Will de-carbonising the UK’s electricity by 2030 reduce bills?

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One of the simple lessons from the history of energy forecasting is that we are pretty awful at it. However as with all types of prediction there is a market for it, and it is not going away. Such predictions often take a central place in the debate over whether the UK should set a target to de-carbonise its electricity grid by 2030. Roughly speaking this would require the equivalent of 10% of UK electricity to come from gas, and the rest from nuclear or renewables (the exact number will vary depending on levels of Carbon capture and storage etc.). A difficult task quite clearly.

This decision is often made appear quite easy by claiming that it would be cheaper than relying on gas for electricity. Why oppose something that cuts bills and carbon? And this seems to be the argument put forward by the Labour Party’s Shadow Environment and Climate Change Secretary in today’s Independent:

In the next decade, a quarter of Britain’s power supply will be switched off for good. This week MPs will vote on the Government’s Energy Bill, which will determine what we replace it with. To tackle soaring energy bills, improve energy security and stop dangerous climate change, we must de-carbonise the power sector by 2030.

and apparently

Breaking Britain’s dependence on fossil fuels, cleaning up our power supply and investing in energy efficiency would lead to lower, not higher, bills.

A close look at the realities of gas and low carbon power suggests that such confidence is unwarranted. Everywhere we look there is massive uncertainty. How much will new nuclear power plants cost? Will they even get built? Can the UK get a single carbon capture and storage plant running by 2030? And how much will they cost? Will shale gas take off outside the US? And how about the impact of US shale exports?

Onshore wind is much cheaper than offshore wind. But will onshore wind essentially be dead by the end of the decade due to public opposition, significantly increasing the costs of wind power? How much will offshore wind cost by 2030? We can’t even say with certainty if its cost will go down much, if at all. We may just be stuck with today’s prices, and how will that be cheaper?

And a more tricky question. How much will it cost to back up intermittent wind farms? As Chris Goodall shows here we will need at least 40 GW of gas plants in 2030 to do this, and maybe even more. These plants will need to run with at most 10% capacity factors. Getting them to run cheaply may not be so easy. And what are the costs of transmission and handling really high levels of wind power?

Consideration of the need for wind back up also seems to reduce even further our confidence that meeting this slightly arbitrary de-carbonisation target will be cheaper.

Imagine we start with a system which is 20% gas, 80% renewables/nuclear. Reaching the de-carbonisation target from here will involve halving gas production from 20% to 10% of the mix. However if you did this with wind farms the number of gas plants would essentially stay the same. It’s also clear that these extra wind farms would run at significantly lower capacity factors due to regular excesses of wind power (our choice here is to store it or dump it, and neither is cheap). And it’s very hard to imagine that the running costs of gas plants per MWh will be higher in 2030 than the costs of an offshore wind farm which will have to run at a significantly restricted capacity factor. The same holds for doing it with nuclear, replacing that 10% won’t be done by just adding it a nuclear power plant running at 90%, you will have to ramp it down a lot when demand is already being met entirely by low carbon power sources. No end of problems really.

So no, claims that de-carbonising the UK’s electricity grid will reduce bills don’t seem to amount to anything more than a badly thought through talking point.

The correct response to our uncertainty regarding the future costs of electricity is to put in place flexible policy efforts,  instead of clinging to arbitrary targets that could very easily make de-carbonising the economy more difficult and expensive than it needs to be.

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10 thoughts on “Will de-carbonising the UK’s electricity by 2030 reduce bills?

    Mark Brinkley said:
    June 2, 2013 at 9:38 pm

    What is a “no regrets” policy?

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      Robert Wilson said:
      June 2, 2013 at 10:24 pm

      Mark

      “no regrets” is probably not the correct term for what I have in mind, I really mean flexible. The problem with an inflexible targets based approach is that inevitably results in us spending large amounts of money on overly expensive, or inappropriate technologies. This is made clear by the 2020 renewables target. To meet this we are building expensive wind farms in the North Sea, because of public opposition to onshore wind farms, and even worse are cutting down forests to power Drax.

      A preferable approach is to put in place a number of policy efforts, and then turn them up or down depending on how successful they are. A government push to develop a next generation may not help meet some arbitrary decarbonisation target, but when it comes to meeting long term targets it will help more than building a pile of third generation reactors. The same goes for energy storage. Irrespective of what approach we take regarding renewables and nuclear, we will need far more storage than today. But if these policies fail, we should quickly abandon them.

