Is U.K. Green Energy Plan A Blueprint For U.S. Under Biden?
“The Biden administration says it wants a net-zero emissions economy like European economies. Britain’s new 10-point green plan provides a template to consider. U.K. costs will be high, with questionable benefits.”
We now know President-elect Joseph R. Biden, Jr. plans to nominate former Senator and Secretary of State John Kerry as his Special Presidential Envoy for Climate. This post will allow Mr. Kerry to also sit on the National Security Council, reflecting the President-elect’s view that dealing with climate will be a central focus of his administration’s actions across all facets of the federal government. Appointing Mr. Kerry to this climate position is also a signal to other countries of the elevated importance of dealing with climate change and that the United States wants to resume its leadership role in directing global policies to reduce carbon emissions. It should be remembered that Mr. Kerry was instrumental in the Obama administration’s fight to secure the Paris Agreement dealing with climate change and America’s role in that Agreement.
Mr. Biden campaigned on returning the U.S. to the Paris Agreement, which the country had exited recently under President Donald J. Trump’s leadership. Returning to the Paris Agreement signals that on environmental matters, the Biden administration will be drawing much closer to the goals and policies of European countries who have been leading the climate change charge. Remember, the Paris Agreement is just that – an agreement and not a binding treaty. While the Obama administration would have loved to give the agreement a more permanent standing by having it ratified as a treaty, they knew it would be defeated in Congress. That was a replay of the Clinton decision in 1999 to not put the Kyoto Acord to a congressional vote because they knew it would fail.
Climate change remains a very polarized topic, but one that does not rank highly on lists of concerns of Americans. But it is of great concern among elites in this country, which includes John Kerry. The hypocrisy between the language and actions of climate change proponents is not lost on Americans. They hear people like Mr. Kerry and former President Obama lecture the public about the need to alter lifestyles and work patterns due to fear of having our coastlines overwhelmed by rising sea levels, only to learn that these two gentlemen own multi-million-dollar seaside homes on the island of Martha’s Vineyard.
As we prepare for an onslaught of climate change lectures and new mandates to fight carbon emissions, we thought the timely release of the United Kingdom’s Prime Minister Boris Johnson’s 10-point climate plan, or his ‘green plan’ or maybe his ‘green industrial revolution’ provides us a roadmap for future U.S. climate policies. Regardless of what one calls it, the plan is P.M. Johnson’s program for how the U.K. will shift from using fossil fuels to renewables to achieve a net-zero emissions economy.
His plan is an attempt to gain support from the liberal portion of the British electorate, but also to put the U.K. in step with (or maybe ahead of) the European Union, especially as Glasgow will be hosting COP-26, the next international gathering of environmental officials who will assess and recommend the course of action by nations to meet the Paris Agreement targets.
The EU has been struggling in getting its green energy plan in place, as various countries and industrial sectors within countries are fighting aspects of the plan. We need to be paying attention to these plans as they are being unveiled, and especially those parts receiving the greatest pushback, as we imagine core parts of these plans will form the Biden administration’s green energy plan.
The plan announced by P.M. Johnson included the following points, as summarized by the BBC:
Offshore wind: Produce enough offshore wind to power every home in the U.K., quadrupling how much it produces to 40 gigawatts by 2030, and supporting up to 60,000 jobs.
Hydrogen: Have five gigawatts of "low carbon" hydrogen production capacity by 2030 - for industry, transport, power and homes - and develop the first town heated by the gas by the end of the decade.
Nuclear: Pushing nuclear power as a clean energy source and including provision for a large nuclear plant, as well as for advanced small nuclear reactors, which could support 10,000 jobs.
Electric vehicles: Phasing out sales of new petrol and diesel cars and vans by 2030 to accelerate the transition to electric vehicles and investing in grants to help buy cars and charge point infrastructure.
Public transport, cycling and walking: Making cycling and walking more attractive ways to travel and investing in zero-emission public transport for the future.
Jet zero and greener maritime: Supporting research projects for zero-emission planes and ships.
Homes and public buildings: Making homes, schools and hospitals greener, warmer and more energy efficient, including a target to install 600,000 heat pumps every year by 2028.
Carbon capture: Developing world-leading technology to capture and store harmful emissions away from the atmosphere, with a target to remove 10 million tons of carbon dioxide by 2030 - equivalent to all emissions of the industrial Humber.
Nature: Protecting and restoring the natural environment, with plans to include planting 30,000 hectares [74,100 acres] of trees a year.
Innovation and finance: Developing cutting-edge technologies and making the City of London the global center of green finance.
