British Telecom will not become wind farmers

British Telecom has indicated that it will not be spending £250 million on a wind farms. The idea was that by building a series of UK wind farms it could generate about 25% of its own electricity usage, making it that bit more “green” as a telecommunications company. The reason for its decision not to invest wind in wind farms is a little complex, but it is worth examining in detail.

There are not many UK incentives for green energy and of those that exist; those for generation of electricity are the most generous by far. It has always been hard to understand why we should have a “green electricity” policy instead of a “green energy” policy, because electrical energy is almost impossible to store in an environmentally friendly way, whereas heat energy is very easy to store in an environmentally friendly way.

The two major ways of generating green electricity require wind turbines or photovoltaic cells. The wind turbines generate no electricity when the wind does not blow. The wind does not blow all of the time, even in windy places, so the electrical supply from turbines is intermittent. Photovoltaic only work in daylight, and are also disadvantaged by our inability to store their electricity. With both technologies you only get the energy when the conditions are favourable for it. That makes it very hard to use the “green” electricity thereby generated, unless you have a demand for electricity only when the wind blows or only in daylight.

This intermittency, when coupled with the grid inefficiencies and the great carbon footprint associated with switching generators off and on intermittently, makes the actual useful energy of turbines and photovoltaic less than what it says on the tin. Without some kind of subsidy or incentive very few wind farms and photovoltaic installations would happen.

Now, the way in which subsidies and incentives for wind farms are organised in the United Kingdom is through a device called Renewable Obligation Certificates (ROC), which is an incentive, not a subsidy. Under the system British Telecom thought that it could get the ROCs, which enable it to avoid paying taxes on the electricity it uses, and at the same time sell the electricity to the grid, which would be able to resell it as “green” electricity and meet their targets for generating a certain percentage of electricity by green means.

For every MWh generated by a wind farm the generator (in this case BT) gets a ROC. It can sell the ROC to an energy generator which can then use it to offset some of their obligation to generate electricity by renewables. The generator can then resell surplus ROCs (at around £34 each) to other generators who fall short in their targets. That is the incentive that a ROC delivers.

The Government has quite reasonably said of BT’s idea that the purpose of the ROC is to incentivise, and not to subsidise. BT’s operation would have presented BT with a windfall of the ROCs because they are already selling the electricity, and the rules prevent BT from have the same benefits twice, because the ROC is used to offset the carbon reduction obligations of the generators, not to provide a commercial windfall.

As soon as BT resells the ROC it in effect gets a Government subsidy on green power. If it sells the ROC it is not generating any more green power than would otherwise be generated, because the generators would have to build the turbines and get the ROC to prove that they had complied with their renewable obligation to generate their target requirement for green electricity.

Clearly something needs to be fixed to encourage more green electricity generation, but it is curious that the government concentrates its incentives, subsidies and obligations on electricity. The easier way to reduce our carbon footprint is to concentrate on the thermal technologies – solar, ground source and air source in that order. The natural gas savings should be used to generate cleaner electricity at the expense of the coal fired plants.

 

One Response

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