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Topic Title: Economics of Home Electricity Generation, Storage and going off-grid
Topic Summary: cheaper to be off-grid, than on-grid?
Created On: 01 November 2013 11:32 PM
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 01 November 2013 11:58 PM
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jarathoon

Posts: 1041
Joined: 05 September 2004

At the moment people use natural gas boilers for around £900 plus vat, for home heating with output of say 7kW to 24kW for heating and hot water.

With just slightly better insulated houses we could replace this with a water cooled 5kW natural gas electricity generator running at 20% efficiency. If you can reduce the energy needed to heat your home to 40 kWh per day, by having a well insulated house maintained within a 2 DegC temperature band. Then heating your home can be achieved by running a 20% efficient 5kW water cooled natural gas electrical generator for 2 hours per day; with 10kWh of electricity generated and 40 kWh of heat produced.

If a household on average needs 15kWh of electricity per day in winter then the remainder needs to be made up with a 2KW to 4KW solar system, depending on latitude of your location in the UK.

In summer the solar system would generate most of the electricity and perhaps some of the hot water as well. If the 5kW natural gas generator is needed to heat the hot water then it can be run for 30 minutes each day to provide 2.5 kWh of electricity and 10kWh to heat for the hot water.

The problem comes in determining the most cost efficient battery storage system to use. The storage costs of electrical energy make it uneconomical to go off-grid at the moment. However that will change quickly if electricity prices rise too fast, and costs of storage come down.

I think this would be the wrong way to go.

When off-grid you will need more storage than if you want to stay on grid and import/export electricity as required. With a smart grid a 10 kWh of storage would allow electricity to be imported when the cost is low and exported when the cost is higher.

However it is probably cheaper if any storage needed is provided as a local grid service (e.g. with the storage based at the local substation), rather than every one buying there own storage.

This could be organised as a community run service, i.e. people buy a share of the local store of energy at the substation level. The total amount of storage needed, and the associated maintenance and renewal costs, will be less per household that way. The savings per household could be made by the local community as a whole needing to import less energy from the wider grid, rather than this happening at the local householder level.

This would mean completely separating the charging structures for the local grid (e.g. up to substation level), from the wider grid costs. There may be a case for local grids to be completely run on at a municipal local level to cater for this flexibility.

Going off-grid in terms of electricity, requires a reasonably well insulated house (with say a 40 kWh per day heating requirements in winter), plus a 20% efficient water cooled 5kW natural gas generator (£500-£1000) [these products aren't ready for mainstream at the moment], plus 2 to 4 kW of solar panels depending on latitude (£3000-£9000), plus 20 to 40 KWh of battery storage (£3000-£5000).

If electricity costs rise too quickly people may find it becomes economic to go off grid completely. I think we will end up with a completely nonsensical electrical supply system if it were cheaper to be off-grid than on-grid.

At the moment it is only really the costs and impracticalities of storing electrical energy that is stopping this happening (and the fact that most people don't have well insulated houses). This may change quickly if storage technologies start reducing in cost substantially.

In engineering and economic terms alone this shouldn't happen. Storing electrical energy at the substation level will be cheaper, safer and more practical than everyone buying there own storage systems.
It seems hard to believe that storage can become so cheap as to make a daily standing charge of 10p-20p a day more expensive. However if the minimum price of electricity is too large, compared to the cost of maintaining your own home electricity storage, then going off-grid will start making economic sense for some users.

In order to discourage this direction of travel I want to state things in a slightly different way...

My First Law of Electricity Supply is that:
"It should never make more sense to be off-grid, than on-grid, when living in villages, towns and cities. This should be true even for electricity users that have low net use and simply need the grid as an alternative to having a large amount of home based electricity storage"

It seems to me that it will always be cheaper and more practical to buy storage as a local community resource, rather than everyone buying there own. Less storage is needed per household that way, and in bulk it will be cheaper to maintain and renew.

