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‘Wind Overbuild: Why More Wind Won’t Work’

During 2021 there were 7 days when variable renewable energy (predominantly wind) contributed more than 50% of UK grid power but also 16 days when it contributed less than 10% (See Fig 1. UK Wind & Solar Power Intermittency 2021). This is the scale of the intermittency problem. Doubling or tripling wind capacity – the current stated aim of the UK government - might mean wind providing more than 100% of grid power on those same 7 days a year, but what would power the grid and prevent blackouts on the other 358 days in the year?

Fig 1. UK Wind & Solar Power Intermittency 20211

The price of power in the UK hit a record of £380/MWh last year but averaged £92/MWh. There is a strong winter seasonal demand bias to prices, which are also affected by the supply of other power sources, predominantly natural gas (See Fig 2: UK Spot Power Prices 2021). There were 13 days when the UK power price dipped below £20/MWh, coinciding when wind power contributed an average of 42% of aggregate demand (and 2 days when the price was negative when weather dependent power market share was 53%) (See Fig 3: “What do low power price days have in common?”). In other words, the UK already has cheap abundant power when the weather is favourable coinciding with high shares of wind generation, and a power crisis when the wind does not blow. 

Fig 2: UK Spot Power Prices 20212


Fig 3: What do low power price days have in common?3

 Assessing the economic viability of wind projects by simply looking at the declining prices of guaranteed CFD’s in new auctions over time is a trap, which the UK government has fallen into without even realising. Even in an energy crisis where the CFD price is below the average price, wind is economically parasitical, draining exponentially higher taxpayer subsidies at increasing market shares.

Building more wind capacity in the UK today is like a factory owner deciding to hire additional workers who guarantee to turn up only when they are not needed: to give those unreliable workers long-term guaranteed contracts and by contrast, pay the existing workers - gas power plants in our analogy - who agree to turn up to work at specified hours less; whilst insisting on the ability to fire these reliable workers without notice. The outcome would encourage all workers to become unreliable and the factory owner would end up having to employ far more workers overall than needed to compensate for unreliability, with no guarantee of being consistently adequately resourced.

The UK government wants to phase out fossil fuels (currently providing 55% of power) at the same time as forecasting a doubling of UK electricity demand. This means that renewable and nuclear capacity must increase by at least four-fold, though as wind operates at less than 50% capacity utilisation, a solely wind solution would require the increase to be eight-fold. At today’s offshore wind build prices – subject to inflationary revisions as turbine OEM’s attempt to recover profitability – this would cost roughly £500bn or nearly a quarter of UK GDP. 

This is not a “one-off” cost since turbines need to be replaced after 10-20 years and as we have seen wind utilities would require ongoing CFD subsidies (we estimate based on historical prices of £55bn or 2.5% GDP per annum). Over the course of economic history it is rare for so much of a nation’s wealth to be spent replacing an historically cheap and efficient product with a more unreliable substitute that depreciates rapidly and will always require ongoing taxpayer support.

Green energy enthusiasts ignore intermittency and suggest we purposely overbuild wind power in the hope that in the future battery technology will make large scale storage technically possible and economically feasible. Current battery technology is unable to offer an industrial scale solution for longer than a few hours. At higher shares of wind power, electricity will need to be stored over weeks and months, not days and hours.

Even if this could be resolved, we need to consider the cost of power storage. At current battery prices £1bn would buy 11 minutes of battery storage for the UK grid; $200 per KWh translates to $171bn (8% GDP) for one day of storage. Even if the battery cost is reduced to 10% of the current price ($20/KWh), £1bn would buy less than 2 hours of storage. It is easy to see how building an electricity grid powered solely by renewables could end up costing the UK more than 100% of GDP.

Let’s suppose as is now fashionable that money is no object. If the UK was able to exclusively source the world’s annual lithium production, this would be enough to store 312 GWh: 1GW (the size of just one small power plant) of electricity for just 13 days, or the entire UK electricity demand in 2020 for just over 8 hours. A similar exercise with Vanadium yields an even more extreme outcome.

Hydrogen is the latest unfeasible storage fad touted to justify wind overbuild. Expensive industrial electrolysers would have to operate at very low-capacity utilisation given the intermittency of renewable energy, with energy subject to high losses on conversion. Since hydrogen is uniquely flammable and difficult to store, it must be chilled to -253 degrees Celsius to liquify and safely transport, meaning that the energy costs of hydrogen storage will outweigh any benefits.

Fig 4: UK CO2 Emissions4

The UK has already halved its carbon emissions (See Fig 4: UK CO2 Emissions), partly through renewables but largely by switching from a predominantly coal to a gas-based grid, now accounting for less than 1% of global carbon emissions (See Fig 5: Global CO2 Emissions). Over the same period, global emissions have tripled, with Asian emissions (China and India) up more than 10-fold. Non-OECD countries now account for more than 2/3rds emissions and these will continue to increase since non-Western countries do not share our decarbonisation zeal. 

Fig 5: Global CO2 Emissions5

Whilst the costs of decarbonisation are becoming clearer, what constitutes success is ill-defined by unilateral action rather than results. Like a doctor who measures success solely by the quantum of medicine administered, the UK is now locked into a financially ruinous path of full decarbonisation, without ever being able to rigorously evaluate whether the patient is responding to treatment. When the decarbonisation of the West inevitably fails to produce a measurable change to global climate, the solution will inevitably be to administer more medicine – whose efficacy can never be measured - locking us into a green policy doom-loop.

A renewable grid will produce abundant electricity for a few days annually and prohibitively expensive, unreliable power the rest of the time, resulting in demand destruction, supply rationing, and deindustrialisation. Building more wind now has no economic value and ironically has an unjustifiable environmental cost: it is a monumental misallocation of capital and a generational policy folly.


Barry Norris
Argonaut Capital
April 2022

NB: Much of this blog is a condensed version of a previous more extensive blog on wind power

1Source: Argonaut Capital, Elexon

2Source: Argonaut Capital, Bloomberg

3Source: Argonaut Capital, Bloomberg, Elexon

4Source: BP statistical Review 2020

5Source: BP statistical Review 2020