During the battle over the closure of its wind turbine blade manufacturing plant on the Isle of White, Vestas told the Guardian (7/8/09) that UK turbine manufacturers were at a disadvantage compared with those in countries that insist that their windfarms use locally made components. In China, for example, at least 80% of components used must be made locally. In Spain and Portugal, windfarm developers must show how many jobs they will create by sourcing supplies locally in order to get planning approval for their projects. Vestas said “There is a strong political will in most countries to favour local manufacturers.”
However there are also arguments against ‘local content’ rules. Essentially they are protectionist- which is seen by some as undesirable since it limits open markets. Ontario’s new Feed-In Tariff for PV solar projects, which provides 44.3-80.2 cents/kWh for PV solar depending on size, includes a requirement that grid-connected solar projects must involve a minimum amount of ‘local content’: small rooftop PV must have 40% local content as a combination of labour and equipment, larger systems 50%. And in two years time that will rise to 60 %. The aim is to boost local employment. This has caused a stir in Germany, where PV manufacturers say Canada is breaching its obligations to the World Trade Organization. Germany’s solar-industries association, BSW-Solar, has protested against what it calls Ontario’s ‘local protectionism.’ It says ‘The actions taken in Ontario directly contravene Canada’s international trade commitments and place foreign solar equipment makers at a serious competitive disadvantage’. Ontario officials however say that ‘the domestic content rules have been developed in a way that welcomes investment from outside Ontario, because only a portion of the costs are required to be spent in Ontario’. See: tinyurl.com/ykssy9y
But is protectionism so bad? Are free markets so wonderful? Purely economic protection might be seen a too parochial and partisan- just defending local interest- but if the net impact is to create more projects and reduce more emissions, then globally surely that is to be preferred? It all depends on whether you think that open market competition is progressive and efficient, or whether you believe that it’s simply about profits- strengthening the dominant players and weakening rivals.
The evidence from the renewable energy field seems pretty clear. Competitive systems like the UK Renewable Obligation (RO) have been far less successful at building renewables capacity than fixed price Feed-In Tariffs (FITs): Germany now has round 25 Gigawatts of wind capacity in place, whereas the UK only has achieved just over 4GW so far- with some of that being offshore and supported by capital grants. And perversely the RO has cost consumers more: the UK’s ROC system cost consumers 3.2 pence/kilowatt hour, whereas in 2006 the German Feed-In Tariff only cost consumers 2.6/p/kWh- despite Germany having a much bigger wind capacity in areas with generally much less wind than in the UK, and also supporting the installation of a lot more very expensive PV solar capacity.
There is also the question of renewables such as PV being very much cheaper to produce in developing countries, such as China, due to manufacturing costs being so low. This had undoubtedly led to greater uptake of PV in developed countries as many individual consumers have voted with their wallets and bought the cheapest ‘green’ technology available. But this ‘market’ freedom has environmental and human costs, such as a non-regulated wages, no health and safety culture and possible environmental pollution in the production cycle. The same might be said of some biofuels grown, for Western vehicles to use, in the developing world. That booming market has deepened some local environmental problems.
That is not to say competitive markets can’t play some role- for example they can sometimes provide incentives for innovation. But innovation has hardly been stifled under FITs: Germany has developed a lot of novel wind and PV technologies and built major new expanding industries, whereas that can hardy be said if the UK- while we still have a research base (just!), we have no major renewable energy technology manufacturing plants and have to import technology from countries like Germany. Maybe a bit of green protectionism wouldn’t be amiss, although really what would make more sense is a FIT for all renewables, not just the tiny one planned for small scale projects. Then the UK might take a lead and win some exports as well.
Friday, January 1, 2010
Monday, November 30, 2009
More Atoms for peace
It’s good to have Obama and Brown pushing for the phase out of nuclear weapons. At least part of the driver for this is that the US and its allies can be seen to be honouring their part of the Nuclear Non-Proliferation Treaty (NPT), in the hope that other countries will sign up to it - or, since it will soon run out, its yet to be negotiated replacement. But there is more. Then, so the argument goes, the way will be clear for the spread of civil nuclear power around the world. That, it’s argued, helps reduce use of fossil fuels and thus reduces global geopolitical tension over oil and gas, while also helping with global climate change. So it’s all related globally and geopolitically - and NPT will save the planet.
The official view seems to be that the NPT has worked well- otherwise we would have many more weapons states. That’s hard to swallow given that India, Pakistan and Israel, all with nuclear weapons, are outside the NPT. The battles with Iran and N Korea over their adherence to the NPT has hardly been a good demonstration of its effectiveness- unless you like brinkmanship. If we are really to enter a brave new nuclear world with lots more countries going for civil nuclear power, but avoiding weapons production, it’s going to get even more hair raising. Hardly sounds like ‘atoms for peace’. With the added increased threat of diversion of technology and materials to terrorist groups, it sounds more like receipt for more global tension and confrontation.
A commitment instead to renewables could avoid all these problems. Egypt, Jordan and Algeria are amongst the countries who have indicated interest in going nuclear recently- yet all these are much better placed to develop their huge solar potential, e.g. via Concentrated Solar Power plants in desert areas. Following the success of pioneering projects in Spain, over 5GW of new CSP projects are already underway or planned in, amongst other paces, Algeria, Jordon, Morocco, Egypt and the UAE. Longer term the ‘Med Solar’ plan envisages up to 20GW of CSP in North Africa.
Meanwhile, GNEP, the ambitious Global Nuclear Energy Partnership programme backed by George W Bush, now seems to be in disarray. The aim was to provide sealed nuclear plants to developing countries, with the spent fuel being returned to the USA for reprocessing, to extract the plutonium that had been produced. This would then be used to fuel a new fleet of US breeder reactors. The theory was that this approach would be less prone to illegal diversion of weapons material- although it would involve installing plants around the world and shipping radioactive material regularly across the globe. GNEP had attracted support from 25 countries,
However, earlier this year Obama halted work on reprocessing techniques that were a key USA contribution to this programme, and the future of GNEP is now unclear. Instead the USA has signed up to IRENA, the new International Renewable Energy Research Agency, which is to be based in Abu Dhabi in the UAE. The UAE of course also has civil nuclear ambitions. So the rivalry between these two very different energy options continues.
