Is the UK subsidy for solar PV a good use of scarce funds?

The Guardian web pages are reverberating to the clash of arms between George Monbiot and UK supporters of feed-in tariffs for solar photovoltaic panels and other small-scale renewables. Monbiot claims solar power is an extremely expensive way of generating electricity in the UK and that the new scheme is another way of subsidising the wealthy middle class. The fans of feed-in tariffs note the success of similar schemes in other countries. They think that the cashback proposals will help create jobs in businesses that install and maintain low carbon energy sources. The UK scheme will help drive down the costs of renewable technologies and increase public support for wind and alternative sources of electricity. The argument has focused on solar photovoltaic panels installed on domestic roofs. This note tries to quantify some of the costs and benefits of the new scheme. I'll take one of  the simplest possible examples: an installation of 12 panels on the roof of a medium-sized house in the south west of England, where solar radiation levels are relatively high for the UK. Does solar energy make sense in this country?

Before considering interest costs

a)      The installation will generate a maximum of about 2 kilowatts in full sun on a south facing roof at midsummer.

b)      Over the course of a year, we can expect the panels to produce about 1800 kilowatt hours.

c)      The value of this output would be about £70 in today's UK wholesale market.

d)      The system will typically cost about £10,000. The price of the solar panels is tending to fall but the associated electronics are in very short supply worldwide. The most important component is the 'inverter', the device that takes the DC low voltage current from the roof and turns it into an 240V AC current that is precisely aligned to the frequency of the AC on the local electricity grid.

e)      A system will probably last about 25-30 years, although there will be some fall in power generated as the solar panels age.

f)        If we assume the system lasts thirty years - and make no deduction for the decreasing production at the end of its life - the full cost of the installation is about £330 per annum. This is without considering any interest costs, maintenance or the probable need to replace the expensive inverter at least once during the 30 year life.

g)      The absolute minimum annual cost of the installation is therefore at least four and a half times the wholesale value of the electricity generated. (£330/£70).

h)      We might choose to compare the cost of the system with the full retail price of the electricity produced. If the homeowner is paying 12.5 per kilowatt hour, the annual value of the electricity produced is £225 (1800 kWh times 12.5p).

i)        Without the huge subsidy provided by the feed-in tariff, the annual electricity output comes nowhere close to covering the costs of the installation over its thirty year life. At current electricity prices, the system will produce electricity worth £7,750 compared to an installation cost of £10,000. In conventional terms, this is an extremely bad investment for society as a whole. Because the feed-in tariff rewards homeowner with over three times the current retail price for electricity, it may nevertheless be good for homeowners that invest in solar. The people who pay for this generosity are all the other homeowners using electricity in the UK who don’t install panels on their roofs. This is the crucial point: a subsidy system that may be good for recipients may be damaging for the rest of society.

After interest costs

j)        If I have £10,000, I could put some solar panels or I could invest my money in 30 year government bonds. Today, these bonds will pay me about £450 a year before tax. If I pay tax at 40%, this falls to £270.

k)      When assessing whether solar panels are a good investment, the rational householder will consider the prospective disadvantage of not getting this income of £270 a year, as well as the cost of the initial purchase. He or she will factor this loss into their thinking on solar panels.

l)        Adding £270 a year to the annual cost of £330 produces a total figure of £600 a year as the full financial impact of putting up solar panels.

m)    This is almost three times the full retail of the electricity produced. Without large subsidy or huge increases in the future prices of electricity, solar panels are a terrible investment.

The proponents of feed-in tariffs seem to accept this broad logic. But they respond by saying that the scheme will assist in the development of a new industry and drive down prices. There may be something in this argument. However the cost of solar installations is largely determined by the world market for PV panels, of which the UK will always be a tiny part. We cannot make much of a difference to global prices. In fact, it can be argued that the new UK subsidies are likely to divert scarce inverters to the UK where they will typically produce about half the maximum output of an inverter in a sunny country. So the UK feed-in tariffs, at least as applied to solar PV, might be said to be actually decreasing the total amount of renewable energy produced around the world.

Does this analysis apply to wind power? No, not completely. A moderately sized wind turbine suitable for a farm – such as the Aeolus Power 50 kW model in a good location - will produce 100 times the electricity of a 2kw solar installation for about 25 times the cost. In other words, the productivity of the capital employed is about four times as great. This means that small scale wind power is almost economic. If, for whatever reason, we choose to subsidise small scale renewable energy in the UK we need to focus our money on wind energy. This argument applies even if electricity prices double or treble in the next decades. Wind we have in abundance, sunshine we are short of. By any standards, focusing on solar PV doesn’t make sense and will add to the energy costs* of householders not benefiting from the feed-in tariffs.

* Assume one million households (about 4% of the UK) install PV panels producing an average of 1800 kWh a year. The annual subsidy will be approximately £700m, all of which is paid for by other electricity users. If all this cost is eventually paid for by householders, the cost will be about £35-£30 a year, or perhaps 5% of current bills. (Only about one third of  UK electricity demand comes from homes but householders will eventually pay the whole subsidy cost because of higher prices for goods and services because of the increased price of electricity).

