Big Picture Burning Money Carbon Capture Carbon Commodities Cost Effective

Summer of Stupidity

It is from the Business pages of The Times Online that I learn that Ed Miliband possibly cannot read, and does not seem to be able to think clearly.

“From The Times : June 1, 2009 : Government to set clear targets for UK energy mix : Britain is set to turn its back on a wholly liberalised energy market and will return to a more interventionist, state-directed model, according to Ed Miliband, the Energy Secretary…“The market on its own is not going to ensure that we make the transition to low carbon,” he said. “It’s not necessarily going to ensure the right diversity in our energy mix.” Mr Miliband, who is pushing for a big rise in electricity generated from low-carbon sources, said that this summer the Government would set out a clear framework for Britain’s future energy mix — specifying future targets for total power generation from nuclear, gas, “clean coal” and renewables for the first time since the 1980s. The so-called Summer Strategy, dubbed the “2030 Masterplan” by senior industry executives, will also provide a long-term framework for the development of the National Grid, which is facing a big overhaul in order to support a huge increase in offshore wind power in the UK, as well as a fleet of new nuclear reactors…”

All those industries with their begging bowls out asking for bailouts and “future price guarantees”. What should I start with first ? New Nuclear Power or “Clean” Coal ? It has to be Coal first.

The reason why nobody wants to build Carbon Capture and Storage plants is because they’re expensive to run.

The UN Copenhagen Climate Change treaty to be negotiated in December is more than likely to include Carbon Trading as one of its major planks.

One of the central features of a market in Carbon is that nobody will be able to assure or predict the future price of Carbon.

Building expensive kit that costs a bomb to operate will obviously be a risky monetary manoeuvre.

That’s another reason why nobody wants to build Carbon Capture and Storage plant.

Although Carbon Capture and Storage plant has been built around the world, the numbers are low, and the likely costs of rolling this out on a wide scale are still unknown, and may not be known for a decade.

That’s another reason by nobody wants to build Carbon Capture and Storage plant.

The only reason why anybody would want to build Carbon Capture and Storage plant is the promise of Government money, in the form of subsidies.

Public financing is the only way Carbon Capture and Storage plant will be built.

As you may already know, I have been re-reading Nicholas Stern’s book “Blueprint for a Safer Planet”, with a red pencil in my hand. My copy of the book is now littered with comments and underlinings.

I find I strongly disagree with much of what he asserts, and I find that his arguments internally contradict on occasions, but that doesn’t stop me agreeing with one central principle – that of cost-efficiency.

page 100
“…achieve reductions of greenhouse gases as efficiently as possible – in other words, to keep the costs of action down. By having just one price for emissions we ensure, at least in principle, that all opportunities are exploited in any given area…”

We do know roughly how much each kind of Carbon abatement will cost. The management consultants McKinsey have produced a stream of cost abatement curves, nation by nation, scale by scale.

This should be enough to convince us to take the cheapest options first.

Especially since they are the fastest to implement.

Why is Ed Miliband fixated on fixing the Big Energy market ?

I think it has something to do with the fact that it seems that the Big Energy suppliers market is already so uncompetitive, it wouldn’t make any difference to have large state control (and large state handouts).

The six large electricity suppliers have been accused of keeping their domestic prices too high (BBC TV Watchdog, for example), even as generation costs slipped at the end of 2008. It looks like because one company didn’t adjust, the others didn’t see the need to adjust either.

We all effectively source our electricity from the same big six companies, so unless you can get trade discount, you will pay roughly the same for the same amount of power, whichever supplier you switch to (as long as they can read your meter correctly).

The big Energy suppliers are not going to radically change their plant to use new and renewable fuels and feedstocks.

Even with a very steeply declining year-on-year amount of Carbon allowances for the large Coal-fired electricity generation companies in the UK, they are not going to diversify out of Coal.

It’s just like BP and Shell are not going to diversify out of Oil and Petroleum and Natural Gas.

It will always be cheaper for them to pay the Carbon price and carry on burning.

New plant will always be more costly than paying the Carbon price on the emissions of the old plant.

Everyone knows we need to finance new Energy infrastructure, regardless of who pays for it.

The problem with picking technologies in Energy is that Ed Miliband seems to be fixated on picking the expensive ones.

If the State financially supports various expensive “low Carbon” Energy technologies, then the price of Energy to the end consumer will inevitably rise to the same level of “expensive”.

Picking “low Carbon” technologies by largescale financial support will also have the side effect of minimising the price of Carbon through the seemingly inevitable universal Carbon Trading exchanges.

But this will only happen when the “low Carbon” technologies come on stream. So in the meantime, domestic Energy bills will become more expensive because of (a) subsidies to expensive “low Carbon” technologies and (b) the ratcheting down of the amount of Carbon Quotas in the Carbon market.

So the end consumer, again, will pay through the nose, twice, for an irrational policy.

And as Stern says (page 107) “…putting a price on carbon emissions will raise the cost to the consumer of a range of goods and services – heating and travel, for example. In the short and medium term, this will affect poorer people most.”

So, Ed Miliband, do you want to be accused of wrecking the policy action on Fuel Poverty ?

Why can’t you read the McKinsey chart ?

The best Carbon price is £0.

I know you’ve said that you have no remit over what people do in their Energy consumption at home, but it would cost the country far less to give everyone insulation and Green Energy grants, than it will to prop up the failing Coal industry by financing an unproven scheme.

Are you a man or are you a stooge ?

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