On Grid Parity

Robert Wilson (@CountCarbon), in a comment on my last blog, raises the issue of grid parity, asking what it is in reality. It's a good question. In essence, the idea is very simple. It's when new forms of energy production cease to be expensive and cost the same as existing methods. The idea being when solar PV, or wind turbines, or whatever tickles your fancy, costs the same as gas or coal burning then, voila, everyone will switch to the renewables. They will have achieved grid parity - that means that the electricity they supply to the national grid costs the same.

But I don't think Robert was looking for the mundane answer. He's a bit of an expert in these matters — I think he will know full well what grid parity means in theory. What he is driving at is that the concept is a whole lot more complicated to understand than my simple explanation makes out. And it is. Take a look at my last blog post for starters — this post more or less carries on from there so it's not such a bad idea to read that one first in any event.

There I make the point that comparing fossil fuel burning with renewables (or nukes — I'm fond of nukes) is an apples and oranges scenario. Fossil fuel has to be paid for but the plant to burn it in is cheap to build. All the others are almost free to run but the capital costs of getting the kit up and running are high. So, given this, the concept of grid parity is immediately challenged because to get a true cost of the electricity produced you have to perform a series of calculations involving a number of assumptions.

For instance, how long will the low-carbon plant last? If it's 25 years, the cost of the power will be x; if it's 50 years, it will be half as much (or x/2). We don't really know how long this plant will last because we have only just started rolling it out in large quantities, so immediately we are in the world of guesswork.

Suppose we decide on a 25-year lifespan, so that we can then work out a cost per unit of energy. We then have to look at 25 years of fossil fuel burning to make a comparison. But what will the cost of fossil fuel be in 25 years, not to mention all points in between? We'll need to know that in order to make a grand total so that we can compare with our low-carbon plant costs. But who knows what will happen to fossil fuel prices over 25 years. More guesswork.

This is an exercise you can do and, indeed, it's been done already many times, notably using DECC's 2050 pathways calculator. This suggests that a low-carbon route is likely to be no more expensive than a fossil fuel, business-as-usual one. But it does all depend on the assumptions being made.

If this really is the case, and that DECC's calculator has got it right, then we have already achieved grid parity and we simply don't need any green subsidies to kick start the low-carbon energy drive. Apparently financial logic dictates that we should move towards low-carbon electricity right away because it's already as cheap and is likely to get cheaper over time (fracking notwithstanding).

But no one really believes this to be the case. Institutions are not falling over themselves to build offshore windfarms or new nuclear power stations, or anything else that vaguely fits the bill. They all want generous subsidies or guarantees to take away the risk that the assumptions made might be wrong.

In other words, there is an apparent lack of will here. It easy to carry on with the business-as-usual scenarios because they are perceived as being less risky, because there is less money at stake. The low-carbon plant would have to become a whole lot cheaper than it is now for the institutions to take the plunge and invest in expensive low-carbon plant without any subsidy involved.

Or to put it another way, grid parity is not enough. We need to get to something like half-the-grid price before new energy forms will start to take over off their own bat. Or maybe even less. Once again, we are speculating.

Even then it's not quite so simple, because we need to sort out the power storage issues before we get too far down this track. Before we can talk about one-for-one substitution, we have to have adequate methods in place to store energy from intermittent renewables, otherwise we will still be building new gas plants well past 2050. Power storage has to be built into the financial equation. Without it, each unit of renewable electricity is worth ever so slightly less than the one produced immediately before it. This isn't a problem with nukes but then again nukes have their own problems.

It's not as if the business-as-usual route is without risks. Even discounting the effects of climate change over the next 35 years, this route ties us into burning fossil fuels and who knows how easy these will be to obtain, especially if the emerging economies continue to expand on the back of fossil fuel derived energy. It may be that fracking and other technological breakthroughs will bring about an unexpected energy abundance. But equally it may not. There's really no more logic to the pro-frackers position than there is to the EnergieWende route, as espoused by the anti-nuclear, pro-renewable Germans. Except, of course, that the German route does at least address carbon emissions, something the frackers only pretend to do.

