Natural gas prices

Matt Ridley has an article in The Times called Green energy could kill Britain’s economy. I will say that I find it quite remarkable that someone who would probably call me an alarmist (for simply accepting the underlying science associated with AGW) can then use such a title without any sense of irony. The article is pay-walled so you can read it here.

I won’t say much about this article, but the basic premise seems to be that oil and gas prices will continue to drop and hence if more and more of our energy comes from renewables we will have an uncompetitive energy market. I’m clearly no expert at this so, as usual, happy to be corrected by those who know better. My understanding is that at the moment, the most expensive renewable technology is offshore wind at around $220 per MWh. The cheapest fossil fuel source is natural gas at around $80 MWh. Many, however, argue that we should be introducing a carbon tax to properly reflect the cost of emitting carbon. Reasonable estimates of a carbon tax would take the natural gas cost up to around $120 per MWh. So, if nothing else changes, natural gas is considerably cheaper than the most expensive renewable technology, but actually quite similar to some (PV, onshore wind).

I did a bit of searching to find out something about projected costs of natural gas. What I found is from the US Energy Information Administration and the relevant page is here. It produces projections for 4 different shale gas scenarios. The figure is below. I realise that this is for the US and that it is simply projections, but it does seem that there is no scenario in which natural gas prices won’t rise.

credit : US EIA

credit : US EIA

So, it seems to me that the cheapest fossil fuel energy source (natural gas) is – today – about a factor of 2 cheaper than the most expensive renewable energy source (offshore wind). There seems to be a general view that natural gas prices will rise over the coming decades. It seems unlikely that the cost of renewables won’t fall. Given that, it’s hard to see how switching to renewables will destroy our economy simply because of a price differential (because there won’t be much of a difference).

Having said that, I’m not suggesting that switching to renewables is trivial. Clearly there are many issues that would need to be resolved and there are some renewable sources that won’t be suited to UK conditions. All I’m really suggesting is that the argument that renewables will destroy our economy by being much more expensive than fossil fuels seems to be based on some assumptions that are unlikely to be correct (fossil fuels remain cheap, renewables stay expensive). Matt Ridley finishes his article with

Suppose, instead, world energy prices come down, even as the cost of subsidising renewables and nuclear starts to bite. We will have rising energy bills while the rest of the world has falling ones. That is a recipe for job destruction.

Suppose, instead, world fossil fuel energy prices don’t drop? Maybe then we’ll be thankful we’ve had the foresight to consider alternatives, especially if we’ve invested in our own labour force rather than simply importing from elsewhere. That might seem like a good way to create jobs.

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123 Responses to Natural gas prices

  1. Bwana_mkubwa says:

    The actual pay-walled Times article is slightly longer and ends with another straw-man rhetorical flourish in the form of a threat to politicians; “If subsidies for windmills prevent us from passing on any future falls in gas and oil prices, and jobs flee to lower-cost countries, the voters will not be forgiving.” I find this article particularly galling as it is all predicated on speculation.

  2. Does seem to be incredibly speculative. Something I meant to mention in the post, but didn’t, is that we are today, I believe, importing 30% of our oil and gas. Ten years ago, we were a net exporter. The trend appears quite steep so that it looks as though (unless shale does indeed prove viable) this fraction will increase dramatically in the next few decades. I can’t really see how anyone can think this a good idea. Some imports will clearly be necessary, but minimising this and keeping jobs here would seem a sensible strategy.

  3. One would have hope that Ridley would have learnt to be cautious of unforeseen events after an “unforeseen global freezing of a liquid market” broke his bank.

  4. Richard, you would have hoped that he may have learned such a lesson. Recent evidence would suggest that he has done no such thing.

  5. william says:

    Germany is the one to watch, will the large companies threatening to leave because of price hikes follow through. Can Germany stop brown outs and make a stable grid, companies have had to instal their own electric generators , renewables do not provide enough ooomph,

    Will Germany continue with subsidies for renewables that are not a constant source of power.

  6. Beobachter says:

    Recent evidence would suggest, that evidence is not something Matt Ridley considers of any worth…

  7. bratisla says:

    There is another untold problem with the “shale gas miracle”, apart from the already told environmental problems and the financial costs. US is not Europe, in two ways :
    – Europe has a higher population density than the US, and its spatial organisation is different. Drilling every km to squeeze gas out of the shale is likely to cost more in Europe because of these geographical points
    – Land ownership works differently. In the US, the land owner also possess the underground ; in France (for example), underground possession belongs to the state, which gives mining permits for a non-infinite amount of time. After that, the permit owner has to make sure that there is no problem before giving the land back to the state, with a certain amount of money to fund post-mining operations.

    The second point is debatable : it’s easier to negociate with one entity rather than meeting every land owner. On the other end, recent events show that (for example) the French government is highly sensible to the citizen’s actions against shale gas exploitation, ending with a fracking ban on the *whole* territory.

    It seems though that Mr Ridley, like some other people, fails to notice this problem. He may be not an energy expert, but it seemed to me that an economist should have this kind of basic notion … Did I miss myself something ?

  8. The shale gas boom has been a uniquely American phenomenon (do-dooo-do-do-doo) for the reasons bratisla gives, as well as the fact that the industry was lightly regulated which allowed rapid exploitation. The gas market in the US became saturated with domestically produced gas which significantly depressed prices. However, companies are already moving away from shale gas to shale oil, and prices are (I believe) already rising again as Wotts’ graph shows. It is inevitable that, as oil and gas becomes harder to extract, that prices will escalate. There cannot be any other way – it’s going to be happen eventually! And then, what happens when we run out of hydrocarbons? We cannot transition overnight and for free. Better to look forward and prepare, than react in the future, right?

  9. Bwana_mkubwa says:

    bratisla, Ridley is not an economist. He has a PhD in Zoology. When he sticks to his real expertise he can write some interesting stuff.

  10. Bwana_mkubwa says:

    Read this for a comprehensive take down of shale gas as a get-out-of-jail card:

  11. johnrussell40 says:

    As I spent quite a lot of time writing this comment on your previous post, Wotts, and as it then became totally swamped in the ‘William/Rational’ perturbation, please indulge me by allowing a repost on this thread—where it seems even more appropriate.

