Hydro at Northenden Weir – Poor subsidising the Greens?

The South Manchester Reporter carried an article about a plan to install hydro power in South Manchester.

The Didsbury Greening and Growing Group (DGG) is hoping to install a new water-powered turbine on the grounds of the old Northenden Mill on the River Mersey.”

For around £500,000 they group, lead by the local Rector Greg Foster, hope to install an Archimedes Screw generating up to 50kw.

Will this save the world? I commented

For half a million quid you get 50kw (67hp) – the power of a small car. For most of the year it will be less. It will only be financially viable due to the 18.7p/kwh feed-in tariff. That is a charge added to everyone’s bill. So those with money to invest in this green scheme will (in a small way) be increasing fuel poverty.

Another way of seeing how the true perspective of this scheme is to measure it against a modern nuclear power station. This can churn out over 25,000 times the power at steady levels 365 days per year. With accelerated closure of fossil-fueled power stations we need to build one such power station every year for a generation.

I received the following reponse

“Manicbeancounter”: let’s just look at your 1.2l petrol engine comparison and see if it really stands up. Your engine has to go flat out, foot to the floor all the time to get say 50kW at the shaft. It’s going to chew through about 10 litres of petrol an hour. Let’s get that to run for the 40 years or so life of a hydro plant (without major refurb). So at say £1.30/litre for petrol, that engine gets through £4.55 million pounds worth of petrol at today’s prices. So does £0.5million all in for the capital expense of an environmentally friendly scheme look so silly after all? Oh, and your little 1.2l car would have done about 35 million miles flat out at 100mph. And that one little generator would have made enough electricity for about half a billion cups of tea in its lifetime taking into account seasonal variations in rainfall. Not such small numbers after all eh?

Must admit, David Slee has done his maths. However, his calculations are out by a factor of two. A stationery generator’s consumption is measured in grams per kwh. 10 litres to produce 50 kwh works out at around 170g/kwh. (RD of petrol approx. 0.85?) This is roughly the fuel consumption of a diesel engine in a large ship. A small petrol engine optimised for flexible power output would use about twice as much.

However, I do not use the comparison of a 1.2 litre petrol engine for cost, but for power output. If anyone was daft enough to generate power from an internal combustion engine filled up from the filling station, they would do the over-taxed masses a favour. Of the £4.55m (or £9m) fuel cost, over half would be tax. So the rich investors would be subsidizing everyone else. A power station does not pay tax. (Generators use red diesel – and businesses reclaim the VAT). A quick calculation reveals is that if this hydro scheme averages 25kw over the year, over 25 years the index-linked subsidy (4% inflation) would generate £1.7m. If the wholesale price of around 8p/kwh is inflated by just 1% a year, the investors will get their money back under 8 years*. From selling electricity to the grid over 40 years investors would get a further £1.7m. Then around £300k for an overhaul to keep £80k+ a year rolling in.

So if this scheme gets off the ground, those lucky enough to have £50,000 to invest could secure a pension equivalent to the basic state pension, and will probably get a national award for their money-making wheeze. Most will be green with envy, or red with anger at their rising utility bills.

*NB If a discount rate of 8% is used, NPV = 0 in just over 11 years. Over 40 years to the projected major overhaul, NPV is £400k.

Prejudiced economic analysis in South Manchester

Have responded to a letter in the South Manchester Reporter of 3rd June.

GM’s letter of last week is prejudiced against a small minority and ignorant of economics. The need to cut is mostly due to the government running up a deficit during the boom years, and then going on a wild spending spree to try to shore up the vote as an election approached. (The cyclical part will be (mostly) taken care of by a strong economic recovery.) So in this area, we can look forward to some shiny new trams and gleaming school buildings along with a generation of cuts to pay for it. For instance, the £120m for the Didsbury spur of the Metrolink alone is equivalent to over 30,000 teachers and nurses doing without a 3% annual pay rise for five years.

The consequence of this fiscal irresponsibility is not just financial. People will lose their jobs or have careers de-railed, others will be made ill through over-work, or through seeing their livings standards fall salaries are frozen, whilst taxes, prices and interest rates rise. Rather than opposing cuts now, people should look to areas where they are least painful. That means shelving some of the recently signed-off “investments”, such as the extra bus lanes on Wilmslow Road; less government advertising; or finding better value for money in the provision of local services. The consequence of not doing so is even bigger cuts later, and lower living standards for the next generation.

But why call somebody prejudiced and ignorant? I quote

“Once again, those who really control the wealth and power (the gambler’s in our casino economy and the obscenely wealthy) have demanded that their government makes the poorest people in society pay for the economic crisis.”


“….John (Leech MP) will no doubt remind him (The Chancellor) that the multi-millionaires are unlikely to feel any effect whatsoever from the cuts to education, benefits and the health service that will inevitably follow in 2011”

The underlying cause of the recession, I believe, are:-

–         The prolongation of the last boom through cutting interest rates after the dot-com bubble burst in 2000, and again in 2001.

–         Failure to raise interest rates in 2003. This would have been very difficult politically.

–         Failure of the regulatory authorities to realise the systemic risks building up in the financial sector, and the risks building up in individual banks.

–         Deficit spending in the boom years, which kept the boom going at the expense of creating structural deficits.

–         Political spin, and dubious accounting (PFI contracts to put liabilities outside the National Debt figure), to hide the reality.

Whether I have highlighted all the points, I am sure to be closer than someone who just blames the rich. The reason is that I, at least, attempt to understand the issues.