There wasn’t much about energy or lifestyles left untouched by the plan. A story in The New York Times about the Johnson plan highlighted its key environmental points – “end the sale of new gas and diesel cars within a decade and change the way people heat their homes” – and why these details “were an early signal to President-elect Joseph R. Biden Jr. that Britain and the United States might find common cause despite the looming tumult of Brexit, which Mr. Biden opposed.”
According to one estimate, the cost of the 10-point plan will be $12 billion, of which reportedly $8 billion represents newly committed funds above the $4 billion that was the ticket price assigned to the government’s original green plan. The details of spending and timelines are to be spelled out in the government’s energy paper due next month. The problem with the current spending estimate, according to the critics, is it doesn’t provide sufficient money to undertake the massive scale of a green energy restructuring of the British economy. That reality, however, may be the undoing of the plan, as we are beginning to see researchers examining the costs of certain aspects of it. That is a critical development, as the realization of the costs of environmental actions are being recognized by the citizens of EU member countries, where the green energy movement is the strongest. The citizens are showing their displeasure at the policies and the costs, as they know their living standards will be severely impacted. Politicians have yet to fully comprehend this reaction, but it will likely dominate 2021 news.
If we look at research about the costs of Mr. Johnson’s 10-point plan, understanding that there are many details yet to be fully explained or their costs justified, we find analysts questioning the plan’s goals relative to its costs. As noted in the BBC summary, there is an emphasis on how the green energy revolution will create jobs – a key talking point of every green energy plan. P.M. Johnson emphasized that the plan will create 250,000 new jobs, which will be needed to offset the thousands of jobs in industries that will be shut down or severely damaged by the energy switch.
We noted the 10-point plan envisions building 30 gigawatts (GW) of new offshore wind power to supplement the 10 GW already in place. This effort will support 60,000 jobs. While Texas hasn’t built any offshore wind, nor are there plans to do so, it should be noted that the state has 30 GW of onshore wind that supports 25-26,000 jobs. Is offshore wind that much more labor intensive? If so, it supports the argument that offshore wind will be a very expensive source of electricity.
The plan’s target of installing 600,000 heat pumps in homes every year will also prove expensive, and questionable, when viewed from the impact on the power market and consumer electricity bills. According to a 2017 study of heat pumps, the annual cost of the 600,000 installations, based on 2016 prices, would range from $5.6 (£4.2) billion for hybrid heating pumps (HHP) to $7.2 (£5.4) billion for standalone heat pumps (HP) that also deliver hot water. These estimates compare to an annual cost of $1.3 billion (£942 million) to install a similar number of new gas boilers.
Exhibit 20. New Heat Pumps Are Very Expensive SOURCE: ElementEnergy
Based on a limited three-year test conducted in Manchester, England, the power needs for three types of heat pumps are shown in Exhibit 21 for each month of the year at the half-hour power demand measure. The figures at the right of the chart show the respective pump’s power needs on the coldest day of the year. Not surprisingly, the power needs are significantly higher than even during the coldest winter months. The hybrid systems rely on the home’s gas-fired boiler or electric units to provide hot water, rather than the standard heat pump.
Exhibit 21. The Amount Of Power Heat Pumps Need SOURCE: ElementEnergy
The power needs data assumes the pumps are powered for a constant heating. However, many British homeowners turn off their heat while they are gone from the home, such as for work, or at night when they sleep. That means homeowners will cycle their heat pumps twice a day, significantly adding to the electricity demand. The report showed the difference in demand between constant versus two heating cycles a day for the typical homes in England. The difference in energy demand was often five-times greater for the cycling operation.
Exhibit 22. Twice-A-Day Heating Is Very Power Hungry SOURCE: ElementEnergy
This analysis was done by Paul Homewood, who wrote two articles about the electricity demand impact of the heat pump strategy. It turned out that his first article overstated the demand impact, which he corrected after examining the ElementEnergy report on the Manchester test project. His calculations show that the installation of 19 million heat pumps (600,000 per year for 30 years) would lead to an increase in electricity demand by 2050 of 66 GW. To put that incremental demand into perspective, in 2019, the U.K.’s electricity generating capacity was 78 GW, which also requires imported power to satisfy the nation’s needs.
Exhibit 23. How U.K. Electricity Is Being Produced SOURCE: DUKES
When we turn to the mandate to ban the sale of gasoline- and diesel-powered by 2030, marking the second fastest ban behind Norway’s 2025 dictate, the question of how the electric vehicles (EV) will be charged becomes a key issue. According to last year’s “Net Zero” report from the Committee on Climate Change, the independent agency established under the Climate Act of 2008 and which advises Parliament on climate matters, the U.K. will need 76 terawatt-hours (TWh) of electricity annually by 2050 to recharge the nation’s EV fleet. Spread evenly over all the hours of the day, this requires an additional 9 GW of power. If most EVs are charged during early evening hours, peak electricity demand would be approximately 40 GW.