There had been some concern that IRENA might also back nuclear. But there is already a powerful International Atomic Energy Agency based in Austria, which promotes nuclear around the world. And in August Helene Pelosse, IRENA’s new director general, commented ‘IRENA will not support nuclear energy programmes because it’s a long complicated process, it produces waste and is relatively risky. Renewable energy is a better alternative and a faster, less expensive alternative, especially with countries blessed with so much sun for solar plants’. Let’s hope that having a major new international agency based in a developing country will shift the balance.
The official view seems to be that the NPT has worked well- otherwise we would have many more weapons states. That’s hard to swallow given that India, Pakistan and Israel, all with nuclear weapons, are outside the NPT. The battles with Iran and N Korea over their adherence to the NPT has hardly been a good demonstration of its effectiveness- unless you like brinkmanship. If we are really to enter a brave new nuclear world with lots more countries going for civil nuclear power, but avoiding weapons production, it’s going to get even more hair raising. Hardly sounds like ‘atoms for peace’. With the added increased threat of diversion of technology and materials to terrorist groups, it sounds more like receipt for more global tension and confrontation.
A commitment instead to renewables could avoid all these problems. Egypt, Jordan and Algeria are amongst the countries who have indicated interest in going nuclear recently- yet all these are much better placed to develop their huge solar potential, e.g. via Concentrated Solar Power plants in desert areas. Following the success of pioneering projects in Spain, over 5GW of new CSP projects are already underway or planned in, amongst other paces, Algeria, Jordon, Morocco, Egypt and the UAE. Longer term the ‘Med Solar’ plan envisages up to 20GW of CSP in North Africa.
Meanwhile, GNEP, the ambitious Global Nuclear Energy Partnership programme backed by George W Bush, now seems to be in disarray. The aim was to provide sealed nuclear plants to developing countries, with the spent fuel being returned to the USA for reprocessing, to extract the plutonium that had been produced. This would then be used to fuel a new fleet of US breeder reactors. The theory was that this approach would be less prone to illegal diversion of weapons material- although it would involve installing plants around the world and shipping radioactive material regularly across the globe. GNEP had attracted support from 25 countries,
However, earlier this year Obama halted work on reprocessing techniques that were a key USA contribution to this programme, and the future of GNEP is now unclear. Instead the USA has signed up to IRENA, the new International Renewable Energy Research Agency, which is to be based in Abu Dhabi in the UAE. The UAE of course also has civil nuclear ambitions. So the rivalry between these two very different energy options continues.
There had been some concern that IRENA might also back nuclear. But there is already a powerful International Atomic Energy Agency based in Austria, which promotes nuclear around the world. And in August Helene Pelosse, IRENA’s new director general, commented ‘IRENA will not support nuclear energy programmes because it’s a long complicated process, it produces waste and is relatively risky. Renewable energy is a better alternative and a faster, less expensive alternative, especially with countries blessed with so much sun for solar plants’. Let’s hope that having a major new international agency based in a developing country will shift the balance.
Sunday, November 1, 2009
Workers and the World Unite
‘The world-wide crises starkly poses the need to construct new world-wide relations of production and exchange that are substantially more decentralized, participatory and egalitarian than the relations which currently exist, at the same time as being ecologically sensitive. The construction of a new energy system, based on a much higher proportion of renewable energy use than currently exists, is a fundamental part of this process’. So says Kolya Abramsky, editor of a new book entitled ‘Another Energy is Possible: Sparking a World-wide Energy Revolution’ (AK Press), who is also helping to organise a major international conference as a follow up.
He notes that ‘The expansion of the renewable energy is, seemingly, taking a paradoxical form. On the one hand the sector has until now developed incredibly slowly, non-linearly and in comparatively few places in the world. On the other hand, resource scarcity, climate change, surplus finance capital, and militarized conflict in oil rich regions are all material pressures pushing towards a rapid global expansion. The urgency of “peak oil”, and especially climate change, are ushering in a new scenario. The end of “the fossil fuels era” may be postponed, but it cannot be prevented. In all probability it cannot even be postponed for much longer. A transition beyond petrol is no longer an ideological choice. It is increasingly a necessity imposed by material constraints. Already demand for renewable energy infrastructure far outstrips supply. The renewable energy sector seems set to become a new global growth sector’.
And he concludes ‘It is no longer a question of whether a transition will occur, but rather what form it will take. Which technologies will it include and on whose terms and priorities? Who will pay the costs and who will reap the benefits? Who can harness the necessary global flows of capital, raw materials, knowledge and labor? Rather than being a technical inevitability, transition will be the result of an uncertain and lengthy process of collective struggle’.
I think he’s right- these are crucial questions. But he also right that, as he puts it, ‘the transition process is actually a process of great uncertainty’, with their being ‘diverging strategic choices and perspectives as to the best way of bringing about social and technological change, and the extent to which this can take place within existing power structures, or whether it requires a more confrontational approach towards these power structures and the construction of new social relations’.
This can lead to conflicts between, for example environmentalists, many of whom are opposed outright to coal and nuclear energy, and worker organizations in these sectors who are predominantly in favour of worker led efforts to clean up these sectors. There was, for example, the recent infamous episode during the battle over the Kingsnorth coal plant when, rather insensitively re working the ‘Coal not Dole’ slogan from the 1984 Miners Strike, Greenpeace used the slogan ‘Put Coal on the Dole,’ with one riposte from the left being ‘where are the French Secret service when your need them?’, harking back to when the French Secret service blew up Greenpeace's Rainbow Warrior boat.
We have to do better than this. The fight over jobs at Vestas on the Isle of White brought trade union and green groups together, and that’s the way ahead. But there are some major issues looming. Can fossil fuels be cleaned up, or will that simply delay the process of switching over to renewables. Can nuclear power be seen off, even though it’s supported by many unions? Can we get global agreement on cutting emissions without undermining the aspirations of those still living at or even below subsistence level? How can the costs and benefits of going green be fairly distributed? How do we create a movement to ensure that when renewables are adopted it is done right?
