Green energy subsidies could do more harm than good

You were probably shocked by the headline on the Sunday Times last week: "Wind farm is paid ?1.2m not to make electricity." The story told how a Norwegian renewables company operating in the UK was asked to shut down its turbines at its Crystal Rig farm

You were probably shocked by the headline on the Sunday Times last week: "Wind farm is paid £1.2m not to make electricity." The story told how a Norwegian renewables company operating in the UK was asked to shut down its turbines at its Crystal Rig farm for eight hours a few Saturdays ago, on the basis that with the wind so high the electricity network was being overloaded.

The payment resulted from a rather nutty-sounding system in place in the UK whereby companies put in bids for how much they want to be paid for stopping production. The National Grid takes the lowest first, but in this case ended up taking a bid from Crystal Rig for £999 per megawatt hour of energy not produced. Had they produced the energy they would have been paid around £100 per megawatt hour for it. Irritating isn't it?

As one energy think tank put it, these payments "show that the scale and pace of government's subsidy-driven push for wind has outstripped National Grid's ability to integrate this uncontrollable source of energy at tolerable cost. A pause for thought would seem to be wise."

Indeed it would. We offer huge subsidies to the wind industry (to the tune of £54,000 per worker in 2009-10) and to other green industries, but we don't stop often enough to think about whether it makes sense to do so. Already, green energy policies add around 20% to the energy bills of business consumers. Ruth Lea quotes Department of Energy and Climate Change (DECC) numbers which suggest this number could rise to 70% by 2020.

There are problems here. The first is that much of the money we all pay away, says Sinclair,  "goes straight into the pockets of a bewildering range of special interests". Companies across the world are making fortunes out of everything from cap and trade schemes to dodgy projects under the Clean Development Mechanism. There are huge new charitable and government organisations at every turn spending great wads of taxpayer cash on all sorts of interventions and threatened interventions.

From MoneyWeek

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