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        Mark Brinkley said:
        June 3, 2013 at 9:43 am

        Whilst the 2020 renewables target is good example of a bad target, surely the 2030 decarb target is a good one because it’s technology independent. Only the Tory right and UKIP would argue that we don’t need to decarbonise the grid and these parties will argue any and everything in any event, so there is no point trying to assuage their points. Given that, what is the problem?

        As for your big point – about the costs of it all – have you thought of reframing the question? Instead of asking what it might cost to decarbonise the grid, we could set a target price for how much electricity should cost in 2030, and let the market work out how best to fill it. It’s an extension of the Hinckley B strike price debate, spread across the entire supply industry. It would also bring some coherence to the retrofitting debate which, in the absence of any meaningful price points, is marooned in a sea of fog about how far it is sensible to go – i.e. how much is a negawatt worth?

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    Robert Wilson said:
    June 3, 2013 at 10:17 am

    Mark

    Yes, it is good in that it’s technology independent. However, like the 2020s renewables target it doesn’t sit very well with an emissions trading scheme. (as Labour quickly realized in 2007 the 2020 targets made the ETS redundant http://www.guardian.co.uk/environment/2007/aug/13/renewableenergy.energy). So, we should figure out what is going to happen with the ETS post 2020 before deciding on any decarbonisation target, otherwise the UK will just be paying extra so that coal can be burned in Poland or Germany.

    On your point about costs, that’s a preferable approach to the targets based one. Ideally we should put a price on carbon high enough so that gas is not competitive. We can be confident that nuclear will be below £100/MWh (on the basis that the EPR reactor appears to be a dud, while Hitachi’s has been built reliably in Asia). So, start at £50/ton of CO2 in 2020 and ramp it up from there. The exact impact of such a policy is uncertain, but again that’s why we should avoid inflexible targets. So, ramp up the price of carbon to the point where CCS is financially desirable to plant owners.

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      Mark brinkley said:
      June 3, 2013 at 12:26 pm

      Both nuclear and renewables are almost free to operate. Their principal costs are the financing of the plant building. At the moment, it’s cheaper to burn gas than to finance a nuke which shows you just how cheap gas is. But David Mackays calculator suggests that the overall cost difference between business as usual and nukes/wind is pretty similar if measured over 40 yrs. so much of the issue of costs comes down to the actuarial treatments of how long the tail is on plant. And how you treat inflation. Whilst we can predict the price of nuclear electricity in 2050 (because its 90% finance) we have no way of knowing the price of gas or coal.

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        Robert Wilson said:
        June 3, 2013 at 12:56 pm

        Mark

        The timing issue is very true, and essentially shows our economic model is not very well suited for dealing with this kind of thing. Spread over its 60 year life span a nuclear power plant offers relatively cheap electricity. The short termism of the city of course sees this differently. Building nuclear power plants also locks in low carbon infrastructure well past 2050 (unless an accident happens, or we act like Germany at some point).

        So, from a long term, climate change perspective nuclear power is not “expensive.” However, none of the above is factored in that much by utilities. Except of course for those owned by governments. And again, these underlying economic problems are much more important and should be addressed before setting a carbon target.

        Does MacKay’s calculator actually say the costs for wind are the same as business as usual over 40 years? Wind farms last 20-25 years, so I can’t really see it being measured over 40 years.

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    […] Yesterday it was the Labour Party putting this argument forward, today Greenpeace. According to their director John Sauven: […]

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    […] Click here to read the full article _____________________________________________ […]

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    Mark Brinkley said:
    June 13, 2013 at 4:52 pm

    I’m not sure of the methodology of Mackay’s calculator. You’d have to ask him. But it does show only marginal cost differences between all the scenarios by 2050. There isn’t a stand-out winner. Which is probably unrealistic, but it does rather depend on blue-sky forecasting, otherwise known as guesswork.

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      Robert Wilson said:
      June 13, 2013 at 5:23 pm

      Mark

      Yes, even the highest cost scenario (by someone going by the name of Mark Brinkley) is only 20% more expensive than doing nothing. I can’t claim to have looked into the cost estimates for the scenarios, because things are mostly not worth the paper they are printed on. DECC obviously want this kind of stuff, but predicting what anything will cost in 2050 feels silly.

      But I agree that the figures look unrealistic. It’s clear that the costs of electricity will vary by much more than 20% by 2030 depending on what mix we choose. Why this calculator finds things so close together is mystifying.

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