Andrew Montford: Honesty is needed on the huge costs of attempting “net-zero”

5 Dec

Andrew Montford is the deputy director of the Global Warming Policy Forum.

Politicians can be divided into those who like to spend big (and posture), and those who know what a dangerous course that is. The Prime Minister might well complain about being labelled one of the big spenders; it is, after all, hardly his fault that his time in office has coincided with a pandemic. He would surely argue that the bill for keeping the country on its feet – around £350 billion – was a case of spending through necessity.

However, the bill that will result from Boris Johnson’s plans for another a major cut in greenhouse gas emissions cannot be waved away so easily. Quite what it will cost is unclear, but we can get some sense of the scale of what is planned from recent work on the costs of total decarbonisation of the economy. When the Government announced its net-zero plan 18 months ago, it was on the back of a recommendation from the Committee on Climate Change, which said that the cost was modest, amounting to only £50 billion in 2050. Unfortunately, they later admitted that they hadn’t actually calculated the cost of getting us to net-zero at all. Some time next year, they be appearing before the Information Tribunal to explain their refusal to release the calculations they used to persuade the Government that decarbonisation could be done on the cheap.

The Treasury and BEIS have bandied around their own estimates of the bill, with figures of £1 or £1.5 trillion quoted in the press. However, like the CCC, they too have refused to reveal their calculations to scrutiny. Despite the lack of clarity, numbers of this magnitude seem to have gained a certain currency in Whitehall. A report from the National Audit Office, published this week, speaks of having to spend “hundreds of billions”.

Apart from the secrecy over a matter of vital public concern, even a brief consideration of what needs to be done shows that all of the Whitehall estimates are so absurdly low as to smack of an almost complete lack of numeracy, or worse, a complete lack of honesty, among senior civil servants. It is simply impossible that decarbonisation can be achieved for a few hundred billion, or even a trillion pounds. Take domestic heating, for example. The cheapest way to achieve decarbonisation will be through use of air-source heat pumps, which will cost over £10,000 each to install. Putting them into 35 million homes by 2050 will therefore cost at least £350 billion – another pandemic’s worth of spending. Upgrading the electricity distribution network to deliver the extra demand will cost another £200 billion, more than the annual cost of the NHS.

So if we are spending £550 billion installing heat pumps alone, it’s fairly obvious that decarbonising the whole economy is going to come with a bill that is at least order of magnitude higher. And as if to confirm this idea, earlier this week, National Grid published the first serious official attempt to cost the project, putting the figure at around £3 trillion.

It is noteworthy that the underlying calculations for this estimate also remain unpublished, but £3 trillion may be the correct order of magnitude. However, the figure is obviously wildly understated, because of some absurd input assumptions, such as the cost of building offshore windfarms – the core of a decarbonised power system. The Grid assumes that these will set us back just half what they actually cost according to published financial accounts. Looking forward, they say the cost will fall still further, while windfarm developers are reporting that there are no cost reductions on the horizon.

It seems clear then, that net-zero is going to be much more expensive than the Grid says. My own work at GWPF suggests that we are going to be spending £3 trillion on electrification of heating and private cars alone between now and 2050. We will probably spend nearly the same amount again on decarbonising electricity generation, and then there is industry and agriculture and freight and air transport and trains and shipping to come.

It’s hard to comprehend numbers of such magnitude, but £3 trillion amounts to £100,000 per household, and we could easily end up spending double that amount. So you can get a sense of the pain that is coming. And remember, this is only the capital cost. Householders will also have to swallow a doubling of the cost of motoring and a tripling of domestic fuel bills. The price of everything will soar.

What is worse, there can be little doubt that spending on this scale cannot be achieved in a free society. Net-zero is, in effect, a programme for the conversion of the UK to a command economy, with all that entails for civil liberties and hard-won freedoms.

Johnson might protest that the tab for the pandemic was simply unavoidable, but when it comes to assigning the blame for runaway net-zero spending and the economic ruin and loss of liberty that his environmental policies will bring about, there will be nobody else to blame. Poverty will be our lot, Johnson will be the man who will be cursed for being its progenitor, and the Conservative Party will be swept aside for being responsible for the social and economic carnage.

Still, as we look back, we will at least be able to console ourselves that Johnson was the last of the big spenders, because there will simply be no more money to spend.

Andrew Montford: Johnson’s green industrial plan is a recipe for soaring prices, new consumer costs – and more pain for taxpayers

20 Nov

Andrew Montford is the deputy director of the Global Warming Policy Forum.