My Second Law of Electricity Supply is that:
"Government policies that make off-grid electricity cheaper than on-grid electricity are disadvantageous in engineering, social and economic terms, and will probably fail in political terms as well in the medium to long term"

Just some thoughts. Feel free to disagree.

James Arathoon


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James Arathoon
 02 November 2013 01:28 AM
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jarathoon

Posts: 1041
Joined: 05 September 2004


I missed of the economics of all this:

From Ofgem's "Electricity and Gas Supply Market Indicators":
Wholesale gas is 2.3p per kWh at the present time (£385 / 16900 kWh)

With the average gas bill being £755 for 16900 kWh (average 4.5p per kWh retail price of gas)

So at the moment the wholesale price of gas makes up 51% of the customer gas bill.

Wholesale Electricity is 5.6p per kWh (£225 / 4000)

With the average gas bill being £600 for 4000 kWh (average 15p per kWh retail price of electricity)

So at the moment the wholesale price of electricity makes up 33% of the customer electricity bill.

The price of gas is 0.3 times the price of electricity.


In the proposed Hinkley Point C deal the price of wholesale electricity is set as £92.5 per MWh (2012 prices). The price of retail electricity from Hinkley point C will be three times this at 28p per kWh. (2012 prices)

Without extra taxes added on to the price of gas there will growing gap between the price of electricity and the price of gas. In order to keep the price of gas at 0.3 times the price of electricity, the retail price of gas needs to rise to 8.4p per kWh. That is it needs to nearly double in price.

If the price of gas becomes dissociated from the price of electricity it will become increasingly economic for people to use gas to generate electricity at home (by using the waste heat for hot water and heating).

If gas is used to generate electricity using a 20% efficient natural gas electrical generator. 20,000 kWh of gas would be needed to generate 4000 kWh of electricity and 16000 kWh of heat for hot water and home heating (in the ideal case).

20,000 kWh of gas (4.5p per kWh) = £900 retail

4000 kWh of electricity (15p per kWh) + 16000 kWh of gas = £1320 retail

A theoretical saving of £420 a year, by generating all your own electricity.

With costs up rated to Hinkley Point C Prices the calculations become...

20,000 kWh of gas (8.4p per kWh) = £1680 retail

4000 kWh of electricity (28p per kWh) + 16000 kWh of gas (8.4p per kWh) = £2464 retail

A theoretical saving of £784 a year at today's prices. Generating your own electricity at home from gas would become a very attractive proposition

In order to reduce the theoretical savings back down to £420 a year price differential using Hinkley Point C prices, the retail cost of gas would need to rise to 17.5p per kWh. That's nearly 4 times today's retail price!

My conclusion is that if we pay Hinkley Point C prices for electricity; we would have to add unfeasibly large amounts of tax to gas, to stop people generating their own electricity from gas and detaching from the electricity grid.

Using the law to stop people generating electricity at home from gas would be futile; we live in a free country after all, don't we?

James Arathoon


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James Arathoon
 02 November 2013 02:28 AM
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jarathoon

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Another Energy Scandal according to the Telegraph...

The Big Six are sitting on our cash

"Energy companies have spent only a third of the £1 billion they have collected from bills to pay for 'green taxes' "

"Well, far from [the Energy Company Obligation (ECO)] being a burden on the companies, ECO - which largely insulates the homes of poor families, thus reducing their bills - has so far proved a bonanza. The Local Government Association has worked out from government and Ofgem data that they have so far actually spent only about a third of the approximately £1 billion they have collected from customers' bills to pay for the scheme. Energy UK, which represents the companies, responds that it is taking time to "bed in". "

I am not sure it amounts to a scandal yet; we will no doubt have to wait until the no longer fuel poor, under the DECC definition, start dying unnecessarily in their homes before the politicians consider this a scandal.

The Telegraph suggests getting rid of the Carbon floor price for electricity generation.

I don't think you have to pay the carbon floor price if you generate electricity from gas at home.