Is the climate changing?

The last few weeks have seen substantial questioning of the quality of the analysis of the global climate record. This presentation, made to the top year at a local secondary school, looks at the Oxford climate series and shows how the way the data is presented may significantly affect judgments on how fast warming is occurring at one particular point on the earth's surface. Apparently innocuous changes, such as varying the number of years in a moving average, can make substantial changes to the appearance of a temperature series. The notes to this presentation can be seen by downloading the PowerPoint file and clicking Notes Page in the View tab; or alternatively by downloading the PDF. Anybody wanting the raw data and the accompanying charts is very welcome to email Chris Goodall at chris@carboncommentary.com.

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The five most cost effective ways of reducing energy bills

The government's announcement today on "green loans" to help homeowners make their property more energy efficient focuses on expensive investments in major improvements in Britain's housing. These proposals are an important step forward, but much cheaper measures can be implemented now by householders eager to reduce their energy bills. In many cases, the financial return will be much faster than the big expenditures mentioned in the latest policy document. For every pound invested, the cash savings will also be better than putting up solar panels or even replacing your central heating boiler with an air source heat pump.

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The Bloom Box - innovation or replication?

The long-heralded announcement of Bloom Energy's solid oxide fuel cell on 24 February generated huge amounts of excitement. Many compared the launch of the Bloom Box to the arrival of a new Apple product. Is it an innovative as the company claims?

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UK attitudes towards climate change and emissions reduction

A recent UK Department for Transport (DfT) survey provides useful data on attitudes towards climate change and on cutting emissions. The fieldwork was carried out in August 2009 and so will not incorporate any effects from the recent criticisms of the IPPC and the revealing of a large number of emails written by CRU scientists at the University of East Anglia. The most interesting feature of the DfT research is that it continues to show that a very substantial majority of people believe that the climate is changing but that relatively few are prepared to welcome potentially painful changes to lifestyle, such as cutting the number of flights taken. The percentages of people suggesting high levels of concern about global warming are generally down about 3-5% since 2006.

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UK feed-in tariffs: buy your hectare of woodland now

Today's UK government announcement on incentives for small scale renewables has three unexpected features: a) The payments for renewable heat, such as the home burning of wood to replace gas or rooftop solar hot water, are much higher than predicted.

b) The figures for wind have risen since the autumn consultation document. This means that well-located wind turbines of the 6-15kW size are likely to produce returns above 13% per year.

c) The figures for solar PV have been increased slightly, but do not offer returns as good as wind. Importantly, the government has also signalled that it will allow PV installed at any time over the next 28 months to capture the full feed-in tariff. Previously, the tariff declined for installations made after March 2011.

An earlier article on this topic which looks in more detail on the incentives to take up the new 'feed-in tariffs' is here.

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Using woodlands to cut emissions

The UK is one of the least forested countries in Europe. Although the amount of woodland cover has increased substantially since its nadir after the First World War, growth has slackened in recent years. The growing maturity of UK woodlands means that carbon sequestration is falling rapidly. An independent assessment commissioned by the Forestry Commission has proposed one way forward: a million new hectares devoted to woodland, generating a reduction of up to 15% of the UK emissions in 2050.

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Postscript on Kenya, climate change and malaria

The previous post on this web site analysed a recent DFID press release on malaria and climate change. I've been sent three recent papers by scientists in Kenya dealing with the epidemiology of malaria. Links to two of these articles are provided below. These documents show that the DFID assertion that malaria is increasing in highland regions of Kenya is highly questionable and that overall malaria rates are probably decreasing, although the geographic picture is complex. They also demonstrate that rates of infection respond to simple but well-targeted interventions. Eradicating malaria from Africa is a difficult target but not one without hope of success.

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Exaggerating the impact of climate change on the spread of malaria

A recent press release from the UK Department for International Development (DFID) suggested that millions more people in Kenya are susceptible to malaria as a result of mosquitoes colonising higher ground as global temperatures rise. ('New evidence of a link between climate change and malaria', 30.12.09.) The press release was extensively covered in UK newspapers and elsewhere. Simple analysis shows that the claims of the press release are almost entirely without foundation. The battle against the severe threat from climate change is impeded, not helped, by government departments issuing alarmist and exaggerated alerts based on poor science.

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Black & Decker's thermal leak detector

Call or write to Black & Decker to demand that the company launches its Thermal Leak Detector in Europe and elsewhere. This is the single most useful energy saving device I have ever seen. Europeans can buy it from Amazon.com in the States, but shipping and customs charges make it quite expensive. Let's get it here before the winter ends.

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Two good software tools for calculating emissions

Tools for carefully estimating carbon footprints have tended to be difficult to use and clunky in appearance. Two recently introduced calculators make real improvements and allow individuals and companies to carry out effective analysis of carbon emissions.

