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

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.