Over the winter break, the launch of a new online energy calculator created by DECC attracted some attention, and some contrasting media coverage.
The gimmick of the calculator is that it lets you take on the role of secretary of state for energy – although unfortunately without simulating the attention of tabloid newspapers. Instead, you get to experiment with creating different future energy scenarios and comparing them for emissions, energy security and costs.
It was created by DECC’s chief scientific advisor Professor David MacKay (author of an online book on the same topic which was well received in the world of energy geeks), and is actually a relaunch of sorts for DECC’s “pathways analysis”, first created in 2010, on which DECC has already based a considerable amount of material.
What’s new is that this is the first time that costs of energy production have been included in public documents. Mackay told the Guardian that the calculator is intended to “take the poison out of the debate” on costs, by giving everyone the opportunity to juggle with these three different priorities. Good luck with that, Professor.
Whilst we were eating turkey sandwiches, the media’s coverage took rather different angles, depending on the editorial views of the paper. The Telegraph headlined “Greener energy will cost Â£4,600 a year”. The Guardian originally went for a similar headline online, but then changed it to “UK switch to low-carbon energy ‘no dearer than doing nothing”.
Actually, both of these headlines are technically correct, if you accept the DECC analysis. Political correspondent at the FT Jim Pickard has written a good blog however which points out that the Telegraph headline is somewhat disingenuous:
The [Â£4,600] figure â?¦ is not synonymous with energy bills – [it] is the total investment in energy needed (Â£2.4 trillion) over the next four decades â?¦ divided by population to come up with the figure.
But as the article makes clear a few paragraphs further down, it could cost even more to rely on traditional sources of power such as fossil fuels and nuclear. (It also suggests we are already spending Â£3,700 a year…
In other words, the predicted rise in the price of of fossil fuels and the investment which is needed anyway to keep our somewhat decrepit energy system from collapse, mean that according to DECC’s analysis it could cost just as much not to go green as it does to switch to a low-carbon system.
Pickard continues by outlining some of DECC’s scenarios in more detail:
* “Do nothing” to develop low-carbon energy systems: this would cost Â£4,682 a year, reflecting an almost inevitable rise in the cost of conventional fossil fuels in the coming decades.
* A “least-cost” scenario with a balanced energy mix of 42 per cent renewables, 31 per cent nuclear power and 27 per cent gas plants. This option, known as “MARKAL”, would cost Â£4,598 a year, ie slightly less than the “do nothing” option.
DECC’s carbon plan also looks at three further options: (on page 16-19 of this document).
* “higher renewables, more energy efficiency scenario” of 55 per cent wind * “higher CCS (but still mostly fossil fuels), more bioenergy” * “higher nuclear, less energy efficiency”
Strikingly, the renewables option is the cheapest of these with the nuclear the most expensive.
…But matters are still not perfectly straightforward. The key question for DECC is why the “higher renewables” scenario is combined with “more energy efficiency” when the other options are not to the same degree?
For example, why couldn’t a scenario which imagined more nuclear power be combined with more energy efficiency? The answer is, of course, that there is no good reason. Professor Mackay responded on the FT blog, noting that the Government could only highlight a few scenarios and that readers should have a go at the calculator themselves to see what result they get.
The criticism that DECC chose to highlight the “high renewables/ high energy efficiency” scenario for communications reasons is probably justified. Although DECC supports the expansion of both nuclear and renewable power, the cost of renewable power is under consistent media attack – so DECC therefore has an interest in creating headlines that defend their stance.
This does not impact on the credibility of the result itself – although the whole process does also raise a recurring issue (which we have discussed before) – about the ambition of the government’s plans on energy efficiency, compared to the resources they are putting into delivering them.
Shale gas and the calculator
Ex-UKIP press officer and blogger Tim Worstall argued on the Adam Smith blog that the calculator is flawed because it does not take into account the potential impacts of developing ‘shale gas’, which may bring prices down.
Shale gas, which is currently being explored in Lancashire and has driven prices down in the US, is not explicitly included in the calculator. But can be easily incorporated, says MacKay, by choosing a low gas price in the model.
It appears that the lowest gas prices which can be fed into the DECC calculator are 45p/therm in 2050, consistent with estimates which are outlined in DECC’s fossil fuel price projections published in October 2011. These use North American gas prices as a ‘floor price’ for the price of gas in this country (as if the UK price falls below the US price gas is likely to be exported). The predicted US price is based on estimations by the Annual Energy Outlook – which does take into account the predicted expansion of production from shale gas, at least in the US.
When we spoke to DECC about this, they said the data used is “based on the most up to date evidence” and that if people can suggest other reputable work which has been done, they are keen to receive it – so get in touch.
Simplifying the energy costs debate?
Given the complexities, there is some justification for Professor Dieter Helm’s description of the calculator as a “heroic and potentially very misleading exercise”. (Helm is an advocate for shale gas technology.)
The calculator misses out some important points. This includes failing to take into account not only the potential technological developments of shale gas, nuclear power or different renewable technologies, but the potential economic costs of climate change, or its potential impacts on the UK’s energy infrastructure over the next few decades.
That said, the calculator allows anyone who is interested to engage with the complex questions and trade-offs inherent in energy policies – and allows interrogation of the assumptions and questions which produce such simple-seeming headlines. This has to be a good thing – maybe other analysts should follow a similar approach?
UPDATE Monday 9th Jan 10am: Christopher Booker has repeated many of the same criticisms of the DECC calculator in yesterday’s column in the Sunday Telegraph. We will look further at this.