This power demand would be in addition to the incremental power needed due to installing heat pumps in all the homes in Britain. Combined, these two incremental power demands represent over 135% of the current generating capacity of the U.K. Another electricity demand consideration with this green energy plan is that the U.K. currently imports 3-10% of its power needs from countries on the continent. At the moment, the imported power helps National Grid balance the system’s supply needs when wind and solar power are unavailable. Will that surplus power be available when the major power exporters fully convert their economies to renewable power? Without this supply, the U.K. will need to add even more generating capacity to assure 100% domestic electricity reliability.
Another key point in promoting EVs is the government’s commitment to invest $1.7 (£1.3) billion in new charging stations. In addition, the government will provide $777 (£582) million in grants to buyers of EVs, continuing a program already in place to subsidize EVs. While banning fossil fuel-powered cars will harm the British automakers, by allowing the continued sale of hybrid cars becomes a sop to them and their workforces. The government also envisions subsidizing battery manufacture in the Midlands by providing $665 (£500) million of aid designed to boost employment in this region of the country.
Virtually every country encouraging its citizens to switch to EVs is investing in, or promoting private companies to invest in, public charging stations, since many people will not have access to garages where they could install their own charging station. The challenge is where to locate these public charging stations and what type of charging unit to build. Often times, the charging stations are located along major highways, leaving those that are installed locally to be installed in controlled locations such as garages, service stations and shopping centers, all controlled by private companies. Sometimes these “public” charging stations are located on the property or in the garages of private companies who prohibit public access.
The economics of charging stations has become an area of focus of environmentalist Paul Homewood. His attention to this topic was driven by his discovery of new charging stations in a neighborhood shopping center. He discovered that the charging station was installed by InstaVolt, a private company backed by private equity. When he examined the company’s financial statements, he found it to be generating substantial losses as it strives to build its business. He estimated that the average cost of a charging station was $24,000 (£18,000). These are 50-kilowatt (KW) units, which provide faster charging times than the lower capacity (7KW) home charging units that cost on average $1,300 (£1,000).
When Mr. Homewood examined the charging station, he discovered it cost the EV owner 46.7 cents (35 pence) (p) per kilowatt-hour (KWh) for the power. That compares with the current cost for domestic power of 18.7 cents (14p)/KWh, but as Mr. Homewood says, the owners of the charging stations are entitled to earn money to repay their investment and earn a return. He noted that according to Nissan, its 62 KW battery Leaf EV will go 239 miles on a single charge. That translates into 12.2 cents (9.1p)/mile for the InstaVolt charge compared to 4.8 cents (3.6p)/mile cost for a domestic charge. If the vehicle is driven 10,000 miles, the cost difference in power sources equates to an additional $734 (£550) annually in the cost of battery charges.
Mr. Homewood did another comparison. If an EV-owner were driving a comparable diesel car, such as the Ford Focus, which gets up to 55 miles per gallon, at current diesel prices, it would cost 13.1 cents (9.8p)/mile. If one excludes the nation’s fuel tax of 77.4 cents (57.95p) per liter, the true fuel cost drops to 6.7 cents (5.0p)/mile. As he concluded, for an EV owner who lacks access to his own charging station and must pay commercial rates for battery charges, his fuel cost is not much different from a comparable diesel car, especially when one considers the greater number of diesel refueling options, as opposed to the limited number of charging stations and potentially longer time required to charge compared to the time to refuel a diesel pump.
The economics of EVs remain controversial, although the initial cost to purchase them is the primary limitation. Attempts to overcome the cost differential through providing government tax subsidies is limited if EV buyers do not have tax liabilities that can utilize the subsidy. A study we prepared showed that average tax liabilities may become a restrictive force mitigating the ultimate number of EV buyers. Range anxiety also is a crucial issue that will only be overcome when charging stations are ubiquitous and charging times shorter. On that issue, a recent study claims that batteries can be harmed significantly even after as few as 25 charging cycles when using large capacity, rapid charging stations.
Although heat pumps are not likely to become a core component of a Biden administration green energy plan, there are numerous other mandate restrictions on our choice of fuels that will have similar impacts. The key conclusion from looking at the U.K. 10-point plan is that it will need to build significant new electricity generating capacity. As this new generating capacity will be renewable, managing the intermittency of the power flow either by employing batteries or other power storage systems will add to the cost and complexity of operating grid systems. The transition to a carbon-free, all electric energy system will take longer and be more costly than most green energy proponents predict, and P.M. Johnson’s plan is merely the latest to highlight those challenges and costs.