Renewables: the answer to Sark’s electricity price problem?

It has been suggested that the reason, or one of the reasons, electricity on Sark is expensive is because ‘expensive’ and ‘dirty’ fossil fuels are used to generate it, and everything would be hunky-dory if only we used the ‘cheaper’ and ‘cleaner’ ‘renewables’.

Does this really stack up?

In our view, this belief, while we are sure, is honestly held (by some), is also naïve and misguided.

If ‘renewables’ are really cheaper than fossil fuels, then why is it that wind turbines, solar installations, tidal energy etc. are only installed, ever, anywhere, when governments subsidize them and why are governments subsidizing them? Why do individuals who have a free choice (and no government help), e.g. people on boats, or in remote areas where power supply is not necessarily reliable but is essential – to the provision of clean water, or for another reason – almost always opting for backup diesel generators, rather than wind turbines? Why is China – ruthlessly focussed on cost – building literally hundreds of new coal power plants, rather than swathes of cuddly and fluffy new wind farms? Someone said to us the other day that wind is now the cheapest form of power, even without subsidies. He genuinely believed it. It must be nice to be deluded.

The hard reality is that generating electricity using fossil fuels is, and has to-date always been, always and everywhere, cheaper than generating it using ‘renewable’ sources.

As for the environmental impact, we shall say more about it later.

The reason electricity on Sark is expensive is not principally because of the cost of generation.

In an earlier article, we estimated that the cost of diesel for SEL to generate one kWh (one unit) of electricity is likely about 17p-26p. It is a good rule of thumb in business that a business should have at least a 50% gross margin (since the gross profit has to cover also the overheads) in order to be viable. So on this rule-of-thumb basis, 34p-52p might seem like a reasonable price for SEL to charge per kWh of electricity generated.

However this analysis overlooks one basic fact. SEL provides a lot more than just kWh-s of electricity generated. First, it has to deliver this electricity to your home. And secondly, it provides its users an electrical connection which provides an electricity supply which is guaranteed. If you press the button switching on your lights, do they come one? How often does your power go out? And when it does, how quickly does it come back on?

The cost of providing and maintaining this infrastructure which provides a reliable electricity supply is very high. The network of cables, transformers and other distribution infrastructure had to be built and it has to be maintained – promptly, in the event it fails. There has to be a high degree of redundancy in the generators at the power station so that if one of them fails, another can be brought online immediately. Spare parts have to be kept in stock – you cannot be without power for 3 weeks because a spare part has to be delivered from the UK, the USA or further afield. A minimum number of staff have to be permanently employed in order to provide this reliable service. Moreover, these costs are largely fixed and do not decline as the population of Sark and the number of customers of SEL declines.

We understand that since the time Chief Pleas got bored with Brecqhou being the resident villain (we suppose that’s reasonable since there are no Brecqhou-owned businesses left operating on Sark to a sufficient extent to make it worth going after them) and turned their attention to SEL, SEL’s legal costs have amounted to about £150k p.a. – that adds 12.5p per kWh to the power station’s cost, or 25p per kWh to the price of electricity at the standard 50% gross margin.

What is the fully commercial way of charging customers for providing this reliable connection, and for covering these fixed costs? It is called a ‘standing charge’: a fixed monthly payment you have to make to have this reliable connection.

We once estimated, without any insider data, that SEL sold about 1 million kWh of electricity for about £660k p.a. of revenue. The real figures, we understand, are about 1.2 million kWh p.a. and £800k p.a. Essentially all of this revenue comes from the sale of kWh of electricity. Our standing charge is £2/month, or £24/year. If 300 households pay the same, it amounts to £7200 p.a. standing charge for the whole island. It is self-evident that this standing charge does not cover the power station’s fixed costs. The power station is subsidizing the standing charge, the cost of providing a reliable power supply, from the electricity it sells.

In our estimation, the power station, as a business, is about washing its face. It is not a highly profitable business. Out of the £800k revenues, about £300k goes for diesel, leaving £500k. Take off £150k for the legal costs, that leaves £350k. Say £30k p.a. salary per staff member – leaving £170k. The power station has 13km of buried cables, with an installed cost base of £100/metre, total value £1.3 million. Depreciated over 40 years, that’s £33k p.a. for the cost of depreciating the cables (or equivalently, averaged over the long term, repairing them) – that leaves £137k. There is then the cost of maintenance/depreciation of the generators, transformers, various incidentals – we cannot estimate all those accurately – but it must surely be clear that there is not much change left after paying all those costs.