    You’re dead right, Wotts, when you write that fossil fuels will continue to become more expensive. It’s rising prices that make it possible to extract the difficult-to-recover oil which is now coming on stream and swelling the assets of the fossil fuel companies. In recent years the idea has been spread that ‘peak oil’ has been a figment of the imagination, as evidenced by the huge increase in reserves. This is a misreading of the situation. Peak oil was never about anything as simple as ‘running out of oil’ (the strawman); it was about the end of ‘easy’ oil—the point at which the price has to rise at an ever steeper rate to make it financially viable to recover the remaining, more difficult, oil. This is where we are now and which started sometime just before 2007.

    This also explains where people like Ridley and Lawson are coming from. A quick look at any list of the world’s biggest companies shows total domination by mining, drilling and natural resources companies. These companies form the backbone of any investment portfolio, including most people’s pensions, and they’re very close to the hearts of Lawson, Ridley & Co who have executive appointments on their boards and I’m sure are invested heavily in the success of those multinationals. Maintaining the position of these cash cows is vital to economies and the wealth of the ‘financial elite’. Our problem, sitting the other side of the fence, is that the renewables industry can never be the monolithic cash generators that the fossil fuel and resource companies are; because the ‘fuels’ they use—wind, water, tides, sun—cannot be bought and sold, or put in reserves and manipulated by the markets. They’re capital intensive with fixed assets that cannot be traded anything like as easily. So they will never hold the attraction of fossil fuels to the big investors.

    This is why Lawson, Ridley & Co are in such total denial, denial that is so astonishing it makes one’s jaw drop. They cannot let go of the goose that lays such golden, and toxic, eggs, even though it’s trashing the planet. They will fight to the bitter end like rats cornered by a Jack Russell. And they have the massive wealth and resources of the extraction companies behind them.

  12. bratisla says:

    @Bwana I stand corrected. My apologies. I thought he was an economist / had some expertise in economy because he was chairman at Northern Rock.
    … Ahem. :]

  13. Beobachter says:

    What I always don’t get in the reasoning, that fossil fuels is the way to go:

    UK oil and gas production is in free fall. And not because some weird greenies are making it fall, but because north sea oil production has exhausted most of its reservoirs, despite using hydraulic fracturing and water injection to keep production from not dropping. And UK shale gas/oil – if exploited massively – would also not change that. There are an estimated 26 trillion m³ of natural gas and 700 million barrel oil recoverable from shale deposits in the UK (see here) That would satisfy the UK energy need for oil for only around one (1!) year and for gas for around 9 years. So basically, that would only postpone the energy problem for less than a decade. That does not solve anything. But when building power plants and planning the energy future, you have to look on timescales of 40-50 years at least. And on that timescale, the UK would be dependent on ever increasing foreign energy imports of gas and oil.

    Even if we would assume, that prices of oil/gas could remain stable, that means, that the UK has to import oil/gas in the net worth of 70 billion dollars every year over the mid-long term (assuming consumption and prices would remain roughly stable). But that 70 billion dollars are missing in the UK economy and flowing abroad to countries like Russia, Nigeria etc. If the energy would instead be produced mainly local through renewables that means that those 70 billion dollars (around 3% of UK GDP) or at least a large fraction of it would remain in the country and benefit the local economy, instead of Russian or Arabic oligarchs.

  14. John, thanks for the lengthy comment, and I would agree. Much of what Ridley, and others, say doesn’t make sense unless one assumes that they’re trying to protect some kind of status quo. This cartoon may be apt. 🙂

    Energy company cartoon

  15. That's MR Ball to you. says:

    And again, where do fossil fuel subsidies fit into this picture? It seems strange to be talking about the relative pricing of renewables and fossil fuels when those very wealthy corporations are being subsidized out of the public purse, while renewables get a token subsidy over the objections of the business community.

    It’s also worth revisiting the argument that the reason we don’t have a widespread solar infrastructure is because it’s too difficult for big corporations to control for their own profit.

  16. Beobachter, as far as I can tell, you’ve hit the nail on the head. I don’t understand why what you’ve said isn’t highlighted more often. An energy trade deficit that is in the high 10s of billions of pounds doesn’t make sense to me even if alternatives are somewhat more expensive. We need to consider how those people who would have been employed in the energy sector would be employed if we import most of our oil and gas. If they could be employed in another sector that could drive economic growth, it might be fine. Trying to make up a £70 billion trade deficit is, however, pretty tricky. It’s my understanding that one way you do this is through public borrowing, and we all know how much of that you can do before you end up with all sorts of other problems.

  17. Beobachter’s comment has made think that I would post something here that I find frustrating about the current rhetoric in UK politics. If the country buys Ridley’s argument then, as Beobachter points out (and I think said something similar in an earlier comment) we will, relatively soon, be importing many 10s of billions of pounds worth of oil and gas. That’s money that’s no longer circulating within our own economy. It’ll be very nice for whichever economy gets it and maybe from a global perspective is a perfectly fine situation. However, what is likely is that there will be people in the UK who will find it harder to get employment because we’ve chosen to source our energy externally, rather than internally. One could argue that this strategy is optimal and that we would simply support those out of work through some kind of benefits/welfare system (i.e., the country as a whole is benefitting from this strategy, we’ll support those who’ve suffered). What will likely happen though is that those out of work will be blamed for not being sufficiently innovative and we’ll be told that we can no longer support a benefits system. This seems to be happening already, so I can’t imagine it will get better if we continue to increase our trade deficit through importing increasing amounts of oil and gas.

    I accept that the above is a little simplistic, but maybe not as far fetched as one might hope.

  18. That’s MR Ball to you, my calculation suggests that the fossil fuel subsidies are around £10 per MWh, so not that insignificant. What I found though – as you probably know – is that if you try and discuss this with some, they claim that a tax break isn’t a subsidy and that if you took it away, we’d all pay more. I tend to disagree with that view, but it’s just another example of how hard it is to have these discussions when people can’t even agree if something is a subsidy or not.

