What shall we do with the drunken sailor?
This week, National Grid announced plans for an offshore grid in the Celtic Sea, to the north of Cornwall and Devon. This is apparently to connect a planned 4.5 gigawatts of floating offshore windfarms to markets.
No costs were given for the project – windfarms pay for the connection to the transmission grid themselves, but it’s clear that the windfarms and their cables are going to cost a great deal of money. Our two floating offshore windfarms to date – Hywind and Kincardine – have been catastrophically expensive, producing power at four times the cost of gas-fired electricity. In the current renewables auction, new ones are being offered a price that suggests costs are not coming down any time soon. So a plan to deploy offshore wind on such a vast scale appears indistinguishable from outright insanity.
This impression is confirmed once the floating offshore wind idea is put in the context of Mr Miliband’s wider plans. Labour has said that it intends to deliver a doubling of onshore wind capacity, a tripling of solar and a quadrupling of offshore wind. Assuming the floating windfarms are part of the offshore increase, and not additional to it, this might add something of the order of £17 billion to the annual cost of the electricity system.
But what about all the savings? We won’t have to pay Norway or anyone else for gas any longer, will we? The fuel element of the cost of gas-fired power is around £50/MWh, and we generate about 90 million MWh per year that way, so the maximum possible fuel saving is less than £5 billion per year. Of course, you don’t save the full cost of the gas-fired electricity because you can’t shut down any of the capacity – it needs to be there in case the wind doesn’t blow.
So Mr Miliband’s plan will add at least a net £15 billion to the annual cost that consumers have to cover. That’s a minimum of £555 per household. As Ronald Reagan famously said:
We could say the government spend like drunken sailors, but that would be unfair to drunken sailors, because the sailors are spending their own money
Notes
The spreadsheet calculations can be downloaded below.