ROCs

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In today’s Independent newspaper (London, Monday 23 February) I argue that we may need to accept some new nuclear power stations. I put forward the view that the trench warfare between the pro-nuclear groups and those that support renewables means that progress towards ‘decarbonising’ electricity generation in the UK is too slow. We probably need to invest in many different types of non fossil-fuel generation as rapidly as we can if we are to meet the tough targets for UK emissions reduction so painfully won by groups such as Friends of the Earth. We no longer have the luxury of ruling out nuclear expansion.

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Westmill Wind Farm Co-op, Watchfield, Oxfordshire
Westmill Wind Farm Co-op, Watchfield, Oxfordshire. Photo credit: http://www.energy4all.co.uk.

Community-owned wind farms are a rarity in the UK, despite their popularity in other parts of northern Europe. So should we welcome an opportunity for individual investors to invest in a newly built wind project in northern Scotland? Yes and no. The prospectus promises reasonable returns. But the protections to investors are limited and the information about the mechanism by which shareholders get their returns is sadly lacking. Even enthusiasts for individual investments in wind power need to be very cautious about investing in the Great Glen Energy Co-operative.

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Offshore location map of the London Array
Offshore location map of the London Array. Click on the image to see a more detailed map from the London Array website (opens as a PDF).

Shell backed out of its commitment to provide the financing for one third of the world’s largest offshore wind farm off the Kent coast. The London Array, expected to cost about £2bn, now needs to find a new investor. What about tapping the public? The project has reasonable economics, and private individuals could benefit from 40% tax relief by putting shareholdings into pension plans. Perhaps as importantly, such a move would raise understanding of renewable energy generation among the wider community.

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The UK government has announced an intention to allow offshore wind farm development around most of the UK. John Hutton suggested that about 33 GW capacity could be added by 2020. This would provide about 25% of current UK electricity demand (which is itself rising by 1 to 2% per year).

Simple calculations suggest that this change may add about 15-25% to UK electricity bills. Offshore wind is more expensive to construct and operate than onshore wind farms. The announcement may suggest that the government believes that offshore wind can be pushed through but that onshore farms are likely to be successfully opposed. The big push for offshore wind seems to mean that the government is losing faith in nuclear.

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In Denmark and Germany, large numbers of individuals own shares in local wind farms. If the government encouraged this in the UK, a large part of the local opposition would disappear. Onshore wind farms in windy locations are good investments which could form an effective part of many people’s pension plans.

One of the few co-operatively owned wind farms in the country has almost finished raising its funds. Investors have put up £3m to buy two existing turbines in the Fens. Locally owned wind farms should be encouraged as a cost effective means of cutting emissions.

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Amazonian topsoil enriched with charcoalOrganic matter, such as agricultural waste, heated in the absence of oxygen splits into two types of material: a charcoal (biochar), and hydrocarbon gases and liquids. When added to soils, the charcoal can provide a powerful fertiliser. The hydrocarbons can be burnt, either to generate electricity or to power an internal combustion engine.

Biochar is exciting growing attention around the world. Charcoal’s ability to improve soils can sometimes be spectacular. But more importantly from a climate change perspective, charcoal is almost pure carbon and is strangely stable in soils. It seems to persist for centuries. Charcoal can therefore offer substantial opportunities for long-term sequestration of carbon. The valuable fuels from the biogases and liquids are also carbon-neutral since they contain CO2 previously captured during photosynthesis. As a third major benefit, soils fertilised with charcoal seem to need less artificial fertiliser, thus saving fossil fuels. Fewer applications of fertiliser would reduce the level of emissions of nitrous oxide, a particularly dangerous greenhouse gas.

Biochar manufacture represents a way of productively storing large amounts of carbon. But the carbon in the charcoal could be burnt to generate electricity instead of being stored in soil. Current emissions trading schemes, such as the European ETS, do not allow sequestered carbon to be considered as equivalent to a reduction in greenhouse warming emissions. This is a mistake that will need to be rectified. It make more sense to use agricultural land to make biochar and biogases/bioliquids than to burn the biomass in power stations. Power stations burning wood benefit from buying fewer emissions certificates and from the renewable energy subsidy, but there is no comparable benefit from storing carbon in the soil. This is an anomaly that should be removed.

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British Gas has launched a consumer gas and electricity tariff that will cost 10% more than its standard rates but which offers better green credentials than any other consumer utility tariff in the UK market.

The product has the following important features:

  • The electricity is derived from renewable sources. The company says that this is not the key ingredient of the tariff. Later in this note I try to explain why.
  • British Gas will buy and retire Renewable Energy Certificates for 12% of the electricity it supplies. This is probably the most important aspect of the proposition.
  • British Gas will ‘offset’ all of the carbon dioxide produced as a result of each household’s purchases. This is the most expensive part of the deal for British Gas.
  • There will be a small donation to a green education fund for schools.

BG says that it makes no extra money from the sale of its Zero Carbon product. This looks a justifiable statement to us. The important other questions to ask are:

  • Why did BG decide that 10% was the appropriate premium to its main tariff? It could have designed a less costly offering with reasonably strong green features. Do mainstream ‘concerned consumers’ regard 10% as an acceptable price increment? Did BG need to ‘gold plate’ the new product to avoid any criticism that it was a proper green tariff?
  • How will the company manage to ensure that it buys high quality offsets, and not the dubious offerings sold by consumer offsetting companies?
  • The product is slightly complex and difficult to explain. Can BG cut through the competing claims of other green suppliers to build a large customer base for this high quality offering?

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Do dedicated biomass electricity generating plants make financial sense?

E.ON UK has recently announced a plan to build a second power station using 100% energy crops as fuel. The first investment – a £90m power plant at Lockerbie in Scotland – will open within the next few months. The second plant, still only in the planning stage, will be in Sheffield on the site of a previous generating station. Both power plants will use wood from forestry and specially planted willow but Sheffield will also burn waste wood from other sources, such as industrial pallets. These are the first two large-scale plants in the UK if we exclude the ill-fated Arbre plant of several years ago. (Arbre was an extremely advanced wood chip gasification plant built in Yorkshire. It was never fully commissioned.)

By the standards of the electricity industry, the E.ON investments are tiny. The proposed Sheffield plant has a price tag of £44m compared to £1bn for E.ON’s intended investment in the new super-critical low(ish) emissions coal power plant at Kingsnorth in Kent. Nevertheless, Lockerbie and Sheffield do appear to make good financial sense, at least in part because of the revisions to the renewable energy subsidy scheme announced in the government’s June 2007 Energy White Paper.

This article looks at the prospective financial return from operating a power plant burning wood and other energy crops.

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