  19. william says:

    not sure how you work these things,

    The draft subsidy level – the “strike price” – will be £155 per megawatt hour for offshore wind farms from 2014, falling to £135 in 2018. For onshore wind farms, which are cheaper to build and run, it will be £100 falling to £95 in 2018.

    That compares with prices of about £90 per mwh for onshore under the current subsidy system, and about £130 for offshore wind, under the current Renewables Obligation, which runs to 2017.

  20. JamieB says:

    From the article…

    “They argue that what has driven energy bills up threefold in ten years is mainly an increase in the wholesale price of energy, rather than any great lurch towards subsidising renewables. True, but most of the lurch is yet to come and as wind power capacity quadruples by 2020, it will add £400 to average bills — not to mention driving up the price of energy to industry, which will pass it on to consumers.”

    Where on earth did he get the £400 figure from? Is he really suggesting that wind power will add £400 per annum to energy bills?

  21. BBD says:

    Exactly as Beobachter has it. The *myth* of shale gas as panacea is presented to the public; the facts of shale gas are rather less – dare I say it – earth-shaking.

    But this isn’t about shale gas *facts*. johnrussell40 has now explained the subtext twice.

  22. Jamie, I’ve no idea where that number comes from. Most analyses I’ve seen suggest that increasing renewables will reduce gas bills by making it less sensitive to increases in the wholesale gas price. If his previous writing is anything to go by, he probably just made it up.

  23. William says:

    Denmark has one of the highest electricity prices in Europe. It is probably the largest generator of renewable electricity per head . Renewables are not cheap. For us in the uk we are paying when the turbines are spinning or not spinning. Even when not producing the turbines have to turn to keep lubricated so actually using energy.

    Feels very expensive to me.

  24. JamieB says:

    It might be funnier than that. Closest I can find comes from the right wing numpties at the Taxpayers’ Alliance:

    *Surely* Ridley didn’t think they meant £425 per year? The TPA figure is most definitely the total spread over the whole period to 2020. To phrase it as adding “£400 to average bills” quite clearly implies £400 per annum.

  25. BBD says:


    This thread is about natural gas prices. On that topic, you should read the link posted above by bwana_mkubwa.

  26. The next time you hear tax breaks aren’t subsidies, show them a definition.

    “Subsidies …come in various forms including: direct (cash grants, interest-free loans), indirect (tax breaks, insurance, low-interest loans, depreciation write-offs, rent rebates).”

    “Definition of ‘Subsidy’ – A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction.”

    When I did just this I was then told that lefties had changed the meaning of the word. So I then showed them the etymology. Nope, they were still convincing themselves. I asked if their CFO cared very much if he lost a $1 of cost or gained a $1 of revenue – the profit remains the same either way. Nope, I was “obviously” a watermelon.

  27. John, indeed one could show them a definition. As you illustrate though, it doesn’t really help. As if to prove my point though, this is about the only tweet I can find that mentions this post

  28. Wotty says the cheapest natural gas he can find is $80/MWh.

    He then introduces a graph showing US current prices stable at around $4/MBTU,

    $4/MBTU was around $14/MWh when I was at school.

    So Wotty is exaggerating by a factor of more than 5.

    Which kind of invalidates the point of the post and all the subsequent comments.

  29. Foxgoose, you qualify as one of the most unpleasant people I’ve encountered in this debate. I have no real desire to engage with you whatsoever. The only reason I allowed your comment was to ensure openness. The $80 per MWh is the Levelized Cost per source. The figure is, I presume, the wholesale cost. The comparison of $80 per MWh for Natural gas and $220 per MWh for offshore wind is the correct comparison.

  30. JamieB says:

    Foxgoose – err surely the cost per MWh is the cost to generate electricity but the cost per MBTU is the spot price for the raw gas?

  31. verytallguy says:


    Feels very expensive to me.

    what’s your comparator William? How about compared to the cost of a 4 degree rise in global temperature? Still feel expensive?

  32. William says:

    I would be happy living in denmark, small population.

    You just have to accept your prices will rise, where this stops who knows,

    High Costs and Errors of German Transition to Renewable Energy … › English Site › Germany › German Energy Revolution
    4 Sep 2013 – German consumers already pay the highest electricity prices in Europe. … If there is too much power coming from the grid, wind turbines have to be shut down. … Occasionally, Germany has to pay fees to dump already subsidized green energy , creating what experts ….

  33. William says:

    Very tall guy,

    If you are worried about co2 perhaps the US is showing the way, their co2 levels have declined.

  34. William says:

    BBC News – Report suggests slowdown in CO2 emissions rise
    31 Oct 2013 – New research suggests that the rate of global emissions of CO2 may … Key factors included the shift to shale gas for energy in the US while China … economic recession in the 27 nation bloc saw emissions decline by 1.3%.

  35. Wotts – ‘pologies for thwacking your twitbate with BarryJ. Obviously agreeing upon the meaning of words is simply a commie ruse.

    Twas bryllyg, and ye slythy toves
    Did gyre and gymble in ye wabe:

  36. Ali TT says:

    I’m intrigued by John Russell’s assertion about the inertia to change in the fossil fuel industry. I have heard this argument used before to explain why the uptake of renewables has been slow. I find it a little difficult to know whether this is the truth and whether it is or not if it represents a very naive view of the future of energy supply (naivete of either the FF companies if true, or those accusing them if not). At some point in the next 100 years energy generation will be predominantly from renewable sources, so if the big-FF companies aren’t preparing in some way for this, they will disappear. I don’t necessarily have faith that they are particularly forward-thinking however (look at the issues the pharmaceutical industry faces, many caused by failure to long-term plan).

    Although obviously the source of the energy for renewables is free, as John asserts, that doesn’t mean a renewable-powered grid wouldn’t be prone to speculation. Take solar power- the sun may be free and ubiquitous but the minerals needed to be mined to make solar panels certainly are not. Then there is the issue that renewably-generated energy will need to be stored at peak Sun or peak wind then released to the Grid at peak load. Is it unforeseeable that this stored energy may be stockpiled and speculated upon as well, albeit in a different way perhaps to FFs?

    A renewable energy system may be more diversified than that at present, but I’m not convinced it will be a more democratised one compared to our present day system.

