Is wind power economic? It very much depends on your point of view.

Ruth Lea contends that onshore wind is ‘quite uneconomic’ in her report for Civitas. She says that although the direct cost of onshore wind is close to that of fossil fuel sources, this comparison excludes the impact of integrating renewables into the electricity grid. When these costs are added, she contends, wind becomes wholly uncompetitive.

This assertion is entirely based on the work of Colin Gibson, a former National Grid engineer, who has made some informal estimates of the cost of integrating wind power into the electricity networks. He suggests that these costs are about £60 a megawatt hour, adding perhaps 70% to the cost of electricity from wind turbines. Ms Lea fails to mention that many, many other analysts and engineers have also estimated the extra costs of adding large volumes of wind power to the electricity system. In this note I suggest that these alternative sources support a view that Mr Gibson’s estimates are wrong by about a factor of four, meaning that Ms Lea’s contention that wind is a very expensive technology is based on shaky foundations.

The task of estimating the relative costs of electricity generating technologies is complex. The result depends critically on the assumptions we make about the cost of investment capital, the amount of bank debt that can be used, how long the generating plant takes to build, the cost of fossil fuels and a host of many other variables. The final numbers, usually expressed as pounds per megawatt hour of electricity produced are, at best, approximations.

Ms Lea uses as her source the figures produced by Mott McDonald, an engineering firm, in 2010. She should probably have the used the more tentative and up-to-date figures generated by Mott McDonald for the Committee on Climate Change in 2011. The 2011 numbers give ranges of estimates for the direct costs of all the main technologies, for both today and in the future. These figures suggest that onshore wind power is broadly competitive with nuclear power. Offshore wind is currently much more expensive but advances in technology are projected to make it competitive over the next few decades. Mott McDonald, whether in 2010 or in 2011, certainly doesn’t see direct costs of wind power as ‘quite uneconomic’ and, to be fair, neither does Ruth Lea.

Wind power is more costly to integrate into the grid than conventional power stations. There are three major types of extra charges and these incremental costs are not included in the Mott McDonald figures.

  • The impact of having to have spare capacity on hand to react to unexpected changes in the outputs of UK wind farms. (Even if the electricity network were entirely powered by large nuclear plants, the UK would still need this spare capacity, ready to ramp up to full power, because of the risk of a station ‘tripping’ and its power not being available to the National Grid. Wind farms are actually less risky than a single nuclear power plant)
  • The cost of having to construct power stations that are used only when the wind is not blowing.
  • Charges arising from having to construct new distribution lines to connect wind farms, often in remote locations or offshore, to the National Grid.

Mr Gibson’s work, on which Ruth Lea entirely relies, suggests that the cost of these extra measures is about £60 per megawatt hour.

Table 1

Spare capacity £16
Power stations sitting idle £24
Improvements to the grid £20
TOTAL £60 per megawatt hour

Other sources give very different figures for the unseen costs of wind generated electricity. From the many available, I have used two reports produced by consulting engineers and by electricity network specialists. As far as I can see the numbers in these reports are representative of the consensus view of wind integration costs.

I don’t claim that these numbers are right, but I do think that Ms Lea should have given reasons why this recent work is less appropriate to use than the rough estimates of a single individual, however competent.

Table 2

Spare capacity £5.3 (1)
Power stations sitting idle £1.91 (2)
Improvements to the grid £7 (3)
TOTAL About £14 per megawatt hour

 

(1)    Sinclair Knight Merz, Growth Scenarios for UK Renewables Generation and Implications for Future Developments and Operation of Electricity Networks, June 2008. (A report for BERR, now the Department of Business, Innovation and Skills.) Page 90

(2)    Sinclair Knight Merz, Growth Scenarios for UK Renewables Generation and Implications for Future Developments and Operation of Electricity Networks, June 2008. (A report for BERR, now the Department of Business, Innovation and Skills.) Page 91

(3)    Energy Networks Strategy Group, Our Electricity Transmission Network: A Vision for 2020March 2009This report estimates the gross cost of new transmission infrastructure to cope with dramatically increased renewables generation at £4.7bn. I turned this into a cost per megawatt hour using the calculator in Mr Gibson’s spreadsheet, thus ensuring reasonable comparability with the figure used in Ruth Lea’s paper.