If electricity were to be sold at the commercial rate, at a 50% gross margin, which would make it about 34p-52p per kWh, in order to stay in business, the power station would evidently have to increase the standing charge equally to a commercial (rather than the almost entirely subsidized) rate. At 34p-52p per kWh, electricity sales would provide £400k-£625k p.a. in revenues to the power station. The remaining £175k-£400k p.a. would have to come from an increase in the standing charge. Divided among 300 households (if that’s what the number is), that would be £600-£1300 p.a. per household. This, of course, is a top-down estimate. A bottom-up estimate (how much providing the reliable connection actually costs) would, we are sure, give a similar number.

Can you generate your own electricity in your own back garden at below 85p/kWh? Or even cheaper than 66p/kWh? Perhaps you can – when your power source is working, when the wind is blowing, when the sun is shining, when your diesel generator is working, when you cross your fingers and the stars are aligned in your favour. But can you – if you switch yourself off from SEL’s supply – guarantee that, using your own equipment, the lights will come on when you press the ‘on’ button? That you won’t be without running water to take a shower, clean, or flush the toilet, for 3 weeks or longer at a time, and from time to time, because your wind turbine has failed and you’re waiting for spare parts? We don’t think you can. We can’t. Even if you can, it’ll cost you. Most of us simply don’t have the skills necessary, the time, or the inclination to achieve this. We’d rather just pay someone else to do it for us, and are happy that someone is willing to do so, moreover for a price which is admittedly high – but, in our opinion, understandably high – and acceptable. Aren’t you?

The reality is that SEL is subsidizing the electricity price of the lower volume consumers (e.g. the poorer people) by charging the higher volume consumers (e.g. businesses and wealthier people) more. If SEL were to charge everyone the purely commercial rate, the price would likely be £600-£1300 p.a. standing charge for being able to have a connection at all, plus 34p-52p per kWh of electricity you consume.

We understand that SEL’s position is that if any of their customers install their own equipment to generate electricity, they will cut such a customer off. We disagree with this stance, but we understand it. If you generate your own power, you reduce the total demand for SEL electricity, but you still benefit from the reliable power supply, which you are given at a subsidized rate. You are given this subsidized rate in the expectation that over all the consumers on the Island, this subsidy will be recouped by electricity sales, particularly to the high volume customers. It seems to us that the answer to this conundrum could be to charge the commercial (lower) price per kWh and the commercial (much higher) standing charge, and then it won’t matter if people do use their own generating equipment. However, this would result in lower electricity consumers (e.g. poorer people) paying more and higher electricity consumers paying less; and the same will of course always be true if some people generate their own power – the wealthier people will be able to afford to install their own generating equipment, the poorer ones will not. SEL may not want to do this, but of course while they don’t, Chief Pleas et al. will continue to focus only on the high per kWh price while giving the power station no credit for the very low standing charge. It might be easier to get pressure off their back if they stop cross-subsidizing the lower volume consumers as they currently do, bring the per kWh price down, and bring the standing charge up to a realistic level.

Should SEL be forced to pay a feed-in tariff to people installing their own ‘renewable’ power sources? The trouble with that idea is that solar panels, wind turbines etc. generate electricity when the sun is shining or when just the right amount of wind is blowing (too little and a wind turbine does not turn, too much and it has to be switched off or it explodes), not necessarily when the demand for electricity is high. Indeed, one of the times of highest demand is on a dark winter night when it’s blowing a gale. And one of the times of lowest demand is on a sunny day when a nice breeze is blowing. With a feed-in tariff, SEL would be forced to pay for electricity being generated at times they cannot sell it. If the feed-in tariff varied with demand (i.e. SEL pays its cost of electricity generation, 17p-26p per kWh, at times of high demand and nothing at times of low demand) this could be a reasonable arrangement. Otherwise, someone has to provide and pay for the battery (or other – e.g. flywheel) storage to accept the feed-in energy at times of low demand and sell it at times of high demand. Storing and retrieving energy back from storage incurs losses, which has to be factored in the level of the feed-in tariff. If the renewable feed-in provider is happy to pay for such battery, or other, storage, and delivers power at times of peak demand, that seems fair. If SEL has to pay for this storage (e.g. because it has to pay a constant feed-in tariff), of course they have to recoup the cost of installing and maintaining the operational state and safety of such batteries.

Installing additional infrastructure – batteries, flywheels, wind turbines, solar panels – only introduces additional costs and potential points of failure into the network. None of the current infrastructure can be retired as a result – ‘renewables’ are not a reliable source of power, therefore the full diesel infrastructure will have to continue to be maintained for the times when no sun is shining and the wrong amount of wind is blowing. The additional potential points of failure will impact reliability in a negative, not a positive, way.