  37. John, it’s no problem. I just didn’t feel up to a major debate about the definition of a subsidy given that it was unlikely to go anywhere constructive. Plus, the point I was making in the comment that Barry chose to ridicule was that introducing fossil fuel subsidies into the discussion will just end up in a debate about whether tax breaks qualify as subsidies.

  38. verytallguy says:


    If you are worried about co2 perhaps the US is showing the way, their co2 levels have declined.

    Couple of points William. Firstly you didn’t respond to my point on expense. Fossil fuels are only cheap because their short term cost does not include their long term impact – termed as externalities.

    Second, no doubt gas replacing coal in the short term is reducing US CO2. However, if the long term result is simply that the coal is used elsewhere, or later, then the net impact on CO2 in the biosphere is positive. It only helps if there is also a strategy to move on to near zero emissions technology in the medium term, *and* to ensure the displaced coal stays in the ground.

  39. Wotty.

    I’m not sure what I’ve done to deserve the personal invective but there is no indication of the source of your $80/MWh natural gas figure. Perhaps you could provide a link.

    The point I was trying to make is that the US shale gas revolution brought gas prices down by a factor of around 3 there and you’re completely ignoring the possibility of that happening here.

    Using the “projection” part of that graph to prove the inevitable rise of gas prices while ignoring the “history” of the original massive fall is simply bizarre.

    We are already starting to import US shale and the effect of that on our gas prices can only be downwards – whatever the eventual exploration of our own shale gas brings.

    In short – there is every reason to expect our gas prices to fall and I think your scenario of inevitable price rises is contrived.

    Is this disagreement too “unpleasant” for you to contemplate?

  40. AAshleySharp says:

    William, I don’t know where you get your information from, but turbines tend to turn when there is wind, and not when there isn’t. Operators are paid only for the actual electricity their machines generate. The thought that they are mysteriously being powered from the grid is somewhat hilarious. In Germany there may have been a few instances where they are ‘artificially’ turned when awaiting grid connection but I’ve not heard of this happening in the UK.
    On a wider point, although UK energy prices are some of the cheapest in Europe;
    Our bills tend to be at the top end of the scale because of our incredibly inefficient housing stock, and we therefore use more energy. If natural gas is the panacea for all ills, I’m wondering why a fair few gas plants are being mothballed? Cheap coal, displaced from the US shale boom (so William your CO2 savings in the US might be being passed on elsewhere), is leading to the UKs emissions rising despite increasing production from renewables. However, as oft said, energy policy is easy if you don’t believe CO2 emissions are important, hence Ridley can chase his carbon dream without fear of the consequences. Actually he probably wants more carbon pollution as it will bring forward his list of AGW benefits.

  41. Rachel says:

    Don’t play victim now Foxgoose. Your previous comment was loaded. What you really should be saying now is, “Oh, now I see. I got it wrong. Thanks for pointing this out, Wotts. And please accept my apologies”.

  42. William says:

    Aashley, I cannot comment on how much power is used as it is not disclosed but this gives an idea of what is happening,

    I can give you a link but when I do off my iPad it does not seem to open .
    ‘Rechargeable batteries – Large wind turbines contain a number of rechargeable batteries to power the electrical systems when the wind is not blowing. These systems include aircraft lights, brakes, blade control devices and weather instrumentation. If the wind doesn’t blow for an extended period, these batteries must be recharged with power off the electrical grid.
    Heaters – Gearboxes in wind turbines contain fluids that must be kept warm in frigid climates. Turbine blades also have built-in heaters to prevent icing, which the author suggested could consume up to 20 percent of the electricity produced by the turbine.
    Motors – A common misconception is that the blades of a wind tower sit still when the wind is not blowing. In fact, a tower uses its generator in reverse as a motor to spin the blades slowly. The movement of the blades is almost imperceptible to the naked eye. The blades move to prevent brinelling (grooving) of the bearings on the main shaft. This occurs when bearing components rock back and forth without much movement. Consequently, electricity is taken either from the storage batteries or off the grid to power the blades during these periods.
    Wind turbine manufacture’s don’t report how much electricity is consumed internally or must be purchased externally. The amount is likely to be quite variable because system designs vary by manufacturer. Moreover, there likely are both good and bad economics of operation as turbine sizes increase.’

    [Rachel: here is William’s source ]

  43. JamieB says:


    “We are already starting to import US shale and the effect of that on our gas prices can only be downwards – whatever the eventual exploration of our own shale gas brings.

    In short – there is every reason to expect our gas prices to fall and I think your scenario of inevitable price rises is contrived.”

    The UK Is not importing any shale gas from the US yet and won’t for at least a couple of years. And even fossil fuel bosses reckon that US and UK shale gas won’t do much if anything to cut gas prices in the UK (see recent comments from Shell and Cuadrilla).

  44. Rachel

    Should I be touched by your loyalty to the boss?

    The issue is Ridley thinks fossil fuel prices are likely to come down. Everyone I know in the energy business agrees with him.

    People who are financially or emotionally invested in the renewable energy business (including politicians, bureaucrats, businessmen, activists and presumably Wotty) find this prospect very alarming and are desperately creating fake scenarios to try and keep their spirits up.

    None of us knows exactly where energy prices will settle – but this piece of news today makes me think that Ridley is likely to be right and Wotty wrong.

  45. AAshleySharp says:
    William, probably from here. Strange how this article treats the whole thing as a conspiracy theory?
    Even if turbines do scavenge as small proportion of energy from the grid to keep their systems running efficiently, they would be no different from any thermal or nuclear plant which uses a substantial amount of either its own output or electricity from the grid in its own operations.
    Foxgoose, how do the long term economics of increasing demand and increasingly harder to get at reserves stack up against ongoing falling prices? Discussing energy policy with anyone who disregards the problem of CO2 emissions is a exercise in futility.

  46. AAshley

    I think you may have misunderstood the debate.

    Commodity prices are determined by market forces not “energy policy”.

    Only some very dim activists & politicians think you can have a “policy” on prices.

  47. Rachel says:


    I’ll direct you to a couple of comments already made by other commentators. Verytallguy points out here that fossil fuels are only cheap because they fail to include externalities in their cost. And then John points out here that fossil fuels are going to continue to go up because we’ve already picked all the low hanging fruit.