It can certainly be done poorly. For example, Germany is often cited as a wonderful example of how many jobs can be created in renewable energy (250,000 so far) but many of these are in the east, where low wages and poor conditions are common- in non union companies. Meanwhile the biofuels boom risks creating many terrible jobs in the developing world, and if left to global capitalism, undermining food production.
We don’t want renewables at any price. The old counter culture view of the 1960/70s was that we wanted an alternative technology AND an alternative society. That remains true. This wont happen automatically- it has to be fought for.
The UK’s Trade Union Congress has called for a ‘just transition to a greener economy’. The TUC report 'A Green and Fair Future', says that ‘support for environmental policies are conditional on a fair distribution of the costs and benefits of those policies across the economy, and on the creation of opportunities for active engagement by those affected in determining the future wellbeing of themselves and their families’.
That’s a good starting position. But it is defensive. We need to be more proactive and create a better future, locally and globally.
He notes that ‘The expansion of the renewable energy is, seemingly, taking a paradoxical form. On the one hand the sector has until now developed incredibly slowly, non-linearly and in comparatively few places in the world. On the other hand, resource scarcity, climate change, surplus finance capital, and militarized conflict in oil rich regions are all material pressures pushing towards a rapid global expansion. The urgency of “peak oil”, and especially climate change, are ushering in a new scenario. The end of “the fossil fuels era” may be postponed, but it cannot be prevented. In all probability it cannot even be postponed for much longer. A transition beyond petrol is no longer an ideological choice. It is increasingly a necessity imposed by material constraints. Already demand for renewable energy infrastructure far outstrips supply. The renewable energy sector seems set to become a new global growth sector’.
And he concludes ‘It is no longer a question of whether a transition will occur, but rather what form it will take. Which technologies will it include and on whose terms and priorities? Who will pay the costs and who will reap the benefits? Who can harness the necessary global flows of capital, raw materials, knowledge and labor? Rather than being a technical inevitability, transition will be the result of an uncertain and lengthy process of collective struggle’.
I think he’s right- these are crucial questions. But he also right that, as he puts it, ‘the transition process is actually a process of great uncertainty’, with their being ‘diverging strategic choices and perspectives as to the best way of bringing about social and technological change, and the extent to which this can take place within existing power structures, or whether it requires a more confrontational approach towards these power structures and the construction of new social relations’.
This can lead to conflicts between, for example environmentalists, many of whom are opposed outright to coal and nuclear energy, and worker organizations in these sectors who are predominantly in favour of worker led efforts to clean up these sectors. There was, for example, the recent infamous episode during the battle over the Kingsnorth coal plant when, rather insensitively re working the ‘Coal not Dole’ slogan from the 1984 Miners Strike, Greenpeace used the slogan ‘Put Coal on the Dole,’ with one riposte from the left being ‘where are the French Secret service when your need them?’, harking back to when the French Secret service blew up Greenpeace's Rainbow Warrior boat.
We have to do better than this. The fight over jobs at Vestas on the Isle of White brought trade union and green groups together, and that’s the way ahead. But there are some major issues looming. Can fossil fuels be cleaned up, or will that simply delay the process of switching over to renewables. Can nuclear power be seen off, even though it’s supported by many unions? Can we get global agreement on cutting emissions without undermining the aspirations of those still living at or even below subsistence level? How can the costs and benefits of going green be fairly distributed? How do we create a movement to ensure that when renewables are adopted it is done right?
It can certainly be done poorly. For example, Germany is often cited as a wonderful example of how many jobs can be created in renewable energy (250,000 so far) but many of these are in the east, where low wages and poor conditions are common- in non union companies. Meanwhile the biofuels boom risks creating many terrible jobs in the developing world, and if left to global capitalism, undermining food production.
We don’t want renewables at any price. The old counter culture view of the 1960/70s was that we wanted an alternative technology AND an alternative society. That remains true. This wont happen automatically- it has to be fought for.
The UK’s Trade Union Congress has called for a ‘just transition to a greener economy’. The TUC report 'A Green and Fair Future', says that ‘support for environmental policies are conditional on a fair distribution of the costs and benefits of those policies across the economy, and on the creation of opportunities for active engagement by those affected in determining the future wellbeing of themselves and their families’.
That’s a good starting position. But it is defensive. We need to be more proactive and create a better future, locally and globally.
Thursday, October 1, 2009
Nuclear expansion? Not in my name!
The public debate and the government consultations in 2006 and 2007 on nuclear power were framed in the context of a replacement programme for existing reactors scheduled to close. On this basis it has been suggested that there was if not a clear consensus then at least a majority in favour.
However, subsequently the government began to talk about going beyond replacement. For example, in May 2008 Prime Minister Gordon Brown commented ‘I think we are pretty clear that we will have to do more than simply replace existing nuclear capability in Britain’ while Secretary of State John Hutton said, that, although it was up to the private sector developers, he would be ‘very disappointed’ if the proportion of electricity generated by nuclear did not rise ‘significantly above the current level'. In Aug 2009, Malcolm Wicks MP, the PM’s Special Representative on International Energy, produced a report calling for a UK nuclear contribution of 35-40% ‘beyond 2030’. Currently the UK gets 13% of its electricity from nuclear sources.
The government has also indicated that it saw a major role for exporting UK nuclear technology and expertise. Gordon Brown has indicated that he believes the world needs 1,000 extra nuclear power stations and has argued that Africa could build nuclear power plants to meet growing demands for energy. In 2009 a new UK Nuclear Centre of Excellence was announced to ‘promote wider access to civil nuclear power across the world’, with an initial budget of £20m, along with ‘up to £15m’ for a Nuclear Advanced Manufacturing Research Centre.
I cannot support any of the above policies or views. As a lifelong Labour movement activist and long standing Labour party member, I have struggled to live with various New Labour policies to which I have been opposed with increasing difficulty, not least in relation to the Iraq invasion. The new policies on nuclear will I believe lead to major long-term global security problems, in terms of the proliferation of nuclear weapons making capacity and the potential for nuclear terrorism. The policies on nuclear could also undermine energy security and environmental sustainability, since money, manpower and other resources will be diverted away from renewables and energy efficiency, which I see as the only long term options for a sustainable energy future, nationally and globally.