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Spanish renewables (again)

A previous article covered the remarkable growth of Spanish wind and the success in incorporating this electricity into Spain's grid. It focused on the periods in November when wind provided much of the country's electricity, peaking at almost 54% in the early morning of 8 November 2009. Wind was almost 23% of the Spanish total electricity production during the month of November, beating nuclear for the first time. Solar also grew rapidly in 2009, up from 1% in 2008 to 3% of national output. The effect on CO2 emissions from power generation was striking. Carbon dioxide output fell by over a sixth, largely as a result of the growth in renewables.

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Light-bulb Libraries

UK supermarkets and DIY chains stock up to twenty different types of energy efficient light bulbs but most households have some light fittings that cannot use any of these bulbs. There are several hundred different combinations of fitting, shape and power. Some internet sites, such as www.lightbulbs-direct.com/article/energy-saving or www.gogreenlights.co.uk offer a very wide range of low-energy-use bulbs including many unusual types you cannot find in shops. One problem remains: it is not always possible to tell whether the bulb you see on a webpage will actually fit your lamp holder or whether it will be the correct brightness. Light-bulb Libaries may be the answer.

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CO2 proxies in the long-distant past

We don’t have direct CO2 records earlier than 800,000 years ago. So scientists use what are called 'proxies' – indicators that give us indirect estimates of the amount of carbon dioxide in the atmosphere. Advances in scientific techniques have given us increasingly good proxies, meaning we can be more confident that our estimates of CO2 levels hundreds of millions of years ago are about right. There are anomalies: the various different proxies don’t always provide similar results. A paper published this week goes a long way to removing one important anomaly. (1) It shows that the proxy that uses estimates of CO2 concentrations based on isotope levels in ancient soil carbonates may have over-recorded atmospheric carbon dioxide levels at some periods. This brings the figures into line with other measures. Why does this matter? In Mesozoic times, from about 250 to 80 million years ago, the soil carbonate proxy has previously suggested very high CO2 levels in the atmosphere. Some studies had concluded that the air had several thousand parts per million of carbon dioxide, peaking perhaps at fifteen times higher levels than today. But records suggest that the temperature was only a maximum of 10 degrees Celsius higher than today. If the standard 'carbon cycle' models are correct, the estimated CO2 concentrations ought to have produced warmer conditions. The importance of this new research is that it shows that adjusted soil carbon proxies indicate that Mesozoic CO2 concentrations probably never rose above 1,500 parts per million, a figure consistent with other proxies and with the probable temperature levels at time. This is one more important indication that ancient CO2 levels were strongly correlated with climate.

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Discipline envy

Richard Black, the BBC's online environment correspondent, attracted attention when he noticed that almost all climate sceptics are men. Instead, he might have chosen to comment that many of them were social scientists with leanings towards economics. Coincidentally, economics is populated by males. It is only this year that the first woman won the subject's Nobel prize, and her work would not be regarded as part of the subject by many academic purists. Sceptics Nigel Lawson, Steven Levitt, Bjørn Lomborg, and others all think about the world as economists. That's probably more important than that they are male.

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Maldives stance on renewable energy

The Maldives President Mohamed Nasheed has become the most visible developing country spokesperson on climate change. Nasheed has continued to press for radical reductions in CO2 levels in the atmosphere, most recently arguing for a 350 parts per million target in a meeting with activist and author Bill McKibben in Copenhagen.

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The Committee on Climate Change shouldn't have answered the question it was asked

The UK government asked the wrong question. It demanded that the Committee on Climate Change calculated how much air travel can rise without causing an increase in aviation emissions. Not unsurprisingly, the CCC answered by saying that the number of trips could rise at the same rate as efficiency improvements in air travel. The Committee said that emissions per passenger will fall by about 1% a year, and so travel could rise by about this amount. No shocks there. By 2050, the CCC opined, the number of passengers taking trips from UK airports can rise to 370 million a year, up from 230 million today. The maximum possible number of new passengers at Heathrow from the addition of new runway and sixth terminal is about 60 million. Hoorah, said the industry, there's space for the expansion. Unsurprisingly, the press misinterpreted the Committee's report and said that it had 'approved' the government's plans for the airport. By answering the government's disiningenous question, the CCC has lost some of its impartiality.

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Coal - fuel of the future?

Two pieces of news provide evidence of a fightback by coal. American Electric Power's Mountaineer plant in West Virginia is reporting significant success for its small scale carbon capture project. And the UK has just licensed exploratory boreholes for offshore Underground Coal Gasification (UCG), a woefully under-researched technology that may make CO2 sequestration easier. The scale of the challenge facing the globe's coal users is enormous but with determined research and development, the fuel may remain usable for power generation in a low-carbon world.

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The Guardian's editorial on Copenhagen - 7.12.09

Today 56 newspapers in 45 countries take the unprecedented step of speaking with one voice through a common editorial. We do so because humanity faces a profound emergency. Unless we combine to take decisive action, climate change will ravage our planet, and with it our prosperity and security. The dangers have been becoming apparent for a generation. Now the facts have started to speak: 11 of the past 14 years have been the warmest on record, the Arctic ice-cap is melting and last year's inflamed oil and food prices provide a foretaste of future havoc. In scientific journals the question is no longer whether humans are to blame, but how little time we have got left to limit the damage.

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