    Here are some more links: ‘Unburnable’ fossil fuels set to leave investors stranded.
    Peak oil is alive and well and costing the Earth.

    And you shouldn’t be touched you should be cautious because I have the power to moderate your comments.

  48. Foxgoose, seriously? On Twitter you implied I was a bigot and you’re now surprised I don’t welcome you here with open arms. Grow some self-awareness.

    Here’s a link.

  49. AAshleySharp says:

    Foxgoose, because the corollary to your observations on commodity prices, and the essence of Ridley’s case is that we are committing economic suicide by following a policy of supplanting fossil fuels with renewables. As stated before, easy to make a straight cost comparison if you ignore the externalities associated with climate change.

  50. William says:

    Aaashley, possibly , but I think rhe engineer had a genuine interest in the workings , the article does go into talk about net power written on the turbines though I do not know how that works as turbines turn on average between 15-30 percent of their maximum potential. So that is a lot of downtime where it has to be powered.

  51. Rachel says:

    Bloomberg has just launched a tool which allows investors to measure their exposure to stranded carbon assets. See Bloomberg carbon risk valuation tool

  52. AAshleySharp says:

    Without wishing to turn this thread into a trawl through the workings of wind turbines, you need to familiarise yourself with capacity factors and actual running time. Most well sited wind farms are generating for ~80-85% of the time, their capacity factor is generally between 20-30% onshore, 35-50% offshore.

  53. verytallguy says:


    a quick google shows the EROEI of 18 for wind. Although that’s from Wiki, so not well researched.

    Your points on power usage whilst down whilst interesting are evidently not significant in the overall scheme of things.

  54. William says:

    Very tall guy ,

    I had a look to try and find out but it seems the wind companies keep these figures hidden. I feel it should be available on their websites.

  55. As far as EROI goes, I found this a while ago. I haven’t confirmed the numbers, but I think I’ve seen similar values elsewhere.

  56. BBD says:


    Wind generators are paid according to the electricity they generate. AFIK they are charged for the electricity they consume.

    So they are not subsidised when they are not generating and they do not scavenge free electricity from the grid.

    Or are you claiming that these companies are actually given free electricity from the grid?

    If so, can you find some documentary evidence for this?

  57. William says:

    Ashley, yes actually turning is up to 80per cent of the time but depending on windspeeds produce around 30 percent of their maximum capacity.

    I would imagine best sites are taken throughout Europe so diminishing returns on new sites, at sea, could be expensive in siting and repairs.

  58. BBD says:

    William, you have been banging on about passive consumption by wind turbines for some time now, so please respond to my last. Thank you.

  59. BBD says:

    BTW, William, do you understand what EROI means? Because that’s the evidence that you have been volubly irrelevant again.

  60. Ali TT, maybe John will respond to your comment at some stage. You may well be correct that there will still be speculation on the different resources needed for alternative energy sources. One issue is that – as you yourself seem to suggest – unless fossil fuel companies get involved soon, they could soon start losing out to others. Hence, the suggestion that it’s in their interests to undermine the alternative industry (although one might hope that they would embrace it and start engaging directly themselves. AFAIK, some already do). Additionally, if you start to have households with wind turbines or solar panels, than that does change the market but, as you indicate, doesn’t guarantee that it will be more democraticised than it is now.

  61. William says:


    It is called parasitic consumption when tne turbines take back power from the grid, as I said I have no idea what this amounts to.

    The wind power companies get money when there is too much power and they have to power down, it is compensation. I would imagine that all things being perfect if the wind turbines could work at maximum capIcity they would be perfect, at the moment I remAin unconvinced that without fossil fuel back up they are a viable source of power in Europe. In certain parts of the world I am sure they could be very effective supplying
    power to small towns backed up by solar as
    Long as there is no heavy industry .

  62. William, you really need to provide some evidence for what you’re saying. As others have pointed out, they pay for the power they use when not turning. Hence it is likely included in the cost. As far as I’m aware, everything you’ve mentioned is included in the cost of wind power. Hence, why is it relevant?

  63. nnoxks says:

    Foxgoose, I don’t know who you know in the energy business, but the vast majority of energy experts do not think prices are coming down. To imply otherwise is simply false. Even the constantly overly-optimistic International Energy Agency disagrees with you and Mr. Ridley, and certainly that organization, for all its faults, has a better understanding of the world’s energy situation than either of you. From the executive summary of the IEA World Energy Outlook 2013: “An oil price that rises steadily to $128 per barrel (in year-2012 dollars) in 2035 supports the development of these new resources, though no country replicates the level of success with LTO that is making the United States the largest global oil producer.” IEA WEO 2013 Executive Summary at 3-4. While the price situation with natural gas is a little less certain due its greater susceptibility to variable regional markets, as Wotts has already pointed out, there is no scenario under which (in the US at least) nat gas prices fall – all scenarios show a steady rise in prices. To suggest that most experts think FF prices are about to fall is absurd – all the evidence is to the contrary.

  64. William says:

    Wotts, I assume that is why the subsidies are so high for windpower, to compensate for downtime and turning off in high winds. Whether this is the deal done in the Uk and does not happen in Germany , denmark etc I do not know.

  65. verytallguy says:


    as I said I have no idea what this amounts to.

    Yes you do. You know it is not significant, otherwise the EROI would not be so high. I helpfully provided a figure on EROI for you, to save you doing any actual quantitative research yourself.


    can I suggest parasitic power consumption is now offtopic unless William produces some evidence. Otherwise we’re off down a rabbit hole again.

  66. William, excepct I think you need to be careful what you mean by subsidy here. In the article you highlighted earlier, the subsidy is the “strike price” – the minimum we will pay for a unit of energy. Unless, I misunderstand this, it’essentially reflects the cost of producing that energy. So, yes, we know that offshore wind is expensive (£155 per MWh falling to £135 in 2018). Onshore wind is more reasonable (£100 per MWh falling to £95). As far as I’m aware, this includes all of the issues you highlight. The only reason parasitism would be relevant would be if the amount of energy used by wind turbines when not turning is significant. I would guess that that is unlikely.