Which brings us back to the concept of grid parity. It's not really measurable, certainly not in terms of unit costs of electricity. Instead, think of it as a ravine that has to be jumped. As you travel along the side of it, the gap gets steadily narrower but at what point do you actually decide to jump? Wherever that is would be where grid parity is. We could hang out a signpost that says Welcome to Grid Parity. But we won't know where to place it until we get there. And there's no guarantee that we ever will.

More Expensive Than What?

We keep hearing that low-carbon energy is more expensive. It's a pretty consistent meme pedalled by the right-wing media on both sides of the Atlantic. The further right the media, the more ruinous the expense. The left wing media tells a very different story, insisting that low-carbon energy is an investment with a long term payback.

But there is a little point here that's often overlooked by both sides. Fossil fuel burning is all about building cheap power stations and then buying in the fuel at whatever the market price may be, whereas the low-carbon alternatives are all about upfront capital costs, followed by almost-free running costs. (I'm excluding biomass here - it's much more like a fossil fuel in this respect).

So immediately you have a problem in that you are comparing apples and oranges. There's no easy way to tell which energy source is more expensive because you don't know what the future holds. To do that, you would need to know the price of fossil fuels many years ahead - like 25 or 50 years ahead. Only then would you be able to calculate which method had been more expensive. In effect, would the cost of fossil fuel burning be greater or less than the cost of financing the building of the low-carbon plant.

Now problems like this are not unusual. Businesses face them all the time. Consider a timber frame company thinking about investing £1 million in a fancy cutting machine which could automate the production line and reduce manpower costs by £250k a year. Even after factoring in a finance charge for the machine, it seems to make financial sense to spend the money. The business will reduce its costs and thus be more competitive, which should bring in more work and the production people who would lose their jobs in the joinery shop may be found new roles in the expanded business.

But the decision is not without risks. For instance, the amount of business being done might collapse and the projected savings of £250k per annum might not materialise. On the other hand, without the cutting machine, the prices charged by the business might become uncompetitive and the business could go into decline. Only with hindsight can you tell whether the decision to invest in a cutting machine is a good one. The question facing the directors is "Is it worth spending the extra money on this machine?" not "Which option is the most expensive?"

It's not so very different with our energy choices. We are not in a position to answer the more expensive question - there is simply no way of knowing until the capital investments we make now have run their course. As it stands, the capital markets are too timid to take the plunge and invest without some guarantee that they will see a return. Their fear is that the future price of energy will still be set by the availability of fossil fuels (and not mitigated by a carbon tax) and that if the price of fossil fuels falls below their financing costs, then they will have to bear a loss on every unit of energy they sell. Whereas the price of fossil fuels can rise and fall in response to supply and demand, the cost of finance is fixed at the outset, and fixed for a very long time.

Hence all the subsidies which governments are using to kickstart low-carbon energy production. The subsidies are not there because low-carbon energy "is more expensive", but because investors don't want to take a punt on fossil fuel costs many years ahead. Hence the need to socialise the decision, or for governments to shoulder the risk.

The trap which the government has fallen into is taking the green subsidy money from utility providers. If low-carbon energy is seen as a social good — which it is — then the money to get it off the ground should come from general taxation, where it would be lost in the mire, along with spending on healthcare, education and my bete noir HS2. Instead we have it pegged to our utility bills and there it's bound to become more and more unpopular as the Mail and the Telegraph continue to highlight just how much of our bills is going on subsidies.

Nuclear 2.0 Review

The nuclear renaissance is a topic which continues to fascinate and one of the key figures in bigging it up is Mark Lynas, who is now better known for his pro-GMO conversion speech which received a lot of publicity earlier this year.

Mark has just produced an ebook called Nuclear 2.0 which is a distillation of his current thinking and seems to have come about as a result of his involvement with the film Pandora's Promise, the making of which involved filming in such well known holiday locations at Chernobyl and Fukushima. He knows his stuff — it's not an armchair treatise — and he marshalls his facts to present a cogent argument that we should be investing heavily in nuclear power and not just relying on renewables, energy efficiency and carbon capture and storage to build a low carbon energy network fit for purpose. I won't argue with this - in fact, I find myself in total agreement.