I have made these points regularly in various forums, including SERA, of which I was a founding member. But the commitment to an expanded nuclear programme seems set in stone and indeed is deepening. When Business/Energy Secretary, John Hutton said that he was ‘determined to press all the buttons to get nuclear built in this country at the earliest opportunity’ and that approach now seems to be even more prevalent with, in effect, the government trying to talk the prospects of nuclear up, so that companies like EDF might be able to raise finance more easily.
A new Policy Statement on Nuclear is due soon. I doubt if it will go much beyond what the government has already said- that it welcomes the 12GW or so of proposal that have come so far from the private sector. In fact the various contenders, EDF, E.ON etc, have ‘reserved’ a total of 23.6GW of grid links for new nuclear capacity with National Grid. That’s about the same as the wind power capacity we are aiming to have by 2020. But as EDF have pointed out, there are operational and economic reasons why a major expansion of nuclear would be incompatible with a major expansion of renewable electricity generation.
The Labour leadership, and I fear many party members, cannot see the lunacy of this approach, which could I undermine our attempts to deal with climate change.
I therefore, reluctantly, decided to resign from the Labour party, not least since I find it impossible to canvas on its behalf. A letter to the Guardian to this effect (9/9/09) attracted a lot of support form others who welcomed my principled stance. My conviction that I was right was further reinforced by Ed Miliband’s comment at the TUC later in Sept. that "'Nuclear power no thanks' today means 'climate change no doubt' tomorrow”. That’s almost on par with John Hutton’s comment to last years Labour Party Conference (22/9/08), where he was reported to have said : ‘No coal and no nuclear equals no lights, no power, no future’. And at this years Party Conference Gordon Brown also backed nuclear as a key innovation.
Given that SERA has become ever more closely identified with New Labour, to which it has become formally affiliated, and has seen fit to have pro-nuclear David Miliband as its president, despite SERA’s long held anti-nuclear policy, I have, with even more regret, also resigned from SERA.
I have long thought that what is now still called 'SERA' should by relabeled 'The Labour Environment Campaign' (its current sub title), so that a separate body called SERA could continue independently to promote the radical red and green policies it used to back. But that clearly is not going to happen, so sadly after many years of activism, I am moving on. I have to say I find the approach of groups like Workers Climate Action and the Climate Change Campaign Trade Union Group much more in keeping with SERA’s original grass roots approach.
These changes in affiliation will coincide with my retirement from the Open University after 38 years trying to relay rational and sustainable approaches to technology and energy policy to a wide audience. But I wont be going quietly into the night! For example, as well as working with trade union groups, and in addition to continuing with this and other blogs, I’ll be continuing to produce Renew, the bimonthly newsletter on renewable energy development and policies, on an independent basis: see http://www.natta-renew.org
David Elliott,
(Emeritus) Professor of Technology Policy,
The Open University
However, subsequently the government began to talk about going beyond replacement. For example, in May 2008 Prime Minister Gordon Brown commented ‘I think we are pretty clear that we will have to do more than simply replace existing nuclear capability in Britain’ while Secretary of State John Hutton said, that, although it was up to the private sector developers, he would be ‘very disappointed’ if the proportion of electricity generated by nuclear did not rise ‘significantly above the current level'. In Aug 2009, Malcolm Wicks MP, the PM’s Special Representative on International Energy, produced a report calling for a UK nuclear contribution of 35-40% ‘beyond 2030’. Currently the UK gets 13% of its electricity from nuclear sources.
The government has also indicated that it saw a major role for exporting UK nuclear technology and expertise. Gordon Brown has indicated that he believes the world needs 1,000 extra nuclear power stations and has argued that Africa could build nuclear power plants to meet growing demands for energy. In 2009 a new UK Nuclear Centre of Excellence was announced to ‘promote wider access to civil nuclear power across the world’, with an initial budget of £20m, along with ‘up to £15m’ for a Nuclear Advanced Manufacturing Research Centre.
I cannot support any of the above policies or views. As a lifelong Labour movement activist and long standing Labour party member, I have struggled to live with various New Labour policies to which I have been opposed with increasing difficulty, not least in relation to the Iraq invasion. The new policies on nuclear will I believe lead to major long-term global security problems, in terms of the proliferation of nuclear weapons making capacity and the potential for nuclear terrorism. The policies on nuclear could also undermine energy security and environmental sustainability, since money, manpower and other resources will be diverted away from renewables and energy efficiency, which I see as the only long term options for a sustainable energy future, nationally and globally.
I have made these points regularly in various forums, including SERA, of which I was a founding member. But the commitment to an expanded nuclear programme seems set in stone and indeed is deepening. When Business/Energy Secretary, John Hutton said that he was ‘determined to press all the buttons to get nuclear built in this country at the earliest opportunity’ and that approach now seems to be even more prevalent with, in effect, the government trying to talk the prospects of nuclear up, so that companies like EDF might be able to raise finance more easily.
A new Policy Statement on Nuclear is due soon. I doubt if it will go much beyond what the government has already said- that it welcomes the 12GW or so of proposal that have come so far from the private sector. In fact the various contenders, EDF, E.ON etc, have ‘reserved’ a total of 23.6GW of grid links for new nuclear capacity with National Grid. That’s about the same as the wind power capacity we are aiming to have by 2020. But as EDF have pointed out, there are operational and economic reasons why a major expansion of nuclear would be incompatible with a major expansion of renewable electricity generation.
The Labour leadership, and I fear many party members, cannot see the lunacy of this approach, which could I undermine our attempts to deal with climate change.
I therefore, reluctantly, decided to resign from the Labour party, not least since I find it impossible to canvas on its behalf. A letter to the Guardian to this effect (9/9/09) attracted a lot of support form others who welcomed my principled stance. My conviction that I was right was further reinforced by Ed Miliband’s comment at the TUC later in Sept. that "'Nuclear power no thanks' today means 'climate change no doubt' tomorrow”. That’s almost on par with John Hutton’s comment to last years Labour Party Conference (22/9/08), where he was reported to have said : ‘No coal and no nuclear equals no lights, no power, no future’. And at this years Party Conference Gordon Brown also backed nuclear as a key innovation.