  67. BBD says:


  68. VTG, I agree. If the EROI is 18 or higher, as you and I have both shown, parasitism cannot be significant. William, we should move on unless you can prove otherwise.

  69. BBD says:


    can I suggest parasitic power consumption is now offtopic unless William produces some evidence. Otherwise we’re off down a rabbit hole again.


  70. In case William doesn’t know, EROI is the energy returned on the energy invested. It’s a ratio and so an EROI of 18 means it returns 18 times as much energy`as it expends.

  71. johnrussell40 says:

    @Ali TT: To answer your points in the order they occur…

    Short of development of fusion (still 40 years away when last I looked) and provided we don’t leave it too late and the cost of dealing with climate change doesn’t take us back to the dark ages, you’re probably correct that within 100yrs generating power will be 100% renewables; though I’d prefer the phrase ‘environmentally sustainable’. If my reasoning is wrong—which it very well could be, say, if fusion works out or we find ways to take CO2 out of the air—then it won’t be because of any ‘naïveté’ on my part, but rather because I ain’t no soothsayer.

    Neither do I think for a moment that the FF companies are naïve. I think you’re right to assume that they are aware that they’ll need to change at some point, in fact I’m sure they’re already well aware (remember ‘BP’—’Beyond Petroleum’?), however the attraction of all those reserves sitting on their balance sheets is difficult to ignore. As an aside, I’m sure you’re aware of the discussions around ‘the carbon bubble’. [ ]. No: I think the FFCo.s are working on the assumption that the more money they hold in their coffers the better position they’ll be in to deal with any problems when they arise. From their perspective there’s no benefit in being the first to jump. But they’re dabbling, as are some of those countries whose economies revolve round oil. [ ] So they’re playing it both ways and holding their cards close to their chests; giving a few quid to think tanks and speaking quietly in the ear of government ministers, offering them places on their boards when retirement beckons. We all know the game.

    As to a renewable-powered grid being prone to speculation: you misrepresent my claim. What I said was “cannot be traded anything like as easily”. I stand by that. You’re quite right that renewables will be stored, perhaps even traded, but their value will have been created by the investment in the technology necessary to generate the power. Which is a very different thing to the value represented (currently) by the reserves in a subterranean lake of oil or a seam of coal.

    Fossil fuels have such power because they’re so massively valuable before any expenditure in recovery. Drilling and mining rights are simply a licence to print money. Countries that have large reserves can become immensely rich with relatively little outlay using proven technology. Is it any surprise that it’s something they don’t want to let go of and will cling to until their dying breath? Isn’t that why the countries doing the least to tackle climate change are those with the largest reserves of fossil fuels per head of population? Even the UAE that’s investing in all that solar power is still wanting to sell all their oil (in fact if they can become 100% renewables they’ll have even more oil available for sale!l). Is that not why the Arctic is proving such a magnet?

    I think it’s time none of us were naïve about what’s going on.

  72. William says:

    [Rachel: Sorry, William but I’m not going to let this through because if you want to continue with this topic you need to provide some evidence for your claims. Please try not to derail the thread. Thanks.]

  73. I’ve just noticed this part of the comment by Foxgoose

    The point I was trying to make is that the US shale gas revolution brought gas prices down by a factor of around 3 there and you’re completely ignoring the possibility of that happening here.

    I believe this is incorrect. I think that the drop in the figure in the post is partly due to various instabilities in the world in the early to mid-2000s that drove the price up, followed by the financial crisis of 2008 that reduced demand and drove prices down. I may be wrong, but I don’t think the sudden drop was due to the shale gas revolution.

  74. guthrie says:

    So fossil fuel prices are going to come down? I don’t believe you. We’re at peak oil right now, and the UK needs to sort out its energy needs pronto, otherwise we’ll be forking over billions more every year for our trade gap. Ideally this would be compensated by the pound falling in value, but because we have the city of london to keep happy, that isn’t permitted to happen.

    If Ridley actually cared about the UK and it’s future, he’d be for whatever methods are necessary to reduce our fossil fuel consumption so as to save exporting it at ever increasing costs.

  75. johnrussell40 says:

    Foxgoose might like to read this: “UK shale gas unlikely to bring down gas prices in short term, say experts”.

  76. William says:

    We were wrong on peak oil. There’s enough to fry us all | George …
    by George Monbiot – in 179 Google+ circles
    2 Jul 2012 – George Monbiot: A boom in oil production has made a mockery of our predictions . Good news for capitalists – but a disaster for humanity.

  77. Rachel says:

    See the link I provided earlier about this Peak oil is alive and well, and costing the earth:

    Peak oil, of course, doesn’t mean that the world is running out of oil any time soon. There is a vast amount of oil left. Over the last 150 years, however, we’ve picked the low hanging fruit, so to speak, meaning that the remaining oil is harder to find and more expensive to extract. This is making it more difficult to increase the “flow” of oil out of the ground.

  78. johnrussell40 says:

    George Monbiot is becoming quite famous for changing his mind on things (no criticism intended). I don’t normally make predictions as it’s a mugs game, but I think he’ll be changing his mind on this back to his original position before long.

  79. William says:

    BBC News – The receding threat from ‘peak oil’
    by David Shukman
    14 Jul 2013 – “There’s enough oil in this country for another 100 years with our present technology and there’s more around the world to be found yet.”.

  80. nnoxks ……….. To suggest that most experts think FF prices are about to fall is absurd – all the evidence is to the contrary.

    Well the IEA must have changed its mind since May – when it was projecting a dramatic fall in oil prices – down to $93 by 2018 ( with the rider “This is the bull case. Prices are likely to be much lower.IEA”):-

    I’m not sure why this is different from your quotes – but, whichever is right, clearly they don’t think the notion of falling FF prices is “absurd”.

  81. Rachel says:

    The BBC article seems to confirm the idea of low hanging fruit. From the article:

    A key factor behind the development of new resources is the relatively high global price for oil. Extracting oil from “unconventional” sources such as “tight” rocks like shale costs more than from traditional reservoirs – and requires far more energy – so only becomes viable at certain price levels.