My only quibble is to wonder about who this ebook is written for? The vast majority of people I know are either totally disinterested in the whole energy debate, or are already in favour of nuclear power - certainly, they are not afraid of it. But then I don't know many Germans and they seem to have a more universal distaste for all thing nuclear (except of course down at their local radiotherapy treatment centres where cancer victims seem quite relaxed about being bombarded with radiation).

In this country, there remains a solid core of energy activists who have dug their heels in and continue to think that nuclear power is the work of the devil, and that the not-insignificant issues with its roll out (cost, proliferation, decommissioning, waste, terrorism, risk of accidents, to name but seven) are simply insuperable. The news is that they're not.

Actually, this solid core is not that small. There is Greenpeace and Friends of the Earth (although, as Mark points out, neither of these campaigns very strongly against nuclear power these days), there are a handful of leftish/greenish MPs and there are shadowy bodies like the Nuclear Consulting Group which is not really a consulting group at all but a bunch of anti-nuclear academics. Together this consists of a considerable anti-nuclear lobby with some well known names. My guess is that Nuclear 2.0 is written with them in mind, but I also think it's more than likely that none of them will be bothered to read it and, even if they do, they won't be convinced by its arguments.

Which is a shame. Nuclear power may well be expensive to build and difficult to maintain, but it still wins out as one of the less destructive ways of making electricity. The risks are overstated.

Obama's climate speech for beginners

The amazing thing about this speech was that it was made at all. It lasted for nearly 40 minutes, consisting of 6,000 words. The transcript is here. Arguably, it's four years too late, but maybe it's a sign of the times that the excruciating climate wars are coming to and end. Or am I being naive (again)?

• So what does he talk about for 40 minutes?

The speech is strong on the background, strong on the science and strong on pointing out that previous bits of environmental legislation were passed into law with bi-partisan support. 1970's Clean Air Act went through the senate unopposed and then went through the House of Representatives with just one vote against. It was signed into law by a Republican president and strengthened later by another. But then it didn't threaten Big Oil, or at least not directly.

• You are suggesting that the strength doesn't last?

About halfway through, he starts on what an opportunity climate change mitigation can be. Here he begins to sound a bit desperate. Try this. A low-carbon, clean energy economy can be an engine of growth for decades to come. And I want America to build that engine. I want America to build that future -- right here in the United States of America. That’s our task. Stirring stuff, but the moment American politicians start going on about how great America is, I begin to have my doubts.

• And the meat? Where's the meat?

Not good.

1) He fudges on the Keystone pipeline decision. Passes the buck to the State Department which is currently evaluating whether it is in the national interest. I bet it is.

2) He backs fracking. His only caveat is that he calls it a transition fuel.

3) He backs more renewables but says nothing about funding mechanisms.

4) He commits government to buy 20% renewable electricity by 2020 - but doesn't define renewable - so it will probably be biomass, me thinks.

5) Makes vague commitments to encourage energy efficiency, but nothing like a Green Deal, as far as I can see. Maybe that's a good thing in itself!

6) Makes some federal funding for flood defences and water development projects - claiming this is mitigation work.

7) Nuclear power gets just one mention in the whole speech We're building the first nuclear power plants in more than three decades -- in Georgia and South Carolina but doesn't say whether he approves, nor does he show any interest or backing for new nuclear technologies.

8) Stresses that he's involved with international co-operation with China, India and Brazil. Comes up with the unintentionally funny line: my administration will redouble our efforts to engage our international partners in reaching a new global agreement to reduce carbon pollution through concrete action. So good news here for Portland Cement manufacturers!

9) Promotes Gina she’s terrific McCarthy at the EPA, and bewails the fact that she is being blocked at every turn by the Republicans. I like this line: We don’t have time for a meeting of the Flat Earth Society. Sticking your head in the sand might make you feel safer, but it’s not going to protect you from the coming storm.

In truth, these are very weak measures indeed and make our own (hopelessly split) UK government look like the Green Party in comparison. But the significance of all this is that he made this speech at all, that he has put climate change back on the agenda in the USA for the first time since the credit crunch.

