onshore wind are relatively clear and transparent. There are databases that track published project costs of various onshore wind projects, for example Bloomberg gathers such evidence. There is also substantial potential for the cost of offshore wind to fall, and the industry is working together to ensure that cost reductions are realised. The Cost Reduction Task Force and Crown Estate’s Cost Reduction Pathways reports provide useful analysis of how costs can fall going forward.

It is e xtremely difficult to accurately assess the financial cost of new nuclear stations due to the huge uncertainty over their capital costs, construction time and operating, insurance and decommissioning costs. It is also very difficult to accurately predict future costs of gas generation. Whilst the cost of new gas stations is relatively clear the operating costs are much more difficult to predict. There is significant uncertainty over imported gas prices and future carbon prices b oth of which impact the levelised cost of gas generation.

How do the costs of onshore wind compare to offshore wind? The cost of onshore wind is considerably lower than the current cost of offshore wind. There is, however, good reason to believe that the cost difference will fall in future.

Arup estimated the cost of onshore wind to be between £72-105/MWh; Vestas broadly agrees with this. The primary factors in the cost are the wind speed, the blade span, hub height and the MW rating of the turbine used. In general the greater the wind speed, the higher the hub height, the larger the turbine and the longer the blades, the lower the cost would tend to be. Other cost factors include the cost of community benefits, the ease of transporting turbines to the site and land rents.

In the UK it is often not possible to install the largest turbines available on the market due to planning restrictions. Vestas’ V112 is a 3MW machine with 112 metre blade span with a typical tip height of 140 metres. There are rare examples of planning consents that allow for 145 metre tip heights which would allow such a turbine to be used. In general the UK market is limited to the V90-3.0MW machines with a tip height of 125 metres. The smaller blade length and lower hub height reduce the output from a site, this increases the cost compared to a larger, taller turbine.

Arup estimated the cost of offshore wind projects contracting today to be between £131-£167/MWh. Vestas considers that costs would typically be towards the lower end of that range. Arup assumed the lower range of operating costs to be £117,000/MW/pa. We consider that operating costs are likely to be below this level for most projects. The cost of offshore is again determined by the wind speed of the site. It is also determined by the distance from shore. In general offshore wind has higher balance of plant costs (non- turbine costs) than onshore wind. Costs such as construction, foundation and cabling costs are greater offshore. It also has substantially higher operation costs.

There are a number of significantly larger machines under development, including the V164 which Vestas is developing. The V164 is a 7MW turbine with a blade span of 164 metres. Larger turbines mean fewer are needed for a given capacity wind farm. Fewer turbines require fewer foundations a nd less cabling between

Page 249 the turbines, which also help to reduce costs. The V164 will have an output voltage of 66kV, whereas most turbines have a 33kV output. This enables more turbines to be connected on each string. This can reduce the length of the inter-array cabling by around a third.

When looking to reduce costs it is important, particularly offshore, to look at operational costs as well as capital costs. The cost of operating and maintaining an offshore wind turbine is a much higher proportion of levelised c ost, compared to onshore. When developing the 7MW turbine Vestas has focussed as much on minimising operational cost as capital costs.

Based on the large scale deployment of turbines such as the V164, V estas considers that it would be possible for the cost of offshore wind to fall to below £100/MWh for projects contracting in 2020. This is consistent with the findings of the Offshore Cost Reduction Taskforce.

How much support does wind power receive compared with other forms of renewable energy? The level of support under the Renewables Obligation is cu rrently under review. The proposed level of support for onshore wind of 0.9 Renewable Obligation Certificates (ROC)/MWh would see onshore remain in the middle of the range of support levels. Offshore wind currently receives 2ROC/MWh but projects commissioning after March 2015 will receive 1.9ROCs and those commissioning after March 2016 will receive 1.8ROC/MWh. Hydro is proposed to be supported by 0.5ROC/MWh and the support for the various types of biomass generation is due to be altered. Support for landfill gas is being reduced to zero. Support for co-firing is due to remain at 0.5ROC/MWh for most stations and increase from 0.5 to 1ROC/MWh for enhanced conversion. It is proposed marine technologies w ill receive 5ROC/MWh up to project caps. All renewable power receives a Exemption certificate (LEC) which is potentially worth £5.09/MWh.