According to Claire Perry, the Government’s former Climate Czar, Dominic Cummings doesn’t “get” the green stuff, seeing it as an obsession of southern posh boys that is of little interest to key voters in the Red Wall seats. One of those posh boys is undoubtedly the Prime Minister, whose plan for a “Green Industrial Revolution” was launched this week.

While long on vision, the presentation was very short on detail, but there was plenty to make the humble taxpayer very nervous indeed. For example, item one on the agenda of Boris Johnson’s revolution will be to bring about a quadrupling of offshore windfarm capacity. To call this a major blunder would be to take British understatement to an extreme.

Let me explain why. For the last 20 years, offshore windfarm developers have been moving to sites further and further offshore, in search of more reliable winds, and they have been building bigger and bigger turbines, seeking to extract more power from them.

Unfortunately, the payback has been very disappointing, and the overall cost of a megawatt hour of wind energy has steadily risen, so that now it is perhaps four times that from a gas turbine. To this must be added the cost of dealing with the intermittency of wind power, so the true ratio may be more like five or six times as much.

Worryingly, recent data from Denmark suggests that offshore windfarms are ageing much faster than previously thought, which means that their useful lives are shorter and their costs commensurately higher.

Nevertheless, windfarm advocates argue that a fundamental change in the industry is in the offing, and that costs are about to fall through the floor. In their support, they point to recent bids to supply energy to the grid, which have been at a fraction of any price seen before. If the advocates are correct, then the Prime Minister’s revolution might bring about a mere doubling of electricity prices. This will still be devastating for the UK’s remaining manufacturing base, but it is nothing compared the carnage if he is wrong.

And unfortunately, he is indeed wrong. When they have got all their funding in place, windfarm developers announce the details to the financial markets, so we have a good idea of how much money is being borrowed to build these allegedly super-cheap windfarms. We can already see that there has been no change in the capital costs. Wind power is expensive, and will remain so.

How can we explain the low bids to supply power to the grid then? What the windfarm advocates never explain is that these “contracts” are not actually binding at all. Given what we know about the high and rising bill for running a windfarm, it seems most likely that operators are simply gambling on future market prices being much higher. When the time comes, they will simply tear the “contract” up and walk away.

If that turns out to be the case, what will the impact on electricity prices be? A tripling? Worse? The industrial and commercial carnage is unimaginable. It would be an economic disaster of historic proportions. And don’t forget that the manifesto commitment to decarbonise the economy involves the electrification of pretty much the whole economy.

In other words, the price of everything is going to rocket. So Johnson can speak airily of the transition to electric vehicles (Item Four of the Revolution), but that doesn’t look like an easy sell on the doorsteps of Red Wall seats if the price of power is going to triple – never mind the premium to buy the vehicle or the cost of replacing the batteries.

Decarbonising housing (Item Seven) doesn’t look like a vote-winner either; not when you have taken into account the cost of retrofitting insulation (£65,000 per property to decarbonise by 50 per cent is a rough rule of thumb for a modest dwelling), installing a heat pump (£10-12,000), and upgrading the household wiring and the distribution grid. Oh yes, and you’ll probably need to pay for a secondary source of heat for cold days, when heat pumps tend not to deliver.

There are no silver linings either. While the cost of decarbonising the economy will certainly be many trillions of pounds, the Prime Minister conjures up the prospect of hundreds of thousands of green jobs as some sort of compensation. However, Nigel Lawson has pointed out that such claims are an example of a common piece of economic illiteracy known as the “broken windows fallacy”. In reality, far more jobs will be destroyed by the resulting energy price rises than will ever be created. The gross employment effect of green policies may be positive, but the net effect will be horrifically negative.

Net zero is a fork in the road for the Conservative Party. The economy has suffered grievous damage over the last year and the national debt has surged to levels that were previously unimaginable. The gloss has well and truly been taken off the party’s reputation for economic competence.

That being the case, it’s difficult to understand why the party of Thatcher and Lawson would even contemplate spending taxpayers’ money on the scale envisaged by Johnson’s team – and to do so without even having imagined some of the technological solutions that would be required, let alone put a cost on them. This is a degree of economic irresponsibility that the public wouldn’t even expect from the more eccentric parts of the Labour Party.

No doubt Nigel Farage is watching the government’s developing green obsession with considerable interest. So while Cummings might wonder how well environmentalism plays in Red Wall seats, the reality is that keeping the country on board the net zero ship, and the resultant loss of any semblance of competence, will mean that seats up north will become the least of the party’s concerns.