It's amazing to reflect that the anti-climate change campaign has been so successful over the past few years that the US President gets saluted as a hero for merely delivering a speech which mentions there might be just a small problem with carbon dioxide, whilst also giving the OK to a pipeline for exporting Canada's tar sands and also bigging-up fracking. No doubt, the Tea Party Republicans will be up in arms at the outrageous interventionist policies Obama is promoting, but secretly they must be delighted that the agenda has moved so far their way that a speech such as this is seen as a milestone.

Every chart tells a story...

Ben Adam-Smith (@BenAdamSmith) alerted me to this chart which he stumbled upon whilst researching the vexed issue of density. Every good chart is designed to tell a story (and back it up with facts and statistics) but that doesn't mean they aren't capable of leading you down the garden path. And this is a good example of one that does.

The chart sets out to show how greedy Americans are when it comes to energy and how the very design of their cities further exaggerates this largesse. 18 cities are compared on the basis of their energy usage per head and this is mapped against their population density. The result? The seven American cities are the seven largest energy hogs and also the largest land hogs. At the other end of the spectrum, the three Asian cities, Tokyo, Hong Kong and Singapore, are not only the three most energy efficient per capita, but also the three most densely populated.

QED? The more densely populated a city, the more energy efficient it is. That, at least is the conclusion we are being drawn to here.

But is it true? Let's dig a little.

First thing that stands out is that the x axis and the y axis are comparing apples with pears. The key metric we are being asked to look at is the energy consumption per head. If we did this and this alone, we would have just a single line populated with 18 different cities, with Houston at No 1 spot with score of 75 and Hong Kong at No 18, with a score well below 10. Now that is already a remarkable observation. People living in Houston consume around ten times more energy per head than people in Hong Kong. This tallies with available national statistics on energy and CO2 emissions, though China no longer has such a low score. I suspect this chart is a few years old now and that Hong Kong's score would now be noticeably higher. But that's not the point.

The chart then adds another axis showing the population densities of each of the 18 cities. Now this too is interesting as it draws us to the conclusion that the American cities are groundhogs and the Asian cities are space efficient, though note that two of the Asian examples chosen, Hong Kong and Singapore, are island city states and neither has that much space to expand so they are almost bound to be space efficient.

My main nitpick is that these two observations which, in themselves, are demonstrably true are not necessarily connected, let alone causally related. They may be, they may not be. But the very fact of graphing them against each other draws us to the conclusion that a connection is there and it's a strong one. Indeed, it draws us to the conclusion that population density is the major factor in determining energy usage. And that dense development patterns are therefore a good thing — inherently sustainable even — and that in future development should take place on this sort of basis. Hong Kong good: Houston bad.

It's an oft held criticism of American cities are that they are so large that they encourage car use — "LA is a great big freeway." In contrast, compact cities are walking cities, and they also make public transport more cost effective because there are more potential passengers within walking distance of each bus or metro stop. All true and good. And therefore transport energy costs are likely to be high in megacities which were developed after the advent of car use and cheap oil. Which is the point the graph is making. But transport costs are not the only energy costs. What about heating? And air conditioning? And manufacturing? And public buildings? Maybe, just maybe, American cities have more of these as well. Not to mention bigger houses. In fact, I'm sure they have all of these features, all much bigger than Asian homelets. I'm pretty sure you could chart energy consumption against average house size, or average incomes, or number of doctors per head of population, and get almost exactly the same looking chart.

This is because Americans are, by and large, rich, certainly when compared to Asians and it's this factor which tends to give rise to space-hungry grid-iron street patterns, high levels of car ownership and heavy energy use per head. Their wealth also developed in a world of cheap energy in which no one gave more than a passing thought to how much energy they used, and a world of cheap land too, so it's hardly surprising that their cities developed as they did.

In conclusion, it's not that this chart isn't accurate or even that it draws false comparisons, but that it's making an observation that tells us about the historical development of cities and dressing it up as lesson for us to learn about tomorrow's cities and developments.

What I'm getting at is that a chart like this gets used as a manifesto to justify high density development when in reality it is just a bit of social history. You could, if you wanted to, create a low density, low energy neighbourhood: think green ribbons stretching across the countryside with everybody having a passivhaus on a one-acre plot and a bus up and down the lane every ten minutes. Or you could create the densest, most energy hungry development imaginable: think of the Candy Brothers' One Hyde Park, 86 apartments in central London in which, apparently, hardly anyone actually lives.

So the moral from all this? Just because cheap energy leads to low density development, it doesn't follow that high density development will result in low energy use.

The strange case of the missing Building Reg

I can distinctly remember sitting in the audience at Ecobuild this year (March 5 - 7) listening to Don Foster, whose is a DCLG minister (official title Parliamentary Under-Secretary of State for Department for Communities and Local Government) saying "It'll be May at the latest."

What was he talking about? And why didn't it happen?

He was talking about publishing the final version of the energy efficiency regulations for buildings in England, known to all as Part L. Part L has been in existence since 1976. Every few years, it gets uprated to reflect changes in the energy landscape and, to a lesser extent, changes in technology. In 2006, Yvette Cooper, who was then the minister in charge of building regs, announced the Code for Sustainable Homes and, with it, a timetable for future Part L upgrades. These being 2010, 2013 and finally 2016.

2016 was seen as the holy grail of energy efficiency, the zero carbon house. It was assumed at the time that the Code for Sustainable Homes and the building regs would come into alignment at this point. 2010 and 2013 were to be stepping stones along the way. Part L, in particular, was in the hot seat here. Unlike the Code for Sustainable Homes which was mostly voluntary, Part L is mandatory.

Now Part L revisions have always been subject to a fair amount of lobbying. The product manufacturers love the revisions because they get to sell more kit (think insulation) and more expensive kit (think boilers and heat pumps). The housebuilders hate them because they have to pay for all this gear. Part L revisions start life in draft form which is subject to consultation. The final version of Part L is habitually late and this in itself causes lots of niggly problems because no one is up to speed by the time the new regs come into effect.

In order to address these issues, the government has published a timetable showing when the building regs will change. All well and good, and very responsible and grown up. The 2013 Part L is due to come into force on October 1st this year and, by convention, the regulation should be published some months ahead of the enforcement date, for obvious reasons. Hence the question to Don Foster back in March which prompted his response about a May publication date.

So why have we got to June 13th without the new Part L? Final versions of Part L have been late before but never this late. This late is ridiculously late. It's all very well lobbying and carrying out base political manoeuverings, but there must be some one in a position to say "Time gentlemen please." After all, it's only a building regulation. You can argue till the cows come home about whether a wall U value should be 0.18 or 0.17 or 0.16, but the world isn't going to come to an end whatever the outcome.

The strange thing is that the most contentious aspect of this revision (it was in the draft version), the requirement for consequential improvements, was dealt a death blow last year by the Daily Mail's Conservatory Tax campaign. All those in favour of toughening Part L have conceded that this proposal is dead in the water and will not be part of Part L 2013. So it seems unlikely that there is much behind-the-scenes lobbying going on here.

What else could they be arguing about? Well we still don't have a definition of what a zero carbon house should actually consist of. But that is an argument that can wait till the 2016 version of Part L. 2013 was only ever to be a stepping stone.

There has been a debate about adopting Fabric Energy Efficiency Standards or FEES. The draft version made a good case for so doing, if only because they are much easier to understand than the existing metrics for overall energy performance of new builds. But I can't really see this as a reason for holding up publication.

So could it be the Treasury, up to their usual tricks in trying to subvert the green machine? Possibly. Part L is certainly a green leaning regulation, and a tougher Part L would be more expensive to implement, which the Treasury doesn't like. But the added cost is hardly a game changer: it will add, at most, a few hundred pounds to the cost of a new house. Delaying Part L publication will arguably add rather more, because the manufacturers won't be able to tool up in time to produce Part L 2013 compliant kit. On balance, it seems unlikely that the Treasury is that bothered about Part L.

So just what is going on behind the scenes? I have no idea. I can only surmise that Part L's non-appearance is symptomatic of a non-functioning department in the midst of a non-functioning government. The novelty of a coalition government, and the optimism that accompanied it, is now long dead.