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Renewables – the cheapest way for Britain decarbonise

NucClear News No 90 , 26 Nov 16   A new report from a think-tank called E3G, which aims to accelerate the transition to a lowcarbon economy, says the Government needs to deliver new low carbon generation capacity as cheaply as possible. The UK will need new capacity capable of producing around 150TWh (terawatt hours = 1,000 million kWh) per year of electricity by 2030 – around half of all current output. All plausible scenarios imply that this can only be achieved by deploying a significantly increased volume of renewable generation – likely to be around 50GW, predominantly from a combination of onshore and offshore wind and solar PV.

The E3G report says there is an increasing body of evidence that the system integration costs of renewable generation are low and that the power system can operate securely and at least cost with more than 50% of electricity demand being met from variable renewable sources. System integration costs are predicted to remain less than £10/MWh which means that not only is it possible to securely operate the power system with high levels of renewable generation, but it also represents the cheapest option. E3G shows that under the current trajectory onshore wind will be at least 22% cheaper than nuclear with offshore wind and solar PV providing savings in excess of 4% and 8% respectively, and savings will probably be even greater as the flexibility of the electricity system improves.

The important conclusion from this E3G study is that the cheapest way to decarbonise the power system involves large volumes of variable renewable generation even when taking system integration costs into account. (1)

Renewable costs keep falling

solar-costs-16

In fact researchers at Citi, a global investment bank, think that paying for energy could soon become a thing of the past. Cheaper storage and smart data analytics may soon make solar and wind energy available to consumers in some parts of the world – completely for free. (2)

Even the government now expects solar and wind power to be cheaper than new nuclear power by the time Hinkley Point C is completed. And Business Secretary, Greg Clark, has admitted that fears that intermittent renewables would jeopardise Britain’s ability to keep the lights on have been overblown. (3) An unpublished report by the energy department shows that it expects onshore wind power and large-scale solar to cost around £50-75 per megawatt hour (MWh) of power generated in 2025. New nuclear is anticipated to be around £85-125/MWh, in line with the guaranteed price of £92.50/MWh that the government has offered Hinkley’s developer, EDF. On previous forecasts, made in 2010 and 2013, the two renewable technologies were expected to be more expensive than nuclear or around the same cost. This is the first time the government has shown it expects them to be a cheaper option. The figures were revealed in a National Audit Office (NAO) report on nuclear in July. “The [energy] department’s forecasts for the levelised cost of electricity of wind and solar in 2025 have decreased since 2010. The cost forecast for gas has not changed, while for nuclear it has increased,” the NAO said. (4)

Growth of clean energy in 2015 was dominated by solar PVs and wind.(AP Photo/Arnulfo Franco, FILE)Onshore Wind Costs

In Europe onshore wind has become one of the most competitive sources of new electricity. Mott MacDonald estimated in 2011 that costs would fall to around £52-55/MWh by 2040 compared with £83-90/MWh in 2011. (5) But according to Bloomberg New Energy Finance (BNEF) new onshore windfarms were the cheapest way for a power company to produce electricity in Britain by 2015 with costs dropping to £55/MWh. (6) The trade body, Scottish Renewables, has shown that costs could be cut by a further 20% if government, industry and regulators work together to make sure we can use the latest generation of turbines on suitable sites, reduce grid charges, and deploy energy storage technologies. (7)

Rooftop solar system in Edinburgh (Image: Emtec Energy)Solar Power

Sustainability expert, Chris Goodall, author of new book called “The Switch” (8), says cheap solar panels and advances in storage technology are about to transform the world. By 2030 or 2040 solar will be the cheapest way to generate electricity, indeed any form of energy EVERYWHERE. At the rate of growth that we are seeing at the moment of 35-45% per year solar will grow from providing 2% of global electricity to at least 50% by 2030. We can see the cost of batteries coming down in price dramatically. Turning surplus solar electricity generating during the summer into something we can put into natural gas networks is what we should be looking at in the UK. Generating hydrogen from water and, using microbes, combining it with carbon dioxide to form methane is the simplest way to do this. The era of fossil fuels is drawing to a close. (9)