Given that SERA has become ever more closely identified with New Labour, to which it has become formally affiliated, and has seen fit to have pro-nuclear David Miliband as its president, despite SERA’s long held anti-nuclear policy, I have, with even more regret, also resigned from SERA.
I have long thought that what is now still called 'SERA' should by relabeled 'The Labour Environment Campaign' (its current sub title), so that a separate body called SERA could continue independently to promote the radical red and green policies it used to back. But that clearly is not going to happen, so sadly after many years of activism, I am moving on. I have to say I find the approach of groups like Workers Climate Action and the Climate Change Campaign Trade Union Group much more in keeping with SERA’s original grass roots approach.
These changes in affiliation will coincide with my retirement from the Open University after 38 years trying to relay rational and sustainable approaches to technology and energy policy to a wide audience. But I wont be going quietly into the night! For example, as well as working with trade union groups, and in addition to continuing with this and other blogs, I’ll be continuing to produce Renew, the bimonthly newsletter on renewable energy development and policies, on an independent basis: see http://www.natta-renew.org
David Elliott,
(Emeritus) Professor of Technology Policy,
The Open University
Wednesday, September 2, 2009
Fighting for wind against markets
The workers occupation of the Vesta wind turbine plant on the Isle of White, threatened with closure with the potential loss of over 600 jobs there and in and an ancillary unit in Southampton, attracted massive support from green groups and trade unions- and, buttressed by the governments new Renewable Energy Strategy, there were calls for the plant to be nationalised. It was seen as a key struggle for green future- uniting ‘reds’ and ‘greens’.
As Green MEP Caroline Lucas put it in the Guardian (24/7): ‘In microcosm, the situation in the Isle of Wight demonstrates the extent to which ministers have ignored calls to promote the renewables industry- squandering opportunity after opportunity to create or protect jobs in fledgling green industries, as well as to meet the UK's greenhouse gas reduction targets’. But not everyone was so keen. The Independent pointed out that the plant made blades for the US market ‘which are unsuitable for UK wind farms’, adding that ‘Vestas is considering setting up a research and development facility in the area to help develop and test products suitable for the UK offshore market. If this is the case, it is easy to see why rash moves by the Government now could ultimately prove counterproductive’.
And the European Wind Energy Association told euobserver.com: ‘The solution is not nationalisation or bail-outs. The wind energy sector itself is much better at producing wind turbines than the government. It's a question of roles. The sector's role is to manufacture wind turbines and the government's role is to create a framework that attracts investment and regulation to ensure targets are met. I don't think we should mix up these roles.’
Vestas, the world's biggest wind energy firm, made pre-tax profits of €803 m last year, up from €579 m in 2007 and saw a quarterly sales rise of 59%, up to €1.1 billion, with its UK division also producing rising multi-million pound profits each year. But, it told euobsever.com that: ‘Due to the credit crunch, soft currency and lack of political action in the UK, we have had to cut down capacity.... Downing Street is doing a lot to support green jobs, but in the countryside there is a lot of opposition. We are being stalled locally. Hardly anything is happening onshore. The offshore market cannot justify us converting the facility to make products for the UK. The market is not big enough. We need onshore too.’
The British Wind Energy Association also backed the company, telling euobserver that ‘the market and the sector's becoming very, very competitive. A number of new entrants are coming from India and China, and it could be that the company needs to cut its costs, producing more cheaply and efficiently. This is to be expected - they have a clear obligation to shareholders to maximise profits.’ But talking later on to NewEnergy Focus, the BWEA put a slightly different spin on it: ‘There is now a direct correlation between nimbyism and the curtailment of the economic benefits of wind power. A positive factor of this unfortunate crisis is that the public are now aware of the fact that the opposition to wind farms is affecting the economic opportunities available to this country.’
That was certainly the line being adopted by the company and the government- it’s not our fault, it’s the NIMBY’s , although the company, like the BWEA, also suggested that its was the planning system that needed improvement: ‘The local planning process for the construction of new onshore wind power plants in the UK remains an obstacle to the development of a more favourable market for onshore wind power.’ (Edie.net) A Guardian editorial went further and suggested that what was really the problem was that, for a range of reasons, Vestas did not believe that the UK governments plans for wind and would really materialise on the scale hoped for.
The announcement of a grant of £6m for Vestas for R&D work on offshore wind technology, part of a new £1bn fund for offshore wind to be organised over the next 3 years by European Investment Bank (EIB) and 3 UK Banks, did not seem to alter the situation much - it was on-land wind that was the issue for the existing plant. Sadly the sit-in workers were evicted –and then 425 workers were sacked, but with 40 being offered jobs in the new R&D centre. Vestas said ‘this commercial decision was absolutely necessary to secure Vestas' competitiveness and create a regional balance between production and the demand for wind turbines.’
What are the lessons from all this? Well, BWEA Chair, Adam Bruce, told ClickGreen.org.uk, ‘the situation at Vestas is a tragedy for the employees, their families and the wider island community, but it does not represent a failure of wind energy, nor the market for wind energy in the UK. If anything, it shows that the
supply market for onshore turbines is very competitive’.
We might draw different conclusions about market failure and the wonders of market competition. And about how to respond. Bob Crow, General Secretary of the RMT union commented that the Vestas workers had ‘done more for the future of green energy and green jobs in the UK in 2 weeks than the government has done in 12 years’. Perhaps a bit overstated, but highlighting the need for reds and greens to work together.
For euobservers full analysis see http://euobserver.com/9/28493
As Green MEP Caroline Lucas put it in the Guardian (24/7): ‘In microcosm, the situation in the Isle of Wight demonstrates the extent to which ministers have ignored calls to promote the renewables industry- squandering opportunity after opportunity to create or protect jobs in fledgling green industries, as well as to meet the UK's greenhouse gas reduction targets’. But not everyone was so keen. The Independent pointed out that the plant made blades for the US market ‘which are unsuitable for UK wind farms’, adding that ‘Vestas is considering setting up a research and development facility in the area to help develop and test products suitable for the UK offshore market. If this is the case, it is easy to see why rash moves by the Government now could ultimately prove counterproductive’.