If I am wrong you may have to factor in the fact that the carbon floor price will rise to £70 per tonne CO2e in 2030.

There is 0.18404 kg of CO2 released from burning 1 kWh's worth of Natural gas according to the carbon trust see here

Burning 20000 kWh of gas to generate 4000 kWh of electricity at home, releases 3.68 tonnes CO2. In 2030 the tax due on this will be £210; this still makes generating electricity at home attractive (on Hinkley Point C electricity prices) even if the tax eventually needs to be paid by people generating electricity from natural gas at home.

I agree with the Telegraph we should have a rethink about the Smart Metering programme and how it will be used and paid for. I am not sure I understand what is happening with this.

James Arathoon

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James Arathoon
 07 November 2013 11:21 AM
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jarathoon

Posts: 1041
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I didn't realise but Germany has a program to bring down the costs of home energy storage and that may an large effect on our energy policies in due course if the cost of storage starts dropping.

As I pointed out in another thread

5kW Natural gas powered electrical generator + 4kW solar panels + cheaper 40 kWh storage = ability to power homes off-grid

Off grid electicity will be cheaper than on-grid electicity if electricity prices rise too fast in comparison with gas prices, and if electricity grid standing charges rise too fast, because of offshore grid connections and other expensive gold and platinum plated grid infrastructure spending.

Germany finances major push into home battery storage for solar

"The German government has responded to the next big challenge in its energy transition - storing the output from the solar boom it has created - by doing exactly what it has successfully done to date: greasing the wheels of finance to bring down the cost of new technology.

Over the past five years, Germany has been largely responsible for priming an 80 per cent fall in the price of solar modules. Now it is looking at bringing down the cost of the next piece in the puzzle of its energy transition - battery storage."


I don't know whether this is the cheapest way of funding innovation and growth in new energy sectors, but it is certainly a better way than forcing £100's of billions of British capital abroad to fund third generation nuclear at any cost starting in 10 or 20 years time.

We now know (thanks to Mark Higson at DECC) that the cost of nuclear at any cost will be even higher, because the government still plans to build a MOX plant (to use up our plutonium stockpile) A new MOX plant will most likely cost somewhere in the region of £10 to £20 billion and take over a decade to build.

In the UK we have already admitted that we do not have the necessary skills to build a MOX plant; that means much more of our money flooding overseas and not able to fund British jobs. If similar overly generous subsidy mechanisms are used to fund the MOX plant, this could mean another £100 to £200 billion more flying overseas over the lifetime of the plant.

Also the public will need to pay EDF money to get the EPR Generic Design Assessment repeated by the Office of Nuclear Regulation, so that MOX fuel can be used in an EPR, and then after that subsidise EDF by paying the added fuel, waste and decommissioning costs that arise because of this.

The one saving grace is that even if the government forces you to buy ridiculously overpriced electricity when on-grid, you can always invest in smaller home grown technology companies which allow you the option of going off-grid to save money.



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James Arathoon
 07 November 2013 12:13 PM
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drhirst

Posts: 46
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The UK Government is doing something similar:
www.gov.uk/government/news/5-million-boost-for-energy-storage-innovation
REDT is a further attempt at a vanadium flow battery, and Moxia is into DC distribution and batteries in homes.
Cheers
David

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David Hirst
 07 November 2013 12:27 PM
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jarathoon

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I should remind people I am not against fair measures to reduce to CO2 emissions, that do not create large counter-productive distortions in the energy markets.

My policy for the UK is simple: it is to scrap trident and to use the £100 billion sum to sponsor the development of new ways of reducing the cost of renewable, geothermal and fourth generation nuclear to below the cost of extracting and supplying fossil fuel energy.

Even though I am still a Liberal Democrat (just) I have no confidence any more in the way the current set of personalities are running the government.

I want to find a way of putting this energy policy to the British people at the next general election, without having to vote for UKIP and having to leave Europe.



