Today the Financial Times reports on the poor performance of the Renewables Obligation in encouraging wind farms: "The amount of new wind capacity added in 2007 was less than three-quarters of that built the year before." This is despite subsidies that make wind farms massively profitable:
"Under the current regime, and thanks in part to high power prices, wind turbines can pay for themselves within about five years, out of a working life of at least 20 years.
In its energy white paper last year the government described the RO as the “primary mechanism” for meeting its goals of reducing fossil fuel dependency. However, Andrew Wright, managing director of markets at Ofgem, the electricity regulator, told the Financial Times: “The RO is a very expensive way of providing support for renewables.”
Peter Atherton, head utilities analyst at Citi Investment Research, said: “It’s a bonanza. Anyone who can get their nose in the trough is trying to."
The problem is that wind farms are getting stuck in the planning system. Now, it is important at this stage to note that they aren't just facing the same "not in my back yard" opposition that many industrial developments do.
Part of the problem with windpower is that each turbine has a very low capacity and, as such, you need massive numbers of them - covering a huge amount of land - to get the kind of power you would get from a small number of conventional or nuclear power plants.
As such, wind farms are poor value in two ways: They are poor value for money as you need to provide a lot of subsidy to produce a relatively small amount of capacity. However, they are also poor value for environmental disruption as you need to ruin a lot of landscapes in order to produce a relatively small amount of capacity. The Government have offered a massive subsidy that has meant it is unnecessary for wind power to offer good value for money. However, they have not found a way of absolving wind farms of the need to provide good value for their geographical footprint - because of that large footprint the planning system is proving particularly difficult to traverse for wind power.
It would be bad enough if the Renewables Obligation, the largest source of subsidy to wind power, were merely expensive - a waste of every taxpayers' money. However, as it functions by obligating energy companies to obtain a certain share of the energy they provide from renewable sources - thereby increasing the cost of electricity - it has particularly pernicious social consequences. The poor spend a significantly larger proportion of their income on electricity than the rich (graph from the TaxPayers' Alliance report The Case Against Further Green Taxes):
The poor could, in theory, be compensated for the additional bill created by the Renewables Obligation with some sort of additional benefit - an increase in the Winter Fuel Allowance, for example. However, benefits are a poor subsitute for keeping your money in the first place. When a Government policy creates an uncertain burden - it is hard to know exactly what the Renewables Obligation will cost people, how much it will raise utility bills - compensation will often be insufficient, slow to arrive and otherwise poorly targetted.
In this particular case the burden of regulation is likely to be not just unwelcome but actually lethal. In 2006-07 there were 23,900 excess deaths in the winter (PDF). These are predominantly the elderly suffering in the cold and making it more expensive for them to keep warm seems almost certain to increase the number of deaths. Poor pensioners - forced to try and cut corners by, among other things, higher council tax bills - should not be forced to choose between a more pressing struggle to make ends meet and the dreadful risks of living in a cold home.
An additional financial burden upon the poorest and deaths among the elderly are a high price to pay for a failing attempt to encourage slight increases in the amount of renewable power we use.
Photo by Flickr User wdrwilson used under a Creative Commons License.
Cross-posted from the TaxPayers' Alliance blog.