The madness of renewable energy subsidies

The subsidies for renewable energy products often defy any sort of sense, says Merryn Somerset Webb. Something that these examples from Shetland clearly demonstrate.

How irritated do renewable energy subsidies make you? If the answer is "very", I suggest you stop reading now.

We have just been in Shetland. There are many amazing things about Britain's most northerly islands, but one of them is that they are one of the few places where there is little doubt that wind energy can make sense. Stick up a turbine and the almost non-stop wind will make it work at a higher level of capacity than almost anywhere else.

So here's the crazy thing: instead of putting up wind turbines, some renewable energy fans are putting in biomass boilers. The community hall at Walls has one; here's news on one in Yell (and on the government loan they got to pay for it); and the leisure centre in Aith is in the process of getting one.

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You might be wondering how biomass boilers work. The answer is by burning wood. And guess what Shetland doesn't have? Yes, it's wood. Wind, yes; wood, no. There are practically no trees on the islands, so the wood has to be imported as pellets or chips from somewhere else Scandinavia or America being the usual somewhere elses.

It's hard to see how this can be environmentally neutral, let alone positive. But from the point of view of community halls, leisure centres and the savvy businessmen helping them get their projects going, it also entirely rational. Why? There is less planning bother and risk than with wind, but nonetheless, the subsidies are great. How's that for unintended consequences?

(Some details here and a useful run down of the industry as a whole here)

PS RWE npower has just become the first of our big energy companies to tell the truth on green energy bills they are to rise by over 19% by 2020 as a direct result of green energy subsidies. You might be entirely happy with that, but it is as well to know where the inflation is coming from.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.