And the European Wind Energy Association told euobserver.com: ‘The solution is not nationalisation or bail-outs. The wind energy sector itself is much better at producing wind turbines than the government. It's a question of roles. The sector's role is to manufacture wind turbines and the government's role is to create a framework that attracts investment and regulation to ensure targets are met. I don't think we should mix up these roles.’
Vestas, the world's biggest wind energy firm, made pre-tax profits of €803 m last year, up from €579 m in 2007 and saw a quarterly sales rise of 59%, up to €1.1 billion, with its UK division also producing rising multi-million pound profits each year. But, it told euobsever.com that: ‘Due to the credit crunch, soft currency and lack of political action in the UK, we have had to cut down capacity.... Downing Street is doing a lot to support green jobs, but in the countryside there is a lot of opposition. We are being stalled locally. Hardly anything is happening onshore. The offshore market cannot justify us converting the facility to make products for the UK. The market is not big enough. We need onshore too.’
The British Wind Energy Association also backed the company, telling euobserver that ‘the market and the sector's becoming very, very competitive. A number of new entrants are coming from India and China, and it could be that the company needs to cut its costs, producing more cheaply and efficiently. This is to be expected - they have a clear obligation to shareholders to maximise profits.’ But talking later on to NewEnergy Focus, the BWEA put a slightly different spin on it: ‘There is now a direct correlation between nimbyism and the curtailment of the economic benefits of wind power. A positive factor of this unfortunate crisis is that the public are now aware of the fact that the opposition to wind farms is affecting the economic opportunities available to this country.’
That was certainly the line being adopted by the company and the government- it’s not our fault, it’s the NIMBY’s , although the company, like the BWEA, also suggested that its was the planning system that needed improvement: ‘The local planning process for the construction of new onshore wind power plants in the UK remains an obstacle to the development of a more favourable market for onshore wind power.’ (Edie.net) A Guardian editorial went further and suggested that what was really the problem was that, for a range of reasons, Vestas did not believe that the UK governments plans for wind and would really materialise on the scale hoped for.
The announcement of a grant of £6m for Vestas for R&D work on offshore wind technology, part of a new £1bn fund for offshore wind to be organised over the next 3 years by European Investment Bank (EIB) and 3 UK Banks, did not seem to alter the situation much - it was on-land wind that was the issue for the existing plant. Sadly the sit-in workers were evicted –and then 425 workers were sacked, but with 40 being offered jobs in the new R&D centre. Vestas said ‘this commercial decision was absolutely necessary to secure Vestas' competitiveness and create a regional balance between production and the demand for wind turbines.’
What are the lessons from all this? Well, BWEA Chair, Adam Bruce, told ClickGreen.org.uk, ‘the situation at Vestas is a tragedy for the employees, their families and the wider island community, but it does not represent a failure of wind energy, nor the market for wind energy in the UK. If anything, it shows that the
supply market for onshore turbines is very competitive’.
We might draw different conclusions about market failure and the wonders of market competition. And about how to respond. Bob Crow, General Secretary of the RMT union commented that the Vestas workers had ‘done more for the future of green energy and green jobs in the UK in 2 weeks than the government has done in 12 years’. Perhaps a bit overstated, but highlighting the need for reds and greens to work together.
For euobservers full analysis see http://euobserver.com/9/28493
Saturday, August 1, 2009
Carbon Bubble bursting?
The EU Emission Trading System is in a mess. The first round was widely accepted to be a disaster- free allocation of carbon credits meant that many companies could stay under the emission caps easily and sell off surplus credits, which in turn meant the value of the credits sank to almost nothing. The second round, from 2008, had been a bit better- until the recession hit. With energy demand falling, once again caps were easy to meet and some companies decided to off-load credits before their value collapsed again, thus making sure that happened! Their value fell to €8.2/tonne carbon, from €31the previous year.
Negotiations for the next round, from 2012, have been stymied by economically hard pressed countries like Poland claiming that they couldn't afford to buy credits- so that there had to be some free allocations again.
The end result of all this is that not many emissions have been reduced by the ETS so far, but some companies- and market traders- have done well financially. It’s a familiar story from other sectors - that's how markets behave, unless very carefully regulated. Now this particular bubble looks like it may burst.
In a way this is odd. Presssure for reducing emission is bound to grow, so the market for carbon credits should also grow - if it’s properly set up. Certainly governments in the EU have looked to the EU ETS as a way to provide income for stimulating new energy technologies- including nuclear power and renewables. And the EU ETS was meant to be a prototype for a global carbon trading system as proposed at the Kyoto Conference in 1997.
While that was a hope for the longer term, the Kyoto conference introduced the Clean Development Mechanism to support projects in the developing world. Sadly that too has been less than wonderful. As several reports (e.g. from WWF) have suggested, despite the process of application being agonisingly slow, some projects have allegedly been supported that were not 'additional' to what would have happened any way. And some bore very little relation to the original aims of radical CO2 reductions- most were low-grade process efficiency or substitution projects, done often for purely economic reasons; few involved renewables, which really needed the extra support.
In the end, this is what you might expect when you try to enlist market forces to deliver environmental gains. Without a lot of regulation, markets simply reward to rich and undermine the poor. And the carbon market doesn’t provide a stable enough economic context for investors to rely on – so we don’t get much new green energy technology. In desperation, there have been calls for government to underwrite the floor price of the EU ETS carbon credits- essentially asking the taxpayers to subsidise the market! Whether this would make potential investors in green energy less risk adverse is unclear. The carbon price level needed for that would probably very high- certainly much more than has ever been achieved so far. We’re talking €100 /tonne or more. A guaranteed floor price might stabilise the variations to some extent and possibly help push the overall level up, but not that far. More likely it would be the carbon markets’ various financial advisor who would to benefit- and although they evidently have suffered from the recession, there are perhaps more deserving cases for state aid!
