How much does onshore wind power cost?
- 14 Jun 2012, 13:30
- Robin Webster
How much does generating electricity from onshore wind cost?
Opponents of the technology argue that it is ineffective and too
expensive - especially when compared to gas - an argument repeated
in a
barrage of
media
coverage over recent months.
In the morass of claims and counter-claims, it can be very hard to
tell who is right. But now, it appears that we might be about to
get some kind of clarity - or at least a considered assessment - as
the UK's Energy and Climate Change Committee (ECC)
yesterday launched an inquiry into the cost of generating
electricity from the technology.
At the same time, a new Grantham
Institute report launched this week aims to "
dispel the myths" about onshore wind, mainly by summarising
recent research into the costs of energy technologies, which is
useful to look at in a bit of detail.
Costs of wind and their impact on energy
bills
In the report, the costs of different technologies are compared
using a measure known as
levelised cost - an approach that attempts to give a full
assessment of how much it costs to generate electricity from a
particular technology. Levelised cost takes into account not just
the capital cost of constructing a power plant in the first
place, but the cost of the fuel, of operating the plant and any
costs imposed on emissions of carbon dioxide. (It doesn't include
costs involved in connecting renewables to the grid, or backing
them up, so bear that in mind.)
The most commonly cited comparisons of levelised costs are sourced
from assessments undertaken for the UK's
Department for Energy and Climate Change (DECC) and the
Committee on Climate Change (CCC), the government's advisors on
decarbonising the economy.
The Grantham Institute's new report uses figures sourced from work
by the
CCC (based on work by consultants
Mott McDonald) to compare the levelised costs of different
electricity-producing technologies now and in 2030.
It use the numbers in this report to produce this graphic, which
shows how the cost of energy generated using different technologies
now, and in 2020:
Although this graph may appear rather bewildering on first
glance, it's worth a good look. As expected, it indicates that the
levelised cost of onshore wind - shown in dark green in the column
on the far left - is currently greater than the cost of unabated
gas power plant - that's gas without
carbon capture and storage technology (the darker grey columns
second from right). If you exclude the impact of the
carbon price (the brown columns on the far right), gas gets
even cheaper.
By 2030, though, things look different. The cost of onshore wind
is predicted to fall, with the cost of gas increasing. In 2030,
low-end estimates for the cost of unabated gas with no carbon price
(i.e. the cheapest possible form of gas generation) are only
slightly lower than the cost of onshore wind, while the high-end
estimates for gas are significantly higher.
The calculations are based on DECC's predictions for the
future price of fossil fuels, which the report says are broadly
consistent with those of the International Energy
Agency .
As we've discussed before, predicting the future price of gas is a
pretty tricky enterprise
as it is subject to international geopolitics, the price of oil,
and a host of other factors. DECC's central gas price projection
indicates (
p.12) that gas prices, which rocketed from 44p/
therm in 2010 to 63p/therm in 2011, are likely to rise to a
maximum of 81p/therm in 2015/16 before falling again to a steady
70p/therm between 2020 and 2030. DECC's high estimate for gas
prices, however, sees gas prices rising to 100p/therm between 2020
and 2030.
The report includes the final column - where the carbon price is
excluded from the calculation - as a "hypothetical yardstick", to
give an indication of how the economics would stack up if the
EU-wide cap-and-trade Emissions
Trading Scheme (ETS) didn't exist. But, the Grantham report
argues against this being seen as a valid comparison:
"Excluding the price of carbon is wrong
analytically, as emissions are a real cost to the economy. But even
if carbon costs were ignored (that is, if gas were to continue to
enjoy a 'carbon subsidy'), the lowest projected cost of gas in 2030
would be only about 20 per cent cheaper than onshore wind."
Finally, the costs in the last two columns also exclude the cost
of fitting carbon capture and storage (CCS) technology. The grey
column labelled gas-CCS shows what DECC thinks will happen if CCS
is fitted, which as you can see makes the cost go up quite a
lot.
Conclusion: argument over? Of course not.
The Grantham Institute is known as a strong supporter of
low-carbon policies, and while the report largely just summarises
numbers which are already out there, it's unlikely that its
conclusions will be universally accepted. Costs of grid connection
for increasing amounts of renewables and providing back up to a
grid which relies more on intermittant power are not included in
the levelised cost calculations.
And some
argue that the introduction of shale gas to the market may
lead to a dramatic drop in the price of gas in the future. But the
report does at least show us the generally accepted evidence base
for these discussions, which is useful - it will be interesting to
see how the ECC committee investigation deals with the kind of
issues that it touches on.
Updated 15th June to note that this discussion only looks at
the levelised costs referenced in the report.