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Why Longannet will close and electricity become even more expensive

While it is standard practice for politicians to blame their opponents for all embarrassing events, it is disingenuous of Mr Ewing to attribute all responsibility for the impending closure of Longannet to the present Westminster government, and particularly so to imply some responsibility to the early closure of the ROC subsidy scheme. (Scottish Government press release)

Scottish Power are quoted as blaming a charge of up to £40 million a year for connection to the UK grid for their decision to close the plant and Mr Ewing is railing at this invidious discrimination against Scottish generators. Both of these positions are puzzling. The charging scheme has been in place since 2005. Why, after ten years has it suddenly become onerous? Also it applies equally to all forms of generation, not just fossil fuels, so why are Mr Ewing’s friends in the wind industry not also complaining?

A more plausible explanation for the announcement in March of the proposed and now confirmed closure, is that from April 2015 the UK’s carbon dioxide tax, called the Carbon Floor Price, was nearly doubled to over £18 per tonne of CO2.  If Longannet were able to operate at its full capacity then its 2.4GW could produce around 21TWh of electricity annually. It is estimated that each megawatt hour of coal fired generation emits 0.966 tonne of CO2, so that each megawatt-hour of output  would be taxed at £22.2. The annual charge on Longannet could thus be up to £462 million, ten times the Grid’s connection charges.

The connection charge regime and the carbon tax were introduced by or during the tenure of the Labour government. The increase in carbon tax was the responsibility of the Liberal Democrat ministers in charge of the DECC during the coalition government. Neither can reasonably be laid at the door of the present UK government.

Longannet has not operated near full capacity for at least five years. Its current capacity factor, the proportion of its maximum output at which it operates over a year, is less than 50%. This is likely to decrease as more wind turbines come into operation, and there are 5.6GW, in theory more than twice the capacity of Longannet, consented and awaiting construction. This is the final reason why Longannet is becoming uneconomic. It has been the SNP government’s policy to encourage the construction of wind  precisely so that the amount of thermal, particularly of coal fired, generation should be reduced. This is now happening. Politicians have belatedly realised that while the amount of such generation can be reduced, reliable thermal generation capacity cannot, as it will be required when, as can happen in the middle of winter, the wind drops and wind generation is effectively zero. The owners of Longannet  however cannot afford to let it stand idle or running at much reduced output for the rest of the time. A 10% drop in capacity factor represents an annual loss of revenue of nearly £100 million.

The predictable consequence of a large amount of intermittent and uncontrollable renewable generation is an increase in the cost of electricity, even without the costs of subsidies to wind and solar power, due to the need to duplicate generation facilities. This extra cost for onshore wind has been authoritatively estimated to be more than £70 per megawatt hour, i.e. even more than the current subsidy, when the further costs of extending the grid is included. And we can only expect to further increases in cost if the ‘green’ energy bandwagon continues to roll. Denmark and Germany, with twice as much wind and solar power as the UK, have domestic electricity prices 50% higher than ours.

All these numbers have been available to policymakers but have been ignored by politicians obsessed with the arbitrary ‘targets’ they have set without understanding how they could be met or what would be the consequences of meeting them.

Professor Jack Ponton

The Scotsman - September 2015