Negotiations for the next round, from 2012, have been stymied by economically hard pressed countries like Poland claiming that they couldn't afford to buy credits- so that there had to be some free allocations again.
The end result of all this is that not many emissions have been reduced by the ETS so far, but some companies- and market traders- have done well financially. It’s a familiar story from other sectors - that's how markets behave, unless very carefully regulated. Now this particular bubble looks like it may burst.
In a way this is odd. Presssure for reducing emission is bound to grow, so the market for carbon credits should also grow - if it’s properly set up. Certainly governments in the EU have looked to the EU ETS as a way to provide income for stimulating new energy technologies- including nuclear power and renewables. And the EU ETS was meant to be a prototype for a global carbon trading system as proposed at the Kyoto Conference in 1997.
While that was a hope for the longer term, the Kyoto conference introduced the Clean Development Mechanism to support projects in the developing world. Sadly that too has been less than wonderful. As several reports (e.g. from WWF) have suggested, despite the process of application being agonisingly slow, some projects have allegedly been supported that were not 'additional' to what would have happened any way. And some bore very little relation to the original aims of radical CO2 reductions- most were low-grade process efficiency or substitution projects, done often for purely economic reasons; few involved renewables, which really needed the extra support.
In the end, this is what you might expect when you try to enlist market forces to deliver environmental gains. Without a lot of regulation, markets simply reward to rich and undermine the poor. And the carbon market doesn’t provide a stable enough economic context for investors to rely on – so we don’t get much new green energy technology. In desperation, there have been calls for government to underwrite the floor price of the EU ETS carbon credits- essentially asking the taxpayers to subsidise the market! Whether this would make potential investors in green energy less risk adverse is unclear. The carbon price level needed for that would probably very high- certainly much more than has ever been achieved so far. We’re talking €100 /tonne or more. A guaranteed floor price might stabilise the variations to some extent and possibly help push the overall level up, but not that far. More likely it would be the carbon markets’ various financial advisor who would to benefit- and although they evidently have suffered from the recession, there are perhaps more deserving cases for state aid!
Wednesday, July 1, 2009
Connect and Compete
Competitive markets, liberalisation and privatisation were touted as being the way to cut prices, stimulate innovation and improve services. In the energy sector the reality has proved to be very different. The privatisation of the UK’s nationalised electricity sector meant the replacement of the Central Electricity Generating Board by National Power and Powergen and the creation of a dozen or so new regional electricity supply companies- from the old regional boards. That was meant lead to competition in a new liberalised market context. But reconcentration rapidly occurred, plus vertical and horizontal buy-outs. The UK power sector is now dominated by oversees companies- Germany’s E.ON and RWE, and the French EDF.
Despite continued resistance (e.g. France has dragged it feet on the privatisation of EDF) the European Commission is still adamant that competition is the way ahead, and it is desperate to create a fully competitive single EU energy market. That is one reason why it has backed the pan- EU ‘Supergrid’ idea, linking up markets and generators via a High Voltage Direct Current (HVDC) grid network across the EU. However, the big EU utilities seem less keen. In addition to improving the overall efficiency of energy production and use across the EU, the Supergrid could make it possible to balance the variable inputs from smaller-scale/distributed renewables like wind farms around the EU. But it may also threaten the market power of some of the large utilities- most of who are much more keen on large scale centralised nuclear.
David Andrews, the co-ordinator of the Claverton Energy Group, a network of UK energy practitioners, says that ‘Many commentators believe that the Supergrid, whilst good for energy consumers, is not necessarily good for the big utilities, since it will make many of their existing power stations obsolete, mean fewer new power stations have to be constructed, and lead to less sales of power station fuels by again selecting the most efficient stations this time at a transnational level’. He concluded ‘It is for this reason that it is believed by many commentators that the Supergrid cannot be merely left to market forces’.
There seems little chance of EU taking on a major role in actually setting up a supergrid - as a shared public asset. It’s more likely just to offer grants to the private sector and then seek to regulate the new market. Some smaller specialist companies do seem interested- e.g. the pioneering Irish Airtricty, and the newly established Mainstream Renewables, along with Norwegian transmission company Imera Power. With 150 million euoro’s on offer from the EU for a North Sea Supergrid linking up offshore wind farms, that’s not surprising.
There has also been interest shown in another supergrid type project- the installation of focussed solar thermal ‘Concentrating Solar Power’ plants in North Africa, linked back to the EU by undersea HVDC power grids. It’s an ambitious idea- 400 billion euros for 100GW of CSP capacity. But with one possibility being the availability a new lucrative EU ‘Feed In Tariff’ for imported solar power, Deutsche Bank, insurer Munich Re, Siemens and utility giants RWE and E.ON. seem to be keen to explore it. So it could be that the big companies will get involved with some Supergrid type projects- if a new market emerges and profit is available. In which case, it will be vital for the EU to regulate how it’s done- to ensue that its done right. For example, what would be the terms of trade offered to the North African countries hosting the projects?
Of course, for the big utilities, the attraction of the supergrid may not just be for linking in to desert solar and North Sea wind: they may also see it an answer to the problem of finding a market for the excess power that would be produced at low demand periods by a large new EU nuclear programme. If it’s a private grid, what’s to stop them?
These issues are all pending- it will be a while before the supergrid gets going. But a small example of how things can go without a wider longer-term perspective is already emerging in relation to the current series of the UK’s off shore wind farms. Most of these project are now being sited several miles off the coast, linked to land via sea-bed marine cables. There are various ways in which these could be arranged. So far however it seems to be a case of each offshore project having their own parallel (and very expensive) links back to shore. In some cases that seems likely to involve duplication of effort, with links to rival projects running close to each other, in parallel. It would arguably be more rational and cheaper overall to have a network of offshore links, with possibly a single link back to shore for each region, offering a common service for each project to use. That is even more the case as we go further out to sea with more wind farms, and would be vital if we also build links across the North Sea to the continent- as part of the EU supergrid concept.
However, in a submission in March 2009 (FBEN 29) to the new Energy and Climate Change Select Committee, E.ON commented: ‘A super grid connecting offshore wind farms to adjacent countries is an exciting proposal, but it is unclear whether this is the most cost effective route for connecting new offshore wind. Timely delivery of the supergrid will be an issue. For example, round three offshore windfarms should not be delayed because the connection of a zone is dependent upon a wider interconnection project’.
