Only two months ago, Tesco agreed to pay a £129 million fine for false accounting, when it overstated profits in its August 2014 trading statement. ‘What happened is a huge source of regret to us all at Tesco,’ chief executive Dave Lewis said, ‘but we are a different business now.’ Not so fast. On Monday, the supermarket giant announced that its UK stores and distribution centres would be switching to 100 per cent renewable electricity this year.
Tesco backs up its claim by saying that its UK electricity consumption will be supported by renewable energy certificates. As part of the EU’s promotion of renewable electricity, all member states are required to run schemes to guarantee the origin of electricity produced from renewable energy sources. In Britain, energy regulator Ofgem runs the Renewable Energy Guarantees of Origin (REGO) scheme that Tesco will use to support its 100 per cent renewable claim.
Last year, renewable sources supplied 24.4 per cent of electricity generated in Britain. Intermittent, weather-dependent renewable in the form of wind and solar accounted for 58 per cent of renewable electricity. The next largest comes from the environmentally destructive Drax power station. It used to be Europe’s largest coal-fired power station but now burns wood pellets sourced from North American forests. Under EU rules, wood imported from outside the EU is accounted for as a renewable, zero-carbon fuel source. Yes, the EU really thinks that burning American forests is renewable.
Given the high proportion of renewable electricity from weather-dependent capacity, what happens when the sun isn’t shining or the wind isn’t blowing? Would you buy chicken from a store that let its chill cabinets warm up? Is Tesco going to let its store go dark when there isn’t enough wind and solar electricity being generated? Of course, it’s not going to put itself out of business by shutting its stores when the wind speed drops.
Neither is Tesco putting its money where its mouth is. According to calculations by Microsoft founder Bill Gates, a lithium-ion battery with enough electricity to run everything in a house for a week would weigh more than a ton and triple your electricity bill. Tesco isn’t going down the route of bankrupting itself by buying up a huge proportion of the world’s output of lithium-ion batteries.
In reality, Tesco’s claim is based on a Big Lie, that electricity can be stored just like groceries, homewares and clothing. As every school child doing GCSE physics knows, electricity is extremely hard to store. Uniquely, electricity is a product line that has to be generated the moment it’s consumed. There is no stock of electricity waiting to be sold. One GCSE text book illustrates the puny scale of renewable electricity. A hydropower project in Chile’s Atacama Desert will have a capacity of 55 million cubic metres to give a potential generating capacity of 91.7 gigawatt-hours. The amount of solar power is only sufficient pump 45 cubic metres of water a day. Question: How long will it take to fill the reservoir? Answer: 3,346 years.
Sir Terry Leahy, Tesco chief executive in its glory days, used to tell people of a phrase Tesco has in its business; follow the money. Meeting the requirements of the EU Renewable Energy Directive is highly lucrative – for some. Based on 2015 numbers for the Big Six energy companies, the average selling price of renewable electricity is 78 per cent higher than electricity from gas and coal-fired power stations. Indeed, at £51.64 the profit generated per megawatt-hour is not far off the average selling price of £62.48 per MWh earned by gas and coal-fired power stations, implying a 46.4 per cent profit margin.
In settling the 2014 accounting fraud, Tesco agreed to pay £85 million to investors contaminated by Tesco’s false trading statement. By claiming it can be 100 per cent dependent on weather-dependent electricity, Tesco is a party to a huge fabrication promoted by investors in wind and solar that they are a source of 24/7 reliable generating capacity. Britain is paying a huge and mounting price for the dash to wind and solar. Tesco’s ignorance in claiming that it will be 100 per cent dependent on intermittent energy makes it an enabler of policy fiasco that is fast heading toward the £100 billion mark. Every little helps. At least on that score, Tesco has form.