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Renewables: the more you have, the more you pay for backups

Cold, still weather in the UK this week triggered high demand for electricity at a time when wind turbines were idling. That forced National Grid to use a back-up coal-generation plant for the first time this winter.

Depending on Mother Nature for electricity means accepting her inconsistencies. Back-up is required, and keeping it available has a cost.

In the US, electricity demand is on average 15 per cent higher during July than January according to the US Energy Information Agency. In the much cooler UK, a government study during 2012-2013 revealed that demand rose 36 per cent in the winter.

Intermittent supply adds to the challenge of balancing the grid. Wind and solar power made up 31 per cent of the Texas grid’s capacity last year, up from 9 per cent ten years prior. That intermittency is a vulnerability.

Indeed, an unusually cold snap in early 2021 forced a system increasingly dependent on intermittent power into blackouts. That prompted calls for more nuclear and gas-fired power plants. Consumers would pay, though it could add just $2 on a typical $100 power bill, say power researchers E3.

In contrast, UK power needs are reasonably well anticipated via capacity auctions. Run by government, these aim to provide generation for expected demand. A recent auction for capacity in 2026/27 cost £5.7bn over the 15-year period of the longest contracts, according to analysis by Aurora Energy Research. Consumers also pay for this, partly through the environmental levies which can make up a quarter of bills.

Power capacity differs from “firm” power capacity, Lambert Energy Advisory points out, depending on reliability and intermittency. In winter months, the UK government gives the accolade of “firm” to gas-fired turbine power plants at 90 per cent of capacity, wind at 9 per cent and solar at under 3 per cent.

Consumers end up paying to build little-used firm power capacity. The conundrum is that the greater the overall share of renewables in the energy mix, the more customers will have to spend on these largely redundant backups.

The Lex team is interested in hearing more from readers. Please tell us what you think of the financial issues raised by intermittency in the comments section below.

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