Electricity on Sark is expensive. It has been made into a pressing issue – as usual for these kinds of things, by cockeyed government action. We just hope people will not fall into the trap of believing that any of Sark’s problems can be solved by using ‘renewables’ – ideas honestly held by some well-meaning and naïve people but perhaps also others who see an opportunity in Sark’s plight to make a bit of profit for themselves. Ultimately, this will simply result in more cost and less reliability, the brunt of both being born by SEL’s customers and/or the taxpayers.

Finally, a word or two about how environmentally friendly ‘renewables’ really are. This is the classical fallacy of the seen versus the unseen. Everyone can see that a diesel generator burns diesel, which creates emissions. How bad are these missions? They are mostly water vapour and carbon dioxide, and some soot. It should be self-evident that the amount of any pollution emitted by the SEL power station pales into insignificance in comparison to the amount of pollution being emitted by the incinerator. This does not need a forensic scientific analysis – all you need to do is look at the amount of black smoke coming out of the incinerator and the amount of black smoke (or lack thereof) coming out of the power station. Furthermore, the incinerator smoke contains large amounts of dioxins and furans, which are highly toxic and which cannot easily be eliminated from the environment – not just the harmless water vapour and carbon dioxide and a small amount of pollutants the power station generates.

What is less obvious (the “unseen”) is just how harmful the environmental impact of wind turbines, solar panels etc. is. Modern wind turbines contain large amounts of rare earth elements. These are, for the most part, heavy metals with favourable magnetic properties. A low-speed direct-drive permanent-magnet wind turbine generator contains approx 650kg of permanent magnets per MW generating capacity. 29% of that is neodymium (atomic number 60), 2%-4% is dysprosium (atomic number 66), and a small proportion is praseodymium (atomic number 59). All these heavy metals are mined mostly in China. Extracting them causes serious pollution – and by that, we do not mean a bit of plant food (carbon dioxide) being released into the atmosphere. Highly toxic acids and other solvents are used to release these minerals, the resulting waste is highly toxic, sometimes (depending on the ore used) radiocative and it is generally just dumped in large quantities into the environment. While carbon dioxide is removed from the atmosphere by plants for their own growth, and while dioxins degrade really slowly, the toxic wastes of rare earth mining remain around basically forever. The process of extraction of these ores also consumes huge amounts of energy and water, which is then permanently polluted.

If you are an innocent little mermaid who believes that Santa Claus exists and that money grows on trees, you can be excused for believing that the wind turbine fairy makes wind turbines in a wind turbine fairy factory from which they come, clean and shiny, and soft and fluffy, and once she very kindly puts them down in your garden (or perhaps under your pillow?), you can have free and clean electricity for ever and ever and ever and can then live happily ever after, free from the exploitation by the evil step-father David. But if you are a little more grown up and reasonably intelligent, you will realize that the ‘unseen’ and the unmentioned – perhaps deliberately – environmental issues caused by the mining of heavy metals and other seriously toxic materials (and we could perform a similar analysis for other sources of so-called ‘renewable’ power) are in fact much more significant than issues involved in, relatively cleanly, burning a bit of hydrocarbons.

And that is before you consider the number of birds wind turbines kill (or, what is less well-known, bats: wind turbines in Canada kill an estimated 2% of some migratory bat species, whose birth rate is only 1% p.a., thus putting them on a path to extinction). And before you consider the impact of using batteries to store the power generated by ‘renewables’. It goes without saying that lead acid and cadmium-based batteries are a nightmare to dispose of, but so are the more modern Lithium based ones. And these batteries do not last forever. How long before your laptop battery stops holding charge to a point where it becomes barely usable? 2-3 years? Batteries used in ‘renewable’ installations use the same technology and have a similiar life span. Thus, ‘renewables’ are not really renewables – they just replace the relatively harmless hydrocarbon consumable with a consumable based on higly toxic heavy metals and acids used in batteries which have to be disposed of (and replaced and paid for) every few years. That is, if they do not explode or catch fire (releasing highly toxic thick black fumes) in the meantime. Why not just use a nuclear power plant? Its toxic waste lasts longer and produces a lot more energy per unit volume.

If people promoting ‘renewables’ were honest, they would tell you about the environmental cost of these waste batteries and the environmental cost of mining the heavy metals and other toxic materials that go into ‘renewables’ construction. They would tell you how much energy is consumed before a wind turbine ever makes its first turn, how much water is used and polluted in its construction, the environmental issues involved in decommissioning and disposing of a wind turbine, and the impact wind turbines have on birds and bats. But generally, they don’t. So forgive us for being a wee bit skeptical of their other claims.

And why do we call carbon dioxide harmless? Because it is and the tales of anthropogenic global warming are neither factual nor grounded in science. But that is a story for another article.

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