Energy companies in the United Kingdom are in the firing line as a result of recent price increases. One of the big suppliers, Centrica, was candid enough to concede that even though wholesale gas costs were falling, it had chosen to raise by 12.5% the retail price of electricity, much of which is generated from gas. This followed similar increases by its main competitors.

The press

The popular press screamed blue murder and various politicians chimed in with proposals for price curbs on the companies and a special inquiry by regulators. Centrica’s chief executive, selected for a public flogging on BBC radio, tried to explain that fuel costs are only a part of the picture and that non-fuel costs were the culprits for the price increase.

Why, you might ask, have non-fuel costs been rising?

The main factor in the UK, as in Ireland, has been the cost of climate change mitigation measures, which are mandated by governments but not paid for through the government’s budget.

Rather they are added on to consumers’ bills and they have been rising sharply in recent years.

They come in various forms, notably in straight subsidies to producers of renewable energy. In Ireland, these producers, mainly owners of windfarms, enjoy a guaranteed price floor.

They sell their electricity into the wholesale market but must be paid a minimum price not available to conventional generators.

If you are concerned about climate change, and you should be, this all sounds reasonable enough

They also receive payments whenever they must be constrained not to produce – this happens when wind conditions are very good and the system cannot take the full output of the windfarms. Since the theoretical capacity of Ireland’s windfarms is enormous and continues to rise rapidly, this happens more and more often.

In addition, there are extra costs placed on the customer’s account for transmission and distribution – all those extra windmills have to be hooked up to the grid and the owners are not required to pay the full connection charges, which is a further add-on to your regular bill.

If you are concerned about climate change, and you should be, this all sounds reasonable enough – pay a little extra to help save the planet.

But there is also an add-on to fund the subsidy to peat-fired stations, which have the highest carbon emissions of all.

The Irish Government subsidises the power stations with the lowest emissions (wind) and those with the highest (peat) at the expense of stations in the middle, including the large fleet of gas stations.

Some of these, although relatively new, can no longer be used effectively, since the wind and peat stations receive priority in deciding which ones get to operate.

The gas stations become less beneficial in limiting emissions if they are continuously interrupted. Since the cheapest fuel source is coal for the big Moneypoint station in Clare, it is top of the queue. Even with a penalty added for its extra emissions, Moneypoint is cheaper to run around the clock.

The gas stations account for most of the hidden costs of on-off operation, and of the hidden emissions, arising from the system’s high reliance on intermittent wind.

They burn extra gas per unit generated, and thus create more emissions, in on-off mode, which also shortens their useful life.

Windfarms in Ireland

Ireland now has so many windfarms that they cannot all run simultaneously on the best wind days of the year. Their theoretical capacity has now reached about 3,300 megawatts, which often exceeds demand if they were all producing simultaneously.

But this cannot happen, since several conventional stations must be running at all times to maintain system stability.

As a result, the marginal benefit of yet more windfarms is declining – each new windfarm increases the likelihood that some of them will have to be constrained not to operate on more and more days of the year. As the total stock of windfarms rises, it would make sense to diminish the subsidies to building more. But no such mechanism is built into the Irish subsidy system.

Bad emitters

The replacement of really bad emitters, like peat and coal, by fuel-efficient gas plants reduces emissions sharply.

These gas plants, at least in Ireland, already exist: they have been built and paid for.

But they are not being used sensibly, with huge State-mandated subsidies going to stimulate the construction of yet more windfarms, in a country which already has more than it can use effectively.

It is not clear that extra windfarms, when viewed in terms of their impact on system-wide emissions, can help any further.

The latest subsidy hunt is focused on solar power production.

With total intermittent generating capacity already at two-thirds of peak demand and no cap on producer incentives, it is entirely possible that plant with poor availability will shortly exceed demand, pushing electricity charges further upwards with no demonstrable climate benefits.

What’s the point?

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Full coverage: Colm McCarthy