Blog

On Tuesday, faced with a combination of cold weather, high demand, uncertainty over electricity imports and low renewables output, National Grid resorted to coal generation for the first time this winter. The 60-year-old West Burton A power station was fired up. From the perspective of those people antipathetic to renewable energy, it was evidence that when the going gets tough, fossil fuels have to come to the rescue.

In socioeconomic theory, there is a trade-off between the amount of money that’s spent to limit supply interruptions of an essential good, on the one hand, and the cost of those interruptions on the other. If interruptions occur frequently, more money should perhaps be spent to reduce their number. Conversely, though, if interruptions never occur, that might indicate that the supply network has been over-engineered or ‘gold-plated’. The optimal point of investment occurs when the marginal cost of reinforcement equals the marginal benefit in the form of reduced costs from interruptions, taking all costs into account. All costs should include ‘externalities’ such as (in this case) the social cost of greenhouse gas emissions. These externalities might be expensive, but a complete absence of any interruptions or shortages is suggestive of over-engineering.

The electricity industry defines Value of Lost Load, or “VOLL”, as the theoretical unit cost of involuntary demand curtailment, the overall economic value that users attribute to security of electricity supply. VOLL is notoriously difficult to quantify. Various studies over decades have estimated it to be several thousands of pounds per MWh, with a wide range between them; and, for a given study, a wide range between types of customer. A study for Ofgem in 2020 came up with a value of £17,500 per MWh for domestic consumers, which equates to £17.50 per kWh. A kWh is roughly the amount of energy used by a typical domestic oven, or kettle, in twenty minutes.

The concept of ‘peak lopping’ or reducing the highest levels of demand – voluntarily or involuntarily, with different associated costs – applies to a broad range of activities; and is likely to be increasingly important in the green revolution. The owner of a domestic heat pump may save money overall by purchasing one that does not quite meet household demand on the very coldest days of the year, choosing to ‘top up’ with a portable heater and/or dressing more warmly on those days. The owner of an electric vehicle may deliberately choose one that does not have the range necessary to travel to the in-laws in northern Scotland, and be prepared to hire a petrol car or go by train for the occasional visit. It might be cheaper for a business to suffer a small percentage of days with connectivity problems than to pay for rock-solid broadband provision.

We could, in principle, build so much renewable and storage capacity (including batteries and hydrogen storage) that we have an entirely green electricity system which is unlikely to experience even a single shortage in a given year. But VOLL notwithstanding it might be cheaper – and better for the environment – to have less capacity and learn how to cope with the occasional shortage.

It looks pretty certain that we will face more extreme weather due to climate change; and there will be an increased need for adaptation. The occasional day when old and polluting power capacity has to be called into action does not constitute evidence for abandoning renewable energy targets. It may, though, highlight the rising importance of flexibility at short notice in our economic activity and way of life.

In the news recently:

• the International Monetary Fund forecasts that the UK will be the only major economy to shrink in 2023

• the Government suggests apprenticeships to get over 50s back into work

• Liz Truss and other Conservatives say we need to cut taxes to stimulate growth

As usual, the language is telling. We learn that the UK economy will perform even “worse” than Russia. The economy “needs” its over-50s. We must have tax cuts to “get the economy moving” and “unlock the post-Brexit potential”.

We all know that GDP is a measure of economic activity – both good and bad. We would increase GDP if we managed to open a dozen new coal mines, switch back on all our remaining coal-fired power stations, triple our output of pornographic material, chop down our remaining forest to convert into that material, quadruple our production of knives, guns and bombs, produce and dispose of five times as much plastic waste, and kill off the elderly so that we can knock down and rebuild their houses and ramp up business for funeral homes.

There is of course nothing good per se about economic growth: it depends how that growth is comprised. What we do, not just the fact that we are busy. We know this, just as we know that GDP only captures activity that is assigned a monetary value. Those over-50s might be doing valuable voluntary work, but as it wouldn’t contribute one iota (or, rather, one pound sterling) to GDP growth, the Government would much rather see them back in paid employment.

Why – when all this is pretty obvious – are our media, economists and politicians so obsessed with economic growth? One theory is that it’s in a government’s interest to keep everybody (measurably) busy so that they don’t have time or energy to plot its downfall. Another is that we are terrified of death, all the more so as the fear is socially unacknowledged, and we don’t want time on our hands to contemplate our mortality. A third is that economic growth has been correlated historically with improved welfare for the population. (I’m sure there are others, and maybe there’s a grain of truth in more than one of them.)

The third of these theories conflates consumption with progress. Lives have been vastly improved by advances in areas such as electrical engineering and medicine. But that doesn’t mean we have to buy lots of stuff we don’t need in order to support the NHS through taxes, or double our power consumption so that we get more wind farms built.

Degrowth

In late January, the Financial Times’ chief economist, Martin Wolf, wrote a piece entitled “In defence of democratic capitalism”. In it, he took aim at people who argue against economic growth. ‘Degrowth’, as it’s apparently termed, is “neither sufficient nor necessary” for a sustainable future, he wrote. It is not sufficient because it would “leave emissions far too high”. And it is not necessary because the “best solutions are technological”.

From a scientific perspective, it is hardly contentious to suggest that if we were to reduce our consumption of material resources and energy and our use of land for agriculture, then we would also reduce our contribution to greenhouse gas emissions and ecological degradation. And if one suggests that such reduction would be desirable, it doesn’t follow that one must therefore be antipathetic to progress.

Voicing an unquestioning reliance on technology is what politicians do, not scientists. Technology may, if we’re very lucky, bail us out on its own. It’s far more likely, though, that it’s a partial solution, just as demand reduction – a correction to the last 100 years’ exponential increase in per capita use of resources by inhabitants of industrialized countries – is a partial solution. Both are necessary, neither is sufficient. Sure, let’s be supportive of new technology, but at the same time be clear-sighted about the limits imposed on it by the laws of physics. And exercise restraint in areas of activity where technology has not managed to keep pace with actual emissions (e.g. flying) – until it’s demonstrated in the real world, not just some laboratory, that it can.

We don’t need to keep purchasing stuff we don’t need, or visit far-flung places just because we haven’t been there before. We can revise our economy so that we consume (and travel, at least in planes and cars) less. Overall, that would mean less exchange of money – and the loss of some jobs – so we’ll have to adapt, not just by having more ‘green’ jobs but probably also by working less (in paid work) and having less money to spend. But we can protect social services and our infrastructure, without having to rely on taxes of the super-rich, if we have the will to do so. It would mean a higher proportion of our income is used in their support (poorest excepted), which would be consistent with spending less of our money on personal possessions. We can live in future with lower GDP and higher happiness. (Isn’t Costa Rica meant to be a current example of this? Perhaps I’m mistaken.)

We will need a change of mindset about the good life though. And a greater willingness to say it’s needed without being muzzled by the fear of accusations of puritanism or hypocrisy.