Ofgem, the energy regulator, has also noted that the advantages with the parallel ‘point to point’ radial approach is that it ‘allows generators to proceed individually and avoid delays due to third parties’, but it has said that it’s also happy with the more integrated network approach. Ofgem nevertheless got a pretty rough ride on this issue at last years BWEA wind conference - it was argued that the proposed grid regime would not encourage joined up networks, and that change was needed to ensure collaborative development and a strategic approach. Do we really need a host of separate lines just to protect competition in the short term?
That was certainly an issue for Green MEP Claude Turmes, who was the European Parliament's lead negotiator for the Renewable Energy Directive. Speaking at the UK Renewable Energy Associations annual conference recently, he claimed that the competitive tender process favoured by Ofgem was delaying grid connections for offshore wind projects: ‘The UK approach, imposed by Ofgem, for competitive bids for chunks of 40 km cables for offshore, is not very productive, to put it mildly. You have to get rid of Ofgem's over-liberalised idea, by which you can have competition on grid installation.’
It’s the same old story- competition often undermines progress, and buttresses the power of the powerful, while weak regulation does little to alter the situation.
Despite continued resistance (e.g. France has dragged it feet on the privatisation of EDF) the European Commission is still adamant that competition is the way ahead, and it is desperate to create a fully competitive single EU energy market. That is one reason why it has backed the pan- EU ‘Supergrid’ idea, linking up markets and generators via a High Voltage Direct Current (HVDC) grid network across the EU. However, the big EU utilities seem less keen. In addition to improving the overall efficiency of energy production and use across the EU, the Supergrid could make it possible to balance the variable inputs from smaller-scale/distributed renewables like wind farms around the EU. But it may also threaten the market power of some of the large utilities- most of who are much more keen on large scale centralised nuclear.
David Andrews, the co-ordinator of the Claverton Energy Group, a network of UK energy practitioners, says that ‘Many commentators believe that the Supergrid, whilst good for energy consumers, is not necessarily good for the big utilities, since it will make many of their existing power stations obsolete, mean fewer new power stations have to be constructed, and lead to less sales of power station fuels by again selecting the most efficient stations this time at a transnational level’. He concluded ‘It is for this reason that it is believed by many commentators that the Supergrid cannot be merely left to market forces’.
There seems little chance of EU taking on a major role in actually setting up a supergrid - as a shared public asset. It’s more likely just to offer grants to the private sector and then seek to regulate the new market. Some smaller specialist companies do seem interested- e.g. the pioneering Irish Airtricty, and the newly established Mainstream Renewables, along with Norwegian transmission company Imera Power. With 150 million euoro’s on offer from the EU for a North Sea Supergrid linking up offshore wind farms, that’s not surprising.
There has also been interest shown in another supergrid type project- the installation of focussed solar thermal ‘Concentrating Solar Power’ plants in North Africa, linked back to the EU by undersea HVDC power grids. It’s an ambitious idea- 400 billion euros for 100GW of CSP capacity. But with one possibility being the availability a new lucrative EU ‘Feed In Tariff’ for imported solar power, Deutsche Bank, insurer Munich Re, Siemens and utility giants RWE and E.ON. seem to be keen to explore it. So it could be that the big companies will get involved with some Supergrid type projects- if a new market emerges and profit is available. In which case, it will be vital for the EU to regulate how it’s done- to ensue that its done right. For example, what would be the terms of trade offered to the North African countries hosting the projects?
Of course, for the big utilities, the attraction of the supergrid may not just be for linking in to desert solar and North Sea wind: they may also see it an answer to the problem of finding a market for the excess power that would be produced at low demand periods by a large new EU nuclear programme. If it’s a private grid, what’s to stop them?
These issues are all pending- it will be a while before the supergrid gets going. But a small example of how things can go without a wider longer-term perspective is already emerging in relation to the current series of the UK’s off shore wind farms. Most of these project are now being sited several miles off the coast, linked to land via sea-bed marine cables. There are various ways in which these could be arranged. So far however it seems to be a case of each offshore project having their own parallel (and very expensive) links back to shore. In some cases that seems likely to involve duplication of effort, with links to rival projects running close to each other, in parallel. It would arguably be more rational and cheaper overall to have a network of offshore links, with possibly a single link back to shore for each region, offering a common service for each project to use. That is even more the case as we go further out to sea with more wind farms, and would be vital if we also build links across the North Sea to the continent- as part of the EU supergrid concept.
However, in a submission in March 2009 (FBEN 29) to the new Energy and Climate Change Select Committee, E.ON commented: ‘A super grid connecting offshore wind farms to adjacent countries is an exciting proposal, but it is unclear whether this is the most cost effective route for connecting new offshore wind. Timely delivery of the supergrid will be an issue. For example, round three offshore windfarms should not be delayed because the connection of a zone is dependent upon a wider interconnection project’.
Ofgem, the energy regulator, has also noted that the advantages with the parallel ‘point to point’ radial approach is that it ‘allows generators to proceed individually and avoid delays due to third parties’, but it has said that it’s also happy with the more integrated network approach. Ofgem nevertheless got a pretty rough ride on this issue at last years BWEA wind conference - it was argued that the proposed grid regime would not encourage joined up networks, and that change was needed to ensure collaborative development and a strategic approach. Do we really need a host of separate lines just to protect competition in the short term?
That was certainly an issue for Green MEP Claude Turmes, who was the European Parliament's lead negotiator for the Renewable Energy Directive. Speaking at the UK Renewable Energy Associations annual conference recently, he claimed that the competitive tender process favoured by Ofgem was delaying grid connections for offshore wind projects: ‘The UK approach, imposed by Ofgem, for competitive bids for chunks of 40 km cables for offshore, is not very productive, to put it mildly. You have to get rid of Ofgem's over-liberalised idea, by which you can have competition on grid installation.’
It’s the same old story- competition often undermines progress, and buttresses the power of the powerful, while weak regulation does little to alter the situation.
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