Is it possible to estimate how much consumers pay towards supporting wind power in the UK? (i.e. separating out from other renewables) In 2010/11 7,678,727 ROC were issued for onshore generation and 5,016,832 ROCs were issued for offshore wind generation. Each ROC cost the consumer £51.34. This means the total cost to the consumer of RO support is around £ 394m for onshore and £258m for offshore wind. Domestic consumers do not pay the Climate Change Levy so do not bear the cost of the LEC support. What lessons can be learned from other countries? Ireland is a very good example of how increased use of wind power can reduce consumers’ bills. Wind meets around 1 7% of Ireland’s annual electricity demand. It has a mandatory pool market. Every MWh of power must be traded through the market. The half hourly price is derived from the bids that every single generator submits into the market every half hour. Put simply, a half hourly ‘merit order’ is created, whereby every MWh is stacked up from cheapest to most expensive. The half hourly price is the bid from the most expensive MWh needed to meet demand. In some hours, when wind output is high, wind can set the wholesale price. This called the ‘merit order effect’. A Redpoint study in 2011 found that the merit order effect was greater than the cost of the REFIT, the feed in tariff for wind in Ireland. Wind is therefore already saving consumers in Ireland over €5 per year and that the savings could increase to €38 b y 2020 .

What methods could be used to make onshore wind more acceptable to communities that host them? The majority of people in host communities already find wind farms acceptable. There are, however, often highly vocal groups of local residents that opposed wind farm proposals. Early engagement can help communities b ecome more accepting of projects. Similarly if communities are able to have genuine input to the project it can g reatly increase acceptance. First-hand experience from those already living near operating wind farms can greatly help allay the fear of the unknown that can often drive people’s concern. Greater demonstration of direct and relevant benefit to the host community could also help public acceptance.

In other countries such as Denmark and Germany members of the local community are often investors in wind projects. Having a direct financial link to a wind farm can make local people more accepting of new developments.

July 2012

Page 250 Memorandum submitted by Richard Moore ( WIND 87)

I am small businessman from March, . I am trying to turn a brown-field site into a carbon neutral enterprise, for small business’s by erecting a 225Kw turbine.

Although on a smaller scale, I am like all windfarm developers , facing huge and expensive battles to turn green with tried and t ested simple clean home grown electricity generation. At the moment carbon neutral energy developers are being left to fight the battle alone, this is expensive, confusing to the public, time consuming, and time is running out. Around the corner, we have an electric car explosion if fossil fuel prices increase much further, which they will.

I don’t personally see there is much choice. I do see millions being spent on carbon capture, with no guarantee it will work. How can you possible say it works until it does? Sticking a pipe in the ground and burying a huge amount of CO2 is hugely risky. What happens if it doesn’t work and we are twenty years further on? There is always the expectation with time new inventions will solve all our problems, but this is folly.

We can wait and spend more borrowed money on something that might or might not work, or we can adapt with what we have now t hat does.

Whether we like it or not onshore windfarms, PV etc need to play a bigger role.

Storage can be resolved partly if we improve and o ur interconnected grid infrastructure, with different regions and better still with countries. The sun emits the same energy consistently everyday, and we have principally two choices of clean methods to convert this energy into electricity, and I don’t see this changing. We can adapt more too offshore, however I am not convinced the extra costs warrant this. With a deep recession lasting many years we must not deviate into expensive schemes which will inevitably lead to more expensive bills and wasted public money.

We have to focus on the perception the public see with the problem o f mainly windfarms and PV. It is time the Government appoint, an industrialist to look into resolving the problem with carbon neutral electricity production, followed by a debate within government. Then the Government need to have a ‘Carbon Neutral Production Act’, this will give a clear message for all to understand. The public presently are understandably confused with one politician saying one thing, and another saying something else. This is why we are in a mess.

Presently we have a situation where planning is confusing, massively complex, time consuming and hugely expensive. I am only a small developer, but yet nearly thirty percent of the whole development costs are being spent on planning alone, and despite the development creating jobs and producing carbon neutral electricity, it will all depend on maybe one or two neighbours opinions on what they can see from their window. Had

Page 251 windmill farmers two hundred years ago, had to go through the planning battles as we do now, there would not have been any bread!

By having a clear message from government backed by an Act, followed by a definitive clear guideline for planning authorities, we can all step forward towards a cheaper production of carbon neutral electricity by onshore wind, PV etc. This will reduce costs dramatically and allow less wealthy developers to join in. If the public have a clear message presented to them, they will understand sacrifices have to be made, for the greater good. At the moment windfarms are seen as moneyfarms for the rich, but you have to be rich to face the planning battle.

We can all discuss until the cows come home about new methods of future generation, but we simply do not have time if we want to keep to agreed amounts of carbon reduction. We have to run with what there is.

July 2012

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