The implication is that should renewables contribute a large share of national needs in 2020, then environmental costs will become politically visible. If some 30 per cent of UK electricity were renewable in 2020, this would require an ongoing annual subsidy of upwards of £6bn (assuming an average subsidy of 5p per unit).
Furthermore, the subsidy is not the end of the additional costs implied by the policies. The character of most renewables increases overall system operating costs. Wind power, for example, requires sufficient flexible conventional generation to meet demand at times when the wind fleet is all but becalmed, and major grid expansion. Such costs are inherently difficult to estimate, but they are very unlikely to be trivial.
The question is whether these generous levels of tax and spend — and the Renewables Obligation is classed as such by the Treasury and the Office of National Statistics — will produce any compensating benefit. The government's own Impact Assessments are not encouraging. The lifetime cost of the Feed-in Tariff scheme is £8.6bn, while its benefits, including climate change benefits, amount to only £420m (technically, the Net Present Value is negative £8.2bn). Government's figures for the revised Renewables Obligation needed to meet the 2020 targets shows that costs exceed benefits by £33bn. The emissions savings fail the government's own cost-effectiveness tests.
Although such policies should never have been allowed to proceed, they duly became law under Labour and the Coalition has yet to grapple with this toxic inheritance. Indeed, it would seem that the current government has persuaded itself that the transition to a low-carbon economy will redeem the situation.
In a speech to the Confederation of British Industry last October, the Prime Minister David Cameron said of the offshore wind programme: "It's a triple win. It will help secure our energy supplies, protect our planet, and the Carbon Trust says it could create 70,000 jobs." Well-meaning talk of this nature needs to be tempered with cool reason. While the gross effect of public expenditure on renewables may well be positive, the net effect is likely to be negative as the costs of creating jobs in the green sector reduce activity in other areas. An authoritative 2009 study from the Rheinisch-Westfälisches Institute for Economic Research (RWI) in Essen notes: "Initial employment benefits from renewable policies soon turn negative as additional costs are incurred. Trade, and other assumptions...claiming positive employment turn out to be unsupportable." Such wealth destruction is hardly surprising when it is considered that the subsidies per worker in the German solar PV industry exceeded €175,000, far in excess of average wages. The study adds: "It is most likely that whatever jobs are created by renewable energy promotion would vanish as soon as government support is terminated, leaving only Germany's export sector to benefit from the possible continuation of renewables support in other countries such as the US."
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