Mine's cheaper than yours: gas and wind proponents trade mangled statistics
- 20 Aug 2012, 15:00
- Robin Webster
It's notoriously difficult to predict what energy markets are
going to do. Sometimes, it's equally difficult to understand what
those predictions mean. Recent debate about the cost of wind has
sparked a series of misunderstandings from opponents and proponents
alike. So where have they got confused? We take a look.
No.1 : The Express on Gordon Hughes
A couple of weeks ago, a
front page article
in the Express said that according to University of Edinburgh
economics lecturer, Professor Gordon Hughes, the government's
green crusade "blunder" will cost £124 billion, before adding: "the
same electricity would be provided by modern combined gas cycle
plant for £13 billion - nearly 10 times cheaper".
As we
found out when we dug a bit further, this isn't quite right.
Hughes's report, published by the
Global Warming Policy Foundation, compared his calculations for
the capital cost of building the infrastructure, and did not
include the total cost of supplying the electricity. In other
words, this comparison for the cost of gas and wind ignores the
cost of gas.
No.2 : Peter Lilley on Gordon Hughes
But the Express isn't the only one. In putting questions to a
Department of Energy and Climate Change (DECC) minister about the
calculations,
Conservative MP Peter Lilley doesn't make the distinction clear
either. He says:
"Figures in the report by Professor
Gordon Hughes, the professor of energy economics at Edinburgh
university, "Why Is Wind Power So Expensive?" … [show] … The cost
of providing a given amount of power by wind plus open-cycle gas
turbines is greater than the cost of using efficient combined-cycle
gas turbines by a factor of 10."
In the previous question, Lilley asks explicitly whether the
government has compared the capital costs of meeting the
government's 2020 renewable target and meeting the same level of
electricity demand using gas plant. But "Providing a given amount
of power" doesn't make it clear that he's discussing capital costs
- it sounds a lot like he's forgotten about the cost of gas,
too.
No.3 : Maria McCaffery on Gordon Hughes
In an article published in
BusinessGreen on Friday, the chief executive of the trade
industry group RenewableUK Maria McCaffery writes:
"Among the more absurd assertions put
forward in this [Hughes's] paper is the contention that wind energy
is 10 times more expensive than gas, but his comparison is flawed.
He fails to include the cost of gas itself and only includes the
cost of building a gas-fired power station and the infrastructure
to go with it."
Again, as skeptic blog
Bishop Hill points out, this isn't quite what Hughes's report
says - it's just how others have interpreted it.
No.4 : The GWPF on Gordon Hughes
So everyone's a bit confused. But it's not hard to see why. The
GWPF press release for the report reads:
"The necessary investment for this Wind
scenario would amount to about £124 billion. The same electricity
demand could be met from 21.5 GW of combined cycle gas plants with
a capital cost of £13 billion - the latter option is cheaper by an
order of magnitude."
Although the word 'capital' is in there, it's not stressed in
the press release that this calculation doesn't take into account
the cost of gas. At the very least, the GWPF could have been a lot
clearer.
No.5 : Maria McCaffery on DECC
In her article, McCaffery also defends the cost of renewables.
She writes:
"DECC has done the maths - if we carry
on burning gas, oil and coal to generate electricity, our household
bills in the year 2020 will be significantly higher than if we
invest in new sources of clean energy like wind power."
DECC
released figures in November of last year indicating that by
2020, green energy measures will, on average, lead to a £94 (or 7%)
reduction in household energy bills compared to what they would
have been in the absence of policies.
But the reason for the relative fall is the proposed
implementation of energy efficiency measures intended to reduce
overall consumption of energy, not measures designed to increase
uptake of renewable energy. This graph illustrates DECC's
argument:
Source: DECC
We contacted RenewableUK to ask where it got its figures from.
It pointed us towards a remark by DECC's Chief Scientific Officer,
David Mackay,
in the Telegraph last December:
"...Doing nothing to reduce carbon
emissions would prove even more expensive [than depending on fossil
fuels] because of rising energy prices."
The Telegraph article says that this is based on numbers
calculated using DECC's
Energy Calculator - which RenewableUK responded
to at the time. But the figures refer to the average annual
cost to
consumers up to 2050 and not to 2020. So it doesn't really seem
right to use them to substantiate McCaffery's statement about
2020.
It's worth pointing out that this doesn't necessarily mean that
McCaffery's wrong. DECC calculates the impact of its proposed green
energy policies on bills by 2020. But it doesn't consider what
would happen if we don't implement them and continue to rely on
fossil fuels. In the absence of comparative figures, it's hard to
know whether the assertion that household bills in the year 2020
will be "significantly higher" if we carry on fossil fuels than if
we invest in renewable energy sources like wind power is right or
not.
The Committee on Climate Change (CCC) has done some of the
relevant number-crunching. It says that according
to its analysis, decarbonising the power sector by 2030 is the
cheapest option - cheaper
than investing in gas. (p.110). Under a 'central' scenario for
future gas prices, says that CCC, "consumers face significantly
lower costs overall - equivalent to a saving of £23 billion"
if we decarbonise by 2030.
Although again, the devil is in the detail. The CCC's numbers
are based on analysis carried out by
consultants Redpoint. For its predictions to bear out
decarbonisation will also rely on nuclear and successful
demonstration of carbon capture and storage technologies as well as
more renewable power.
Anyone for tennis?
Will energy bills rise or fall in the future? Is wind power or
gas the cheaper option? Do green policies add costs - or take them
away? Commentators, politicians, thinktanks and NGOs are all busy
batting competing figures back and forth, as though the UK energy
debate were a particularly complex game of tennis.
Meanwhile, many of the underlying assumptions - about the future
price of gas for example, or changes in investment patterns -
remain unstated. Perhaps because of this, numbers often get mangled
in interpretation. All this is worth bearing in mind next time
someone gets up to serve.