 

The implication of the far lower costs in Table 2 is that we should add about 15-20% to the direct costs of wind power to properly account for the impacts of this source of electricity on the costs of the network as a whole, not 70%. This leaves wind as an entirely economic and carbon-saving technology. Did Ms Lea, a noted climate change sceptic,  use Colin Gibson’s very high figures because of her dislike for the renewables policy of the UK government?

  1. Paul C’s avatar

    Thanks for doing the legwork on this, Chris. I had downloaded the Civitas report to try and identify why its estimates were so much higher than the others I had read, and this gives me a headstart. I think it’s a reflection of the poor state of science journalism in general that this kind of problem with the basic numbers gets completely overlooked in the name of ‘balance’, leaving only the headlines to mislead people. Thanks again!

  2. Mike Knowles CEng MIMechE’s avatar

    One comment only the rest you can see on the DECC’ website. The Institution of Mechanical Engineers has just responded to its consultation on rebanding of the Renewable Obligation for 2013 to 2017. One key factor that cannot be denied is that offshore wind farms constructed so far have only achieved about 32% load factor according to the Government’s own statistics. This is well below the load factor used in the Arup RO rebanding report of 38% used to give levelised costs. It is claimed that with better operational maintenance and by going further offshore higher wind speeds will be achieved. However the DECC’s own impact assessment show an ROC range of 2.0-3.0 ROCs for R2 offshore wind (with an operation start in 2014) and an ROC range of 2.6-3.9 ROCs for R3 offshore wind (with an operation start in 2017)”. 2.6-3.9 ROCs is currently equivalent to 3.8 to 5.7 X the current price of wholesale electricity. DECC has ruled out going any higher than 2ROCs reducing to 1.9 ROCs in 2015/16 and 1.8 ROCs in 2016/17. So this will probably rule out R2 and R3 offshore, wind leaving us with the nearshore wind farms Thanet etc., which are underperforming by 18%. Mike

  3. Chris F Goodall’s avatar

    Mike,

    The trouble early years of offshore wind, including maintenance problems and lower than expected wind speeds, do indeed suggest that it will take a long time to become cost competitive with nuclear, let alone fossil fuel power stations.

    Personally, I’d be more optimistic than you. The 20 months of low wind speeds to October 2011 may well just have been a blip. I would have expect that the last weeks have delivered much better power output.

    However what I was really trying to do in this post was to suggest the Civitas report was using a real outlier for its estimate of wind integration costs, not the cost of wind power per se. I’d be interested to see your views on the right assumptions about integration costs.

    Chris

  4. Mike Knowles CEng MIMechE’s avatar

    Chris

    Have a read of the IMechE’s response for lots of engineering issues.

    For example we have also indicated that it would be 5 time cheaper to pay Greece to install solar PV than put it up in UK with its poor sunshine record and low irradiance. With the huge budget deficit we must think outside the box.

    A FIT of 21p/kWh now set for <4kW solar pv and is now justified on grounds that installation costs are £2500/kW.

    You are right about 2011 and LF will probably reach 35% with overall renewable electricity 8.5% but on low wind speed years it could go down to 27.5% as in 2006 ref DUKES 7.4.

    Not sure what you mean by integration costs – is it back up costs? PB Power indicates that these costs for a low renewables mix are an overhead of the order of 20% of the total cost of energy delivered if it was able to be generated at baseload by the selected plant mix. For higher levels of wind generation, up to the 30% energy, the overhead cost was increased to 25-35% of the baseload cost.

    Arup report says “There is still a great deal of uncertainty in relation to Round 3 costs. Early indications suggest that costs are expected to exceed the other two scales, with estimates ranging from £2.4m/MW to £3.4m/MW, reflecting the technical characteristics of those sites that are generally further offshore and in deeper water. It is estimated that operating costs for Round 3 wind projects will be between £221,000/MW/year and £110,000/MW/year. The large range is again primarily due to site-specific characteristics, but is also accentuated by stakeholder uncertainty over future costs.”

    Mike

  5. Mike Knowles CEng MIMechE’s avatar

    Chris

    For an overall view of UK electricity generation see IMechE Energy Policy Statement EP11/02 April 2011- Electricity Generation – Cost effective management on http://www.imeche.org/Libraries/…/UK_Electricity_Generation.sflb.ashx

    ERRATA for Table 2 Electricity capacity of, and productionfrom renewables in 2009. In col headed Average Load Factor % – Wind onshore 26.9% (NOT 24.7%) and Wind offshore 33.7%. (NOT 21.1%) It was 29.6% in 2010 when wind speeds & rainfall were much lower.

