Counting carbon, pounds and pence

Mark Lynas and Chris Goodal recently presented data in the Guardian which demonstrates that wind is displacing output from Combined Cycle Gas Turbines, MW-hr for MW-hr. Such quantitative analysis is to be welcomed and certainly adds to the debate. We clearly need to deal in numbers with units rather than simply words.

It can be seen from the data presented that as wind output rises, the production share of efficient Combined Cycle Gas Turbines (with emissions of order 350 kg CO2 per MW-hr) indeed falls. However, the production share of coal (with emissions of order 900 kg CO2 per MW-hr) remains unchanged. At present, wind is therefore displacing relatively clean and efficient gas, rather than base-load coal, which is our largest source of carbon. 

To evaluate the merit of energy technologies, