There is a shockingly alarmist comment in today’s press release from the normally restrained Committee on Climate Change.
‘continued reliance on unabated gas-fired generation carries the risk of electricity bills for the typical household being up to £600 higher than under a low-carbon power system over the next decades.’
We need the CCC to be an objective and thoughtful analyst of energy and climate change. Its (entirely correct) opposition to extensive unabated gas-fired power generation must not cause it to get as careless with the truth as its political masters. Today’s statement risks severely diminishing its standing.
The rationale for the Committee’s £600 figure is as follows:
a) If we use use gas to provide nearly 100% of our electricity, the UK is vulnerable to gas price rises raising the cost to generate power.
b) Similarly, a carbon tax of £500 per tonne of CO2 would add to the cost of generating 100% of our electricity with fossil fuels such as natural gas.
c) Add these two factors together and the CCC sees a wholesale cost of electricity of about 26.4p per kilowatt hour in 2050, compared to about 8.3p for low carbon technologies. Since the average household consumes about 3,300 kilowatt hours of electricity a year the additional cost is the difference between 26.4p and 8.3p (18.1p) multiplied by 3,300 kilowatt hours. This arithmetic produces an incremental cost for gas-generated electricity of about £600.
The problems with its analysis.
a) It doesn’t make clear that its arithmetic refers to the year 2050 and not ‘over the next decades’ as specified in its press release. Price differences are much, much smaller before 2040.
b) Gas fired power stations last about 20 years. If we (wholly mistakenly, I believe) dash for unabated gas today, all the plants will be demolished by 2050. Today’s decisions, or even those of 2025, won’t affect electricity prices in 2050
c) None of the main low-carbon technologies will anywhere near as expensive as 26.4p per kilowatt hour in 2050. Today, farm-sized PV farms are being built to provide power at about 12p per kWh. Onshore wind is about 9p. Biomass is similar. Even the most expensive mainstream renewable source – offshore wind – is no more than 14p per kWh. The Severn Barrage will cost less. And all renewables will get cheaper over the next forty years. As a result, if it did cost 26.4p/kWh to generate electricity using gas in 2050, no gas power stations would be built. They would be hopelessly uncommercial against renewable competitors.
d) No-one is suggesting that the 30% of UK power that will be generated by renewables in 2020 will disappear. The assumption that nearly all generation is gas powered in 2050 is strikingly unreasonable.
d) The main ingredient in the CCC’s high electricity price is a carbon tax of £500 per tonne, approximately 60 times current levels. But the Department of Energy’s ‘central’ carbon price estimate is £200 per tonne in 2050. It’s close to propaganda to use the £500 figure without explaining why is reasonable to employ a figure so far from standard estimates.
e) In addition, the CCC uses a projected gas price of 102p a therm in 2050 but only publishes the sources of its estimates out to 2035. These show ‘central’ costs of about 70p in the period 2020 to the end of the period.
The profoundly wrong government decision to incentivise more exploration and encourage the construction of unabated CCGT power stations is frightening the CCC into taking a more aggressive stance against gas. This is understandable because its world-leading work is being largely ignored. Nevertheless it must remain an impartial and evidence-based research institute and resist the understandable temptation to overstate its case.