    Mike

  6. Robert Marchand’s avatar

    I recently attended a talk from Derek Birkett – Author of ‘When will the lights go out’ who put forward a similarly sceptical view as to the suitability of wind to supply energy to the UK.

    He went as far as to suggest that we should be opening up the pits again and building new coal fired power stations as China and India was doing it and we shouldn’t be left behind. He argued this on the basis of length of service of power station (compared to gas) and speed of construction (compared to Nuclear), whilst freely admitting he is a climate sceptic.

    Many of us in attendance felt his work was highly flawed (wind data was based on small on shore Wind farms in Scotland, rather than collections of off shore wind farms around the coastline) and that he was far to eager to promote the status quo as he knew it worked.

    However, as a previous controller of the electricity grid for Scotland, he does get listened to (and asked to lecture at Universities) so I thought you should be aware of his work.

  7. Robert Marchand’s avatar

    I should clarify, when I say similarly sceptical, I mean similarly sceptial to Ruth Lea.

  8. Mike Knowles CEng MIMechE’s avatar

    Robert & Chris

    Having seen a number of Ecotricity’s wind turbines – Swaffham and Reading M4 – whilst they are prominent they are local to towns and commerce/industry where the electrcity is needed. I hope that the Swindon Honda project Ecotricity is promoting will eventually go ahead. There are already many onshore wind turbines near cities Bristol, Liverpool and Blyth which are near shore.

    The IMechE fully supports the increasing use of such sites as they are very cost effective and feed in to the local electricity network – distributed electricity and lower losses.

    How about 3000 such sites each with 5 x 2MW wind turbines -30GW? like Ecotricity’s 269MW operating, building and planned – that’s the economic way to go.

    The local authorities should get together and promote much greater use of large MW wind turbines around all UK cities, towns and villlages and beneftt both the councils and the consumers. My son in law is the energy action man at Gloucester City Council whose Alney Island 800kW Enercon wind turbine project is awaiting permission.

    Mike

  9. Tony Day’s avatar

    Both the pro- and anti-wind lobby base theri arguments on the assumption that substantial decarbonisation of UK energy supplies can only be achieved by a combination of electrification and using electricity sources with lower average Carbon intensity than the current generating mix. This underlying assumption is open to question.

    It is feasible to substantially and economically decarbonise the UK gas grid using Carbon neutral Synthetic Natural Gas (SNG) made by co-gasifying a 50% biogenic mixed 80% hazardous and non-hazardous wastes, woody and contaminated biomass, and 20% coal, Tyre Derived Fuel and petcoke. Existing proven ex-British Gas Corporation technology, currently being developed by British companies in India and China can achieve a net fuel to SNG efficiency of 75%. In order to produce pipeline quality gas, 50% of the Carbon throughput is removed in the form of pure CO2 at zero additional cost. The decarbonised SNG can then be used to supply existing CCGT’s producing low cost ‘dispatchable’ decarbonised electricity in order to back-up intermittent wind power at least economic cost and CO2 emissions.

    Due to a combination of waste being a negative cost fuel and high energy efficiency, Levelised Cost of Electricity of £45/MWh and Marginal Abatement Cost of Carbon of £45/tonne can be achieved. This will reduce the ‘add on’ costs to support wind power.

    The ‘add on’ cost of integrating intermittent wind depends strongly on the extent of penetration of wind. Can the contributors to this ‘string’ advise what the assumed proportional penetration of wind used in the pro- and anti-wind arguments and costs discussed above.

    Tony Day

    e anthony.r.day@hotmail.co.uk

  10. Tony Day’s avatar

    Renewable Energy Foundation recently published a survey of public access data from OFGEM on the average marginal cost of curtailing excess, or non-dispatchable, wind power off the grid. This effectively represents the marginal income foregone by wind generators when their output is curtailed, ie the real economic wholesale price, excluding back up and connection costs, charged by wind generators in the UK.

    The average cost last year, over a wide geographical and time distribution of wind generators, was £199/MWh. Based on REF’s analysis, the true wholesale cost of wind is around £200/MWh, excluding back-up and connection costs, plus the hidden cost of reduced back-up plant load factor.

    Best wishes,

    Tony Day

    e anthony.r.day@hotmail.co.uk
    T 01420 542888
    M 0791 256 0740

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