Blain’s Morning Porridge – Dec 12 2022 – Weather is a disaster for UK Energy!
“In the bleak midwinter, snow on snow..”
This Morning: It was a disastrous weekend for UK energy strategy as the biting cold and lack of wind demonstrated the fallacy of wind as “the” renewable solution. Energy security requires predictable power. Meanwhile, Central Bank mull rate hikes and implications for dollar strength.
Sorry for the very late comment this morning – but the weather is not my friend…
The weather over the weekend (especially on Saturday) was as bad as Southern England could possibly get. Saturday was a simply glorious day as we walked along the old Hampshire drove roads to a marvellous country pub. A blocking high gave us a Christmas-card perfect beautiful blue-sky, ice crackling beneath our feet, the bliss of a kiss beneath the largest clump of mistletoe we’ve ever seen, as the puppy-dogs played on a freezing crisp winter’s day. Not a breath of wind. An utter disaster for the nation.
Our chums up in the Southern Downs experienced their first blackout of the winter as Sunday dawned grey and freezing. As I warned last week, the UK reliance on wind power does work when it’s cold and the wind don’t blow. This morning the UK National Grid has put the remaining Drax coal-fired plants on standby to “give the public confidence” in energy supplies. Spot energy prices in the UK surged to a record on Sunday – £2,586 a megawatt hour.
Who knew wind power actually isn’t the solution to everything? Freezing weather and no wind… no electric.. Dang.
This morning, trains are cancelled because of the cold and snow – not that it matters.. the railways are on strike for the rest of the week anyway. It’s the road and horseless carriage for me later today… trying to get up to London for meetings this week.. and I’m bringing a spade to dig myself out of the blizzards – when the wind finally kicks in. (Which might not be till Thursday!)
I confidently predict the weather will dominate markets this week, and on the basis the UK seems to do absolutely everything badly these days, then it’s going to get worse. The very first thing I learnt in the City was to buy a pair a good shoes. If you buy cheap ones, they fall apart in the slush and rain of winter. I’ve had one particular pair of Churches since the 1990s – and they are still functional!
Much the same problem with energy. You pay for what you get. There is no point buying shoes that come apart in the mud, and there is no point putting all our energy eggs in unreliable/intermittent baskets. Again, we need to figure what a proper transition plan from fossil fuel to renewable energy will look like – wind and solar can only be a small part of that because of their intermittency unless it can be stored – capacitance. In contrast, Hydro power is very well understood and a good way to store energy – but is a risk in times of drought.
I don’t want to sound like a broken record, but the tide came in and out twice yesterday… it has the potential to power the UK multiple times – but doesn’t attract much funding because harvesting energy from the tide is difficult. Machinery corrodes in salt water, and installations immediately become prime real estate for every kind of sea life. The trick is regular, quick, easy and simple maintenance to ensure complex but highly predictable and reliable tidal generators deliver. Wind is easy and completely unreliable. Wind power is absolutely fine when the wind blows, but wind turbines are not an optimal solution because of their intermittency.
Try explaining that to a climate change protestor. Good luck. They will tell you the solution to a lack of wind is to build more windmills.
The problem is… asset management companies listening to the loudest most strident voices. They know that virtue signalling to garner assets to manage is about sound bites. The biggest investment companies highlight their green credentials by ostentatiously investing in the cheapest, simplest, easiest renewable solution – Wind and Solar – rather than funding the optimal solutions – like tide. (And notice how I have not referenced once the high carbon costs of constructing and recycling wind turbines, or their underperformance in terms of output and maintenance.)
As I said last week… the future of a zero-emissions energy policy for the UK should be based on a broad mix of power that is as secure from the vagaries of the weather as much as from Putin’s legions. That means a mix of renewables that range from easy to complex, investment in capacitance in the form of both batteries and hydro (Electric Mountain tech!) and nuclear!
Gas will have a part to play. Yes, it’s fossil, but it can be mitigated and its less bad than coal. On the plus side, the Germans have managed to build new LPG gas import facilities in record time to reverse their energy dependency on Russian gas.
This morning the Americans announced they managed to get more energy out a fusion reactor than they put in – a first, and that probably means fusion power by the end of the century!! Check out: Fusion energy breakthrough by US scientists boosts clean power hopes.
Back in the immediate world.. this week is going to be an interesting one, with the Fed, The Bank and the ECB all set to hike rates by 50 or maybe 75 basis points. Everyone gets it – inflation is moderating, but now the risk is recession. The number, the comments, the votes, the arched eyebrows, the sweat on central bankers’ foreheads will all be scanned for clues on when interest rates pivot to lower hikes. There was a time before we used words like taper or pivot to describe central bank actions…
I think I shall start to describe what The Bank is likely to do as Snowploughing interest rates – wanting to slow inflation by making snow “Pizzas” (as young skiers are now taught), but keeping the blades just flat enough to keep the economy going, thus using one’s skis to stop!
The increasing dispersion between the likelihood of more aggressive action by The Bank of England and ECB while the Fed is heading for lower rates is going to be most apparent in the weakening of the dollar – that’s potentially an easement for the current economic misery we expect in terms of European recession. The fact the UK economy grew a modest 0.5% in Sept/Oct is hardly booming growth, but the fact it expanded at all is perhaps positive – even though the widening £24 bln trade deficit hints of an economy still in somnambulance!
Finally, last week I got a number of calls from Readers about how they’d missed the story about Thurrock council – the Tory town council that managed to lose over £600 mm investing in dodgy solar energy. If you want the whole sordid tale, there is a great take on Bloomberg. I wonder.. how did it happen…. ?