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James Arathoon
 07 November 2013 03:24 PM
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Ipayyoursalary

Posts: 265
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Interesting idea James. I concur with your figures, but FYI my 3 bed bungalow uses 100kWh of gas per day for heating in winter. Average is 50kWh gas per day over the year - and it would be expensive to reduce that without tearing down the house and installing a totally new heating system, triple glazing, and maybe some kind of air conditioning system so we can keep the windows closed without it getting stuffy. Can't see that happening. It would be cheaper to vote UKIP and get a sane energy policy designed to keep bills down instead of one designed to drive prices ever upwards on the basis of a bogus weather scaremongering CO2 tax scam. Also, frankly I have better things to do than attempt to run my own power station juggling gas turbines, solar panels and battery storage and massively bureaucratic billing system. Alot of people round my way have already gone over to using wood burning stoves to provide most of their heating during winter. As a result, when I go out for a walk I come back with lung fulls of smoke and soot. Apparently this is progress, according to Ed Davey and the loonies running HM department of climate change.
 07 November 2013 05:50 PM
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jarathoon

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Originally posted by: Ipayyoursalary

Interesting idea James. I concur with your figures, but FYI my 3 bed bungalow uses 100kWh of gas per day for heating in winter. Average is 50kWh gas per day over the year - and it would be expensive to reduce that without tearing down the house and installing a totally new heating system, triple glazing, and maybe some kind of air conditioning system so we can keep the windows closed without it getting stuffy. Can't see that happening. It would be cheaper to vote UKIP and get a sane energy policy designed to keep bills down instead of one designed to drive prices ever upwards on the basis of a bogus weather scaremongering CO2 tax scam. Also, frankly I have better things to do than attempt to run my own power station juggling gas turbines, solar panels and battery storage and massively bureaucratic billing system. Alot of people round my way have already gone over to using wood burning stoves to provide most of their heating during winter. As a result, when I go out for a walk I come back with lung fulls of smoke and soot. Apparently this is progress, according to Ed Davey and the loonies running HM department of climate change.


As you realised my point is that people will always find cheapest ways to heat and power their homes, and those ways won't always be part of DECC's central master plan for world domination. Automated systems could run the home power station for you.

Your other example is more pressing in terms of environmental effect. If large numbers of people move to wood burning stoves (with back-boilers) to heat their homes, then black marketeers will start raiding forests for fallen trees and when those are all gone will start cutting down living trees instead.

Let's be honest with you and say that I won't be devising a policy to work energy cost miracles for homes lthat leak energy like a sieve. The main reason for the policy is to avoid unnecessary energy cost rises that effectively mean that you have to decide between freezing to a passive death or having to build areplacement passivhaus to survive.

Why isn't trusted advice available on home insulation in this country? (that is independent the big six and their main irrational promoter DECC).

Thickening up the loft insulation, redecorating with internal insulation on outside walls, repositioning radiators, overlaying new sills as necessary. Adding thinner higher cost insulation to window reveals if necessary (it hasn't proved necessary in our house and we don't have triple glazing). None of these steps is very difficult on their own, (beyond the scope of small builders nationwide) they are just unfamiliar in sequence that's all.

Installing insulated plaster board internally against the outside walls of your house (when you redecorate a room), will gradually reduce your energy use (up to a third) and will gradually increase comfort levels in winter and summer. Eventually you will have bills 15-20% lower than average instead of 15-20% higher than average.

None of this requires that you knock your house down and start again, nor does it mean that you have to change the character of your house when viewed from the street. Once finished you will hardly notice it has been done. Your house will become a more pleasant place to live, with temperatures not dropping so fast in winter when the heating isn't on, in the middle of the day and in the middle of the night.

If you are willing to go this far then my energy policy will work much better.

The headline cost of two nuclear plants (£16 billion) is equivalent to 3.2 million household grants for £5000 each to the poorest; this will pay the majority of the material and labour costs in carrying out this work. (The money be raised out of general taxation, not by counter-productively increasing energy bills, hitting the poorest hardest).

