I mostly stick to personal finance…but occasionally we catch a glimpse of The Escape Artist’s secret environmental agenda.
So today we are talking about renewable energy in general…and electricity in particular.
In the future, electricity will be cheaper. And, as long as we don’t spend the money saved buying more crap, this will allow us to buy our freedom earlier.
I don’t claim to be an expert on electricity. But I’m pretty sure most people are doing it wrong…using too much electricity and paying over the odds for it. In the UK, around two-thirds of customers of the big six energy companies are still on expensive standard tariffs.
Let’s start by taking a look at how technology advances mean things are getting better and better every year. Here’s Peter Diamandis on solar energy:
In 88 minutes, 470 exajoules of energy from the sun hits the Earth’s surface, as much energy as humanity consumes in a year.
If humanity could capture 1 part in 1,000 (one-tenth of one percent) of the solar energy striking the Earth – just one part in one thousand – we could have access to six times as much energy as we consume in all forms today.
These staggering numbers, in combination with an exponential decline in photovoltaic solar energy costs ($ per watt price of solar cells), put us on track to meet between 50 percent and 100 percent of the world’s energy production from solar (and other renewables) in the next 20 years.
Solar is already undercutting coal and natural gas in sunny geographies.
Take a look at the plummeting costs…
So the cost of solar power has been falling like a stone for years. Government
screw-ups interventions have sometimes obscured this…for example, the UK government cut feed-in tariffs in 2016 and this gave the impression that solar energy was no longer competitive. But, despite the occasional…ahem…hiccup, the long term trend is clear. Solar power is getting cheaper and cheaper.
To be fair, UK governments over the past 40 years have mostly done a great (and under-appreciated) job in weaning us off fossil fuels and moving towards a situation where UK electricity generation is based on home grown renewable energy.
To understand how profoundly and recently things have changed, consider that it was only in April 2017 that Britain first went a full day without turning on its coal-fired power stations…for the first time since the industrial revolution got going.
In April 2017, the Financial Times reported:
Engineers in the National Grid control room watched the share of electricity from the country’s shrinking number of coal power plants sink to zero at about 11pm on Thursday night. It stayed that way until midnight on Friday, making it the first working day in which no electricity came from the fossil fuel that has been a bedrock of the UK’s energy system since the first steam-driven public power station opened in the 1880s.
“To have the first working day without coal since the start of the industrial revolution is a watershed moment in how our energy system is changing,” said Cordi O’Hara, director of UK system operator at National Grid.
Coal disappeared from the power system at certain times of the day last year (2016). But its absence for an entire working day underlines a crash in the use of a fuel that accounted for 23 per cent of UK electricity generation as recently as 2015, but in 2016 slid to just 9 per cent.
“The first country to use coal for electricity is now on the cusp of being the first major economy to completely phase it out,” said Ben Caldecott, director of the sustainable finance programme at Oxford University.
Coal power has faded as wind farms and solar parks have blossomed around the country, spurred by green subsidies introduced to help the UK meet legally binding targets to cut greenhouse gases by at least 80 per cent from 1990 levels by 2050.
Between June and September over half (52%) of UK electricity generation was met by low carbon sources, compared with 35% four years ago. And on a sunny Friday in May 2017, solar power produced about quarter of total UK electricity generation.
September 2017 saw the opening of the Clayhill solar farm in Bedfordshire (not famed for its year round sunshine). The site has over 30,000 solar panels and is able to generate 10 megawatts of power, enough electricity for 2,500 homes. What makes it interesting is that it was built by private company Anesco without any government subsidy. This suggests that solar energy is now cost competitive – with or without government support – even in not very sunny places.
And as solar roof tiles improve and get cheaper, we should put these on more homes and office buildings and gradually return fields to agriculture or, even better, woodland.
And its not just solar that is getting cheaper. A Government energy auction in September 2017 showed how cheap wind power has become. The price of offshore wind came in at £57.50 per megawatt hour, the same as conventional gas and much cheaper than nuclear. This challenged the old thinking that you could have green energy or cheap energy, but not both at once.
Some perspective is helpful here. For the last 50 or so years, the West was pathetically dependent on fossil fuels in general and on imports of oil from the Middle East in particular. Remember how quickly fuel blockades by lorry drivers created chaos?
This led to some situations where, at best, we turned a blind eye to nasty Middle Eastern dictatorships with their brutal attitudes to women, dissenters and democracy. And, at worst, we fought wars in which a lot of people died. Domesticly generated renewable energy plus electric vehicles offers the tantalising prospect of energy security…where we can’t be held to ransom.
The Escape Artist is old enough to remember the 1980s when people complained that the government was cruelly destroying coal mining by failing to subsidise loss making pits. This should remind us how people often resist change even when its positive and environmentally friendly. As a forward looking OPEC oil minister once said: the Stone Age didn’t end because we ran out of stones, it ended when a better technology came along.
In November 2015, the UK government announced that all coal-fired power stations would close by 2025 as part of bringing down UK carbon emissions. The Ofgem graph below shows the striking change in the electricity generation fuel mix over the last 10 years and suggests that coal fired electricity production will probably finish sooner than 2025:
Its amazing how far the UK has come just in 10 years in reducing our reliance on coal and oil….at least for electricity generation. And with electric cars now becoming popular, we’re starting to tackle our oil addiction in transport as well.
The traditional problems that have held back mass adoption of renewables are being quietly solved. For example, one traditional problem with renewables such as solar and wind power has been their intermittency (variability of output) combined with the lack of utility scale storage. This has meant that the grid has not been able to store surplus electricity created by solar (when its sunny) or wind (when its windy).
Battery technology has (up until now) only been able to store small amounts of electricity…enough to power a car or a household for a few days….but not enough to power a town or city. The traditional power grid has not stored electricity…it simply generates it and then distributes it. Surplus electricity was lost.
But large battery technology is progressing rapidly, thanks to super-brains like Elon Musk. And the spread of electric cars creates an opportunity to store huge amounts of energy on a decentralised basis. Imagine if people with electric cars could take cheap surplus electricity from the grid when available…charging their car batteries to take advantage of the surplus. They could then either use the electricity to drive their car…or power their home…or sell it back to the grid at peak times at a profit.
That’s enough big picture optimism for now. The Escape Artist believes in getting his own shit together before handing out lectures…so let’s get back to personal finance basics.
First, ignore the news media who re-run the same old stories about “greedy” utility companies and rising prices. It’s mostly bullshit.
Then focus on what you can control. When The Escape Artist becomes Emperor of All Galaxies, people that can’t be bothered to move to a cheaper tariff will not be allowed to complain. The correct approach is:
- Get yourself on a low cost tariff; and
- Keep some perspective and remember that for most of human history, life was grim and there was no central heating in winter. We are now living in a time of amazing abundance.
In December, my gas & electricity tariff came up for renewal so I checked the market for the best deal using the MoneySavingExpert Cheap Energy Club.
I switched to Bulb, a fast-growing new energy provider which now has >250,000 customers. Bulb sources 100% of its electricity from renewables and has one of the lowest tariffs on the market (lower than non-renewable providers). And their electricity works just fine! 🙂
I have no other affiliation with Bulb but, if you want to switch to them, this link gives you (and me) £50 cashback.