Five things to read this morning:
WSJ Slowing Growth Edges out Inflation as Top Concern
FT European parliament shaken by Qatar corruption scandal
FT Credit Suisse First Boston 2.0: what could possibly go right?
Torygraph The ten megathreats facing the global economy – according to Dr Doom
BBerg Energy Latest: UK Readies Coal Plants as Snow Tests Grid
Out of time, getting the snow tyres on!
Bill Blain
Strategist – Shard Capital
6 Comments
Comments are closed.
Bill,
Here’s a UK tidal project that has two key ingredients – a supportive local authority and in K-water, the company behind the current world’s current largest tidal project. The Liverpool region also has one of the country’s largest tidal ranges
https://www.liverpoolecho.co.uk/news/liverpool-news/mersey-tidal-project-up-now-25713102
Morning Bill,
I do appreciate that things are pretty bleak at present, in many countries, not just our own. I’d be interested in hearing about best case scenarios and possibilities for the UK in short, medium and long term. Or are there none and we’re all just doomed?!
Bill,
Well done for pointing out that tidal power is far more reliable than wind and solar. But as you said, it comes in and out twice a day and has dead spots in between. And yes it’s also highly corrosive, (chemically & physically.
The answer, is in them thar hills! Or more specifically the rain that runs down them, into rivers all over the world, the vast majority of which never stop flowing. NEVER EVER! Not even once a day. They just keep flowing. And they will power generators constantly, 24/7, 365 days of the year, clean and green, for-ever!
But you know that. And so do MP’s. But they choose to be blind. And they choose to be deaf. And they choose never to look at anything further than the next election and the well paid ‘advisory job’ they can get once they leave parliament.
If I could sleep at night, I would sleep soundly. Knowing that we have a solution that can power the world clean and green with 24/7 reliability, cheaply; and with less environmental impact than wind or solar. Lower manufacturing and installation costs than wind, (and considerably less steel and concrete) and the opportunity to be virtually invisible, (interested? @nowind.org.uk?).
WESGen™, (https://www.whcltd.com/WesGen-Hydro) and it’s derivatives, located everywhere from small systems in local rivers, to the as yet untapped giant Hydro generators of the Mississippi, Missouri, Danube, Rhine, Ruhr, Seine, Amazon, Et al, will save the world, I am confident of that. Whether it will be in my lifetime, I’m not so confident.
So for now and the foreseeable future, Bill, I’d advise investing in Gas & Cumbrian coal and wrapping up warm.
Ref the point about our mix of electricity generating capacity in the UK on which you are quite correct I think that the graph on page 30 of the report from the UK govt below highlights the issue:
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1094025/UK_Energy_in_Brief_2022.pdf
In 1996 we had 71.3 GW of generating capacity that was “non-renwable” (i.e. dependable).
In 2021 we had 55.3 GW of generating capacity that was “non-renwable” (i.e. dependable).
Go figure 🙂
The “political” point for me would be that in the late 1980s and early 1990s we privatised the entirety of our energy generating infrastructure (gas and electric, generators, distributors, retailers…).
These “asset managers” then became governed by “how do we make money, preferably quickly and with the lowest risk available to us?” (sound familiar?).
I would contend that this model of ownership / stewardship is not compatible with the scale and timescale of decisions and commitments that need to be made to “keep the lights on”.
Within that timeframe our nuclear generating capability has dropped by 5 GW (nearly 40%) and a lot more will be going offline “soon”.
Only “the government” has the scale and longevity to take on the risks of replacing this capacity; the market will NOT provide.
By burying their collective heads in the sand (the blue tories and the red tories during that time) the government took decisions to replace nuclear generating capacity far too late (and continue to be too late). They’ve also incidentally chosen to replace them in the most expensive way possible.
And hence we have the gap that you correctly identify, and no obvious likelihood of it closing anytime soon (none of which is “news”).
Sell Rio Tinto and buy a portable diesel generator?
Yes, tidal power is absolutely reliable, but it changes direction and therefore reduces to zero, albeit extremely predictably, 4 times a day meaning that the output from any turbine reduces to nothing for at least 4hours every day. In which case the equivalent of the Drax steam turbines would need to be kept hot actually turning over for 24 hrs every day.
The problem can be reduced by installing a large proportion of base load nuclear reactors, then using the excess power during windy weather to generate first hydrogen which can provide short term back-up and then converting the excess hydrogen into methanol which can be stored more cheaply and use both to drive combined cycle gas turbine generators when the wind stops blowing and the sun goes down.
If it needs doing then it needs doing well and not in a piecemeal fashion, and it certainly isn’t going to be cheap!
There is no one solution in renewable energy. Just like you make hay when the sun is shining, you make wind power when the wind is blowing, and solar power when the sun is shining. Gas fired peaker plants are a good solution if you have the gas storage. They can be started relatively quickly where coal is slower and nuclear is even slower to start. Where I worked the company (a major fossil fuel company) built a solar thermal facility. Tracking mirrors concentrated the sun and heated a heat transfer fluid which was stored in an insulated tank and we made steam during the night). We just needed the steam for the oilfield but could have just as easily made electricity with steam turbines.
As a former sailor (I know you sail), I am not quite as keen on tidal power as you are (I had a steel sailboat and it was constant maintenance) but the trick is to have a gradually implemented carbon tax and let the free market figure out which is best. Big payoffs encourage big risk takers.