On average this will save 18 GWh of energy each year most, with most of the peak savings in winter. On current gas prices (4.5p per kWh) that's a saving of £800 million per year. On Hinkley Point C retail electricity prices (28p per kWh) that's a saving of £5 billion a year.



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James Arathoon
 08 November 2013 01:50 AM
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Ipayyoursalary

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Hi James. Your plan certainly makes more sense than DECC's 'blank cheque' plan for nuclear and wind. An even better option might be to ignore the EU directives and keep our existing perfectly serviceable coal power stations open until such time as they can be replaced by new coal and gas power stations ( scrapping DECC's CO2 limits which currently prohibit new coal generation). This would be far cheaper, keeping energy bills down leading to more prosperity and jobs, and giving UK industry a fighting chance against our international competitors who have wisely chosen not to let eco-zealots and drama-greens dictate their energy policy.

On the subject of energy saving - I think you can only go so far with this, and you must always look at the cost vs savings. In our case we've had an extra layer of loft insulation and cavity wall filling, but haven't noticed any change in consumption. Maybe the house is fractionally warmer but not so you'd really notice. Although I'm sure you could do alot to reduce bills in the oldest, draftiest houses, for alot of people like myself, we're already as energy efficient as it is cost effective to be.
 08 November 2013 12:00 PM
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jarathoon

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Originally posted by: Ipayyoursalary

Hi James. Your plan certainly makes more sense than DECC's 'blank cheque' plan for nuclear and wind. An even better option might be to ignore the EU directives and keep our existing perfectly serviceable coal power stations open until such time as they can be replaced by new coal and gas power stations ( scrapping DECC's CO2 limits which currently prohibit new coal generation). This would be far cheaper, keeping energy bills down leading to more prosperity and jobs, and giving UK industry a fighting chance against our international competitors who have wisely chosen not to let eco-zealots and drama-greens dictate their energy policy.



I don't understand why we are shutting down our coal stations before we have anything else to cost effectively replace them with. We have people controlling our energy policy who have never studied engineering or had any interest in studying engineering.

I suggested a low level carbon tax applied to all fossil fuels, not just applied to those used in the electricity sector, but hardly anyone thinks that is viable. The only sensible policy we have now is to set in place policies to develop cheaper non-fossil fuel technologies, and to assign significant engineering resources to making this happen.

In the meantime we keep our coal stations open, or build one or two new ones if the old ones are completely worn out, and beyond refurbishment.



On the subject of energy saving - I think you can only go so far with this, and you must always look at the cost vs savings. In our case we've had an extra layer of loft insulation and cavity wall filling, but haven't noticed any change in consumption. Maybe the house is fractionally warmer but not so you'd really notice. Although I'm sure you could do alot to reduce bills in the oldest, draftiest houses, for alot of people like myself, we're already as energy efficient as it is cost effective to be.


Cavity wall insulation is about reducing convective heat losses. Convective heat losses will be smaller in bungalows and so the effect of filling your cavity walls will be lower than for a house with two floors.

Since bungalows have a large ground floor area a larger proportion of your heat will be lost through the floor.

I agree cost effectiveness is key, and obviously cavity wall insulation was not a cost effective solution in your case.

In insulating old properties the law of depreciating returns applies.

Given the experience we have had, it is possible to knock a third off the heating bill using a mixture of external insulation applied to the gable end of solid walled semi by and internal insulation applied internally to the front and back, plus having a new boiler. A new room was built in the attic, increasing the air volume and floor area of the house, so higher energy savings may be possible without doing this.

This is possible even though the thermostat is set slightly higher and the temperature of the house remains higher for longer when the heating is off. I don't know what proportion of the savings can be ascribed to the new boiler and what to the insulation. The fact that the house is more pleasant to live in and stays warmer for longer through the day and night is definitely due to the added insulation.