Offshore wind farm (MorgueFile image)Offshore wind

Earlier this year DONG Energy of Denmark, the world’s largest offshore wind company, won a bid to build two wind farms 22 kilometres off the Dutch coast. The company says power will be produced for less than any other offshore scheme to date. It is estimated that when the scheme is fully operational, electricity will cost €72.70 per megawatt hour (MWh) and €87 MWh when transmission costs are included. (10)

At the time this was described as the cheapest offshore wind electricity in the world: “beyond even the most optimistic expectations in the market.” (11) Since then Swedish utility Vattenfall has agreed to build a giant offshore wind farm in Denmark that would sell power for €49.50 per MWh. Vattenfall has broken its own previous record of €60 per MWh.

Greenpeace has produced the chart below [on original] to show the cost of offshore wind power compared with the cost of Hinkley Point C. The UK’s cheapest offshore windfarm will produce power at roughly £120 per MWh, which is far more than the projects being built in Denmark and the Netherlands. Part of the reason for that is that those governments cover transmission costs, so in the name of fairness Greenpeace adds £25 per MWh. And then to address offshore wind’s intermittency, you’ve got to add another £7.6 per MWh — according to the UK government’s top climate advisers to cover the cost of the ‘balancing’the system. (12)

So we can see that the latest Vattenfall bid is coming in at £75.50/MWh compared with £100.50/MWh for Hinkley Point C. (The £92.50/MWh strike price agreed for Hinkley Point C was index-linked at 2012 prices so £8/MWh has been added to allow for inflation.)

energy-efficiency-manEnergy Efficiency

Research out by sustainability expert, Chris Goodall, shows a business and government drive to promote switching of homes, street lights and offices to energy efficient LED light bulbs would see a huge reduction in the UK’s electricity demand for lighting – more than two Hinkley nuclear plants’ worth of electricity. Lighting is responsible for nearly a third (29%) of total winter peak electricity demand – a complete switch would halve that. Switching entirely to LEDs in homes will save about 2.7 GW of peak winter demand; street lighting 0.5 GW; offices and commercial buildings 4.5 GW.

An expenditure of about £62 in an average house, replacing about 21 of the bulbs in living areas would cut electricity bills by at least £24 per year. This could be done relatively quickly and the total cost of partially upgrading all UK homes to energy-efficient LED lights would be around £1.7 billion. The price of LED light bulbs is falling over time and they cost just £1.60 each at major retailers. Aside from saving money for the householder directly, the government would conservatively save £65 million per year on capacity market payments from this action in houses and more elsewhere in street lighting and commercial sector. (13)

There are good reasons for using investment in energy efficiency as a vehicle to stimulate the economy – the macroeconomic benefits of public energy efficiency programmes have been illustrated by economists time and time again. For instance Verco and Cambridge Econometrics estimate that if delivered as part of a major infrastructure investment programme for £1 invested by government £3.20 is returned through increased GDP resulting in increased employment of up to 108,000 net jobs per annum. A recent study by Frontier Economics calculates that an energy efficiency infrastructure programme could generate £8.7 billion of netbenefits to the economy.

We know from the German KfW loan scheme that public subsidies for energy efficiency are more than offset by the increase in tax revenues and savings in welfare spending due to lower unemployment. Now is the time to do this in the UK, according to Jan Resnow at the Science Policy Research Unit at Sussex University. The economic uncertainty caused by the Brexit vote will prevail for some time until Britain’s new status becomes clearer. At the same time, there will be no energy efficiency programme for the able-to-pay sector after 2017 and funds for fuel poverty alleviation are falling short of what is required to achieve the target. The economic evidence is clear – energy efficiency provides a golden opportunity for an economic stimulus in the UK. (14) http://www.no2nuclearpower.org.uk/nuclearnews/NuClearNewsNo90.pdf

November 26, 2016 - Posted by | renewable, UK

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