    A paper published last week in Eos, the newsletter of the American Geophysical Union, supports the assertion that a peak in oil production is “a myth” but argues that the rising cost of extraction could itself provide a limit, and may act as a brake on economic growth.

  82. Well, my quick Google search produces this. Seems to say something different.

  83. James Westwood says:

    William says:

    “Denmark has one of the highest electricity prices in Europe. It is probably the largest generator of renewable electricity per head.”

    The high prices in Denmark are because of taxes.

    When taxes are removed Denmark has lower Energy prices than many European countries, including the UK. So I do not think this supports your opinion renewable is expensive.

  84. guthrie says:

    Whoops, I wrote exporting instead of importing fossil fuels. But I’m sure you are all intelligent enough to get the idea.

  85. guthrie says:

    Anyway, I’m glad we all agree that fossil fuels are bad for the environment, and that we need to add the externalities from them into the price.

  86. I have a table on EROEI’s on my blog: if anyone’s interested, and there’s a link to the source (admittedly a presentation so you’ll need to follow the references therein…).

  87. johnrussell40 says:

    Just to make it very clear, I and others have never said the price of fossil fuels will rise in a nice steady upward curve. Instead we’ll see up and down spikes due to the variability of other influences; but the overall trend will be upwards.

    I think we have observed much the same in other trends in recent years.

  88. Ian Forrester says:

    jr40 said:

    I think we have observed much the same in other trends in recent years.

    Funny that it seems to be the same people who cherry pick short term trends and base their predictions on those short trends.

  89. nnoxks says:

    Foxgoose – The IEA did not change its mind. You are looking at the IEA’s five-year forecast, out to 2018. It predicts a slight decline in oil prices mainly as a result of shale oil in the US, as well as deep water and tar sands. The World Energy Report projects out to 2035. A little more context from that quote from the WEO may help clear things up:

    “The capacity of technologies to unlock new types of resources, such as light tight oil (LTO) and ultra-deepwater fields, and to improve recovery rates in existing fields is pushing up estimates of the amount of oil that remains to be produced. But this does not mean that the world is on the cusp of a new era of oil abundance. An oil price that rises steadily to $128 per barrel (in year-2012 dollars) in 2035 supports the development of these new resources . . . .” IEA WEO 2013 Executive Summary at 3.

    In other words, the oil is getting more expensive, no way around it, regardless of new types of resources. Please keep in mind that the IEA’s projections for oil price and production over the last decade has been wildly optimistic. Example (I just love graphs like this):

    William – take heed of the above sentence – let me repeat it for you: “But this does not mean that the world is on the cusp of a new era of oil abundance.”

  90. nnoxks says:

    Urrgh. Sorry about the copypasta screwing up the quoted paragraphs above.

  91. William says:


    Yes but why is it getting expensive, shell and be have been manipulating the price for a decade decade,

    And the following,

    Blatant Distortion and Manipulation of Oil Prices Laid Bare ……j…/blatant-distortion-and-ma_b_3815863.html
    26 Aug 2013 – What transpired on Friday was a brutal movement in the price of oil to the enormous benefit to oil interests. And for no reason that can be …

  92. William says:

    I found this a good perspective on denmark,

    [PDF]Wind Energy: The Case of Denmark – Cepos

    Click to access Wind_energy_-_the_case_of_Denmark.pdf

    by C Landgreven – ‎2009 – ‎Related articles
    2 Sep 2009 – The cost of Denmark’s wind capacity to Danish consumers is … Denmark has been a first-mover in the wind power industry for over ten years, …

  93. I’m no expert in British energy, but my understanding is that recent energy price increases are mostly due to rising natural gas prices, and certain folks with certain agendas have tried very hard to instead blame it on wind energy.

    It seems entirely logical that natural gas prices must rise in the long-term, because natural gas is a non-renewable resource. There’s only so much of it. On the other side, wind prices have nowhere to go but down as technologies become more efficient. We know we’re not going to run out of wind. It’s a similar story with solar energy.

  94. Ian Forrester says:

    There is a good article on Ridley and his political connections in a piece in the Independent:

    The “sceptic brotherinlaw” is Ridley.

    I was trying to find out where his family got their original money from and it turns out to be from coal mining. How ironic (or not).

  95. Dana, I believe that you’re correct. The main reasons for the rise in energy prices in the UK are a 50% increase in natural gas prices in the last 5 years and a 50% increase in energy company profits. It’s even acknowledged by Ed Davey, the Secretary of State for Energy and Climate Change. Yes, I also can’t see how, in the medium to long-term, natural gas prices won’t continue to rise, while the cost of alternatives will drop as technology improves.

  96. Rachel says:

    I’ve edited the link in your comment because it wasn’t working. You might want to check that I’ve got the correct one.
    Also, I’ve found an article which is quite dismissive of yours. See Researchers correct the false allegations on Danish wind energy.

  97. There is no-one, but no-one, less sceptical than a “climate sceptic”.

    The 2009 CEPOS study was paid for by Institute for Energy Research. . The IER is a fossil fuel paid PR group,

    Follow the money, they say.

  98. verytallguy says:

    There is no-one, but no-one, less sceptical than a “climate sceptic”.

    Indeed. “Credulous” would be a much better word to describe the modus operandii of jumping on any information, however flimsy, from any source, however unreliable, which might support the case. “Gullible” would be another.

    Unfortunately, neither has a satisfying noun associated. “Climate gulls” would be spot on but implies a rapacious seabird rather than a credulous fool. I quite like “Climate credules” but unfortunately the word doesn’t exist.

    So suggested very civil name for Wott’s proposed bore hole – the “Gulls Nest”.

  99. Building upon VTG, “Gullible’s Travels” for the bore hole?

  100. William says:

    Perhaps more balanced,
    Comparing cepos and ceesa.
    Wind Power Variations are exported

    5 Mar 2010 – The installation of new wind turbines in Denmark has been seen as an essential step towards … It is surprising that the CEPOS study, which after all is simply empirical …. objectively what is right and wrong in this matter.

  101. AAshleySharp says:

    Seeing as our host is a physicist, what about the “wormhole”?