Without a loft conversion, this is expenditure is of the order £6,000 to £10,000 depending on the design and size of the house. To reduce the energy bill by half instead of just a third would probably double this bill. At the moment fuel bills don't justify spending another £6,000 to £10,000 to get a further 17% saving in bills.

As the next stage in 7 years time (if DECC gets its way and bills are much higher), I think we could experiment with thermally isolating rooms (using internal insulation applied to all walls) that we wanted to keep at a slightly higher temperature than the rest of the house at specific times of the day, e.g. the lounge and the bedrooms. Lowering the heat capacity of these rooms would mean that a smaller amount of heat input applied for shorter periods, would be needed to make them comfortable in the morning and the evening.

At least we would have at least one igloo in the house to retreat to where we wouldn't freeze to death. Seems ridiculous when you put it like that doesn't it.


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James Arathoon
 16 November 2013 05:46 PM
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acsinuk

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Certainly we should keep the old coal stations running until we have sufficient spare capacity to avoid black outs.
As it is the cheapest option anyway means its a no brainer.
The IET must advise the government of the current situation immediately and explain that we will hold them and DECC responsible if the lights go out due to a lack of generation capacity this winter.
CliveS
 17 November 2013 11:42 AM
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jarathoon

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Clive,

If National Grid wants coal stations to carry on running for the next few years, then they should set out a properly thought out plan on this and present it to the public. If they predict blackouts or large energy cost spikes in the next 4 or 5 years if too many coal stations are closed now, and then don't do anything about it, they will get a large part of the blame for any blackouts and large energy cost spikes which do occur.

Following the strong public reaction to Ed Milibands speech at the Labour Party Conference it is very unlikely now that the Civil Service will be able to set a reliable and clear direction on energy policy until well after the next General Election. National Grid will have to take their own view and risk analysis on where the new politics surrounding energy policy will ultimately take us. In the meantime the long term risk of future climate change will have to be weighed against the short term risk of blackouts, and people not being able to afford to heat their homes in winter.

If the government tries to use existing legal frameworks to stop National Grid from implementing its short term energy security plan, then it is ultimately up to the judiciary to decide who is in operational charge of running the electricity grid through these difficult times, National Grid or government civil servants.

If the judges rule that National Grid can't enact its energy security plan and has to do exactly what the government says, in spite of evidence that this may increase the chance of blackouts and further excess winter deaths in the next few years, then the judges would be effectively saying that National Grid is no longer run by a management team appointed by shareholders, it is run by government.

I don't think we should take responsibility for blackouts and unnecessary winter energy cost spikes away from National Grid until they lose such a court battle.


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James Arathoon
 26 November 2013 02:18 AM
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kengreen

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James,

These words-tsunamis whose generation affords you so much interest would be of more interest still if you would abandon your calculator in favour of history books?

Less than 200 years ago are major fuel was wood but there came a switch to coal as we rapidly destroyed our forests. Opposition from mine-owners alone meant that, to gain a footing in the energy battle, the sale price of electricity had to be maintained as a low-level. The situation changed again when mining coal became increasingly difficult, dangerous and less profitable but, within my memory, the candle and the smelly paraffin lamp reluctantly gave way to gas - an offshoot of the coal industry.

Again this switch to electricity was hampered by the capital expenditure which was beyond the means of the majority of house-owners and house-renters; the other great factor that held back the march of electricity was the fragmentation of the generating industry.

Clearly the economic miracle that was required had to be generated by "governments" and was tightly linked to subsidising the necessary installation costs and to holding down the price of the commodity. Surely there must have been someone realised that they were stepping onto a unidirectional escalator but it is difficult to perceive an alternative?

This is why a distributed generating system is bound to be more costly than any nationwide grid - and it must remain so. Now it is entirely the task of "government" to find a primary fuel to support the grid - and everyone is flapping around because they have only one option? Press your calculator buttons and put forward your exciting dreams by all means but the truth will not go away - namely we have boxed ourselves into a shrinking corner?

This is the inevitable price of our technological progress coupled with our fecundity.

Ken Green
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