  102. William says:

    Rachel, a discussion on the radio about offshore windpower, the question asked to the windpower guy, if all my energy came from windpower what would my energy costs be, guy said they would double in price.

  103. William, I believe that that would indeed be true today. Two things to bear in mind. Fossil fuels are not paying for their externalities. Reasonable estimates of a carbon tax are around $55 per tonne of CO2. Also, as I was trying to illustrate in this post and as many have illustrated through the comments, there is very little evidence that fossil fuels will get cheaper. It seems much likelier that they’ll get more expensive. Alternatives will also, presumably, get cheaper. This document shows the strike price dropping by 5 – 10% in the next 5 years. So, a factor of 2 today is quite likely to be considerably less than a factor of 2 in a few decades time.

  104. BBD says:

    Another indication of the shape of things to come. Hardware costs on this scale are unlikely to usher in an era of falling gas prices.

  105. William, you really don’t need a larger blade on your spade. Just stop digging. Your “more balanced” citation is just as unbalanced, or unhinged, as your first one.

    PF Bach writes for the Renewable Energy Foundation, another front group.

  106. AnOilMan says:

    I’m ever late to the party…

    First, no one is drilling for natural gas. We in the drilling industry stopped 2-3 years ago. The sales of equipment into drilling ceased then, and pipeline work is winding down. You don’t need to be an economist to know that this state of affairs is intended to raise prices. I’d expect 2-4 times…

    Second, emissions for natural gas are on par with coal. There is no debating this fact. New EPA regulations with ‘green completions’ for natural gas will bring natural gas emissions to about half of coal. (That is bad, not good.)

    Third, I’ve crunched the numbers, and in Calgary Alberta Canada it costs $0.22 cents per kwh for solar (on grid), and coal costs $0.10. However, remaining on grid is the expensive part (other fees double my bill). Going off grid and onto battery is more than a little bit feasible. Seriously, does anyone drive the exact same kind of crappy car they drove in university? No. We’ve all upgraded. There is no economic reason for renewables not to be adopted,

    wottsupwiththatblog: The biggest deterrent to renewables right now is backup power supplies. Bill Gates, and Donald Sodaway discussed this in their TED talks. Donald Sodaway has founded Ambri batteries in Boston. They are expecting utility grade batteries to cost $0.05 per kwh in volume. There are many other utility grade battery companies with the similar cost models.

    I don’t know if anyone knows this, but GWPF are oil and gas lobbyists. When I was working in drilling, their marketing brochures kept coming across my desk from the sales people. They are hardly a credible source of information.

  107. AnOilMan, thanks. I was aware of the backup power supply issue but don’t really know much about what is being done in that regard. What you mention about batteries is interesting. I also have a friend who is working on research into hydrogen storage, but I’ve no idea at what stage that technology is.

    I wasn’t specifically aware that the GWPF are oil and gas lobbyists, but would not be surprised to find that they are. However, I am well aware that they are not a credible source of information 🙂

  108. BBD says:

    Wotts, of course the GWPF are gas lobbyists – they promote fracking constantly.

    An interesting (and local) research project into energy storage provides an insight into what may be a near-term breakthrough in energy storage. Do have a look at Isentropic.

  109. BBD, true. I was more referring to them sending out marketing brochures than to their media statements, but – you’re right – that alone would qualify them as gas and oil lobbyists.

  110. johnrussell40 says:

    AnOilMan: you wouldn’t be able to lay your hands on one of the GWPF’s brochures, would you?

  111. AnOilMan says:

    wottsupwiththatblog: Might I suggest a future article on utility grade energy storage? I would be interesting to see what your intelligent guests have to say.

    By the way, the largest utility grade battery is Cruachan Dam in Scotland. Its reversible, you can pump it full of water to store for peak demand. Its just waiting for some wind or solar… This sucker can store almost 10GWh.

  112. AnOilMan, I’m quite often out of my depth when I write blog posts, but that may be pushing it a bit far 🙂

    I’ll have to do some reading and see what I can find out, though.

  113. AnOilMan says:

    johnrussell40: No… that was years ago. I’m not in drilling these days.

  114. AnOilMan, since 2009 presumably, unless there’s another GWPF or they reformed in 2009.

  115. AnOilMan says:

    wottsupwiththatblog: Ditto… I’m just an engineer, but I’ve learned so much from sifting through the BS the denial sphere keeps shoveling around.

    I’ve had two very vocal individuals also claim that it is all just a conspiracy. In one case, the individual claimed that the Alberta Government was infiltrated by Tides Canada, and therefore under their direct control. (This individual writes news paper articles no less. Talk about crazies at the wheel!)

    Another complete idiot was promoting the idea that Wind Farms produced CO2, and met the usual questioning with abject obtuse stupidity. (Irish energy grid has co-generation plants. When wind is high, wind energy output high, but dang if people don’t want more heat with all that wind. So co-generation plants which produce CO2 are turned on.) It was fun learning about wind generation though.

  116. That's MR Ball to you. says:

    “Vocal”? As my mother would say, she was vaccinated with a gramophone needle. I’m surprised she’s not on the editorial board of the National Post yet. (the NP is Canada’s version of the GWPF and The Telegraph, rolled up into one smug ball of denial.)

  117. AnOilMan says:

    Speaking of the Fiends of Science…

    How is Mr Ball’s lawsuit coming on?

    Tim Ball has already lost two lawsuits. One against a climate scientist who pointed out that he lied or fabricated his credentials, and the other against the Calgary Herald for publishing it. (Best part here? The Herald won’t publish his lies anymore.)

  118. That's MR Ball to you. says:

    Nevertheless, it’s good to see that Tim Ball is still travelling around and preaching his version of climate science to retirees and rural interest groups.

    I’d be more interested in seeing Andrew Weaver’s suit against the National Pos come to pass. (There was a “t” there, but I like it better this way.) It’s been a couple of years already, so I don’t know if it will ever go to court, but I think it would be very educational for all concerned. Especially because some of the stuff published by Corcoran & Co. is so egregious (Arctic ice recovering completely etc.).

    I still have a soft spot for Timmy! He practically invented Climatology, you know.

  119. I’ve changed the name of the blog to And Then There’s Physics. If you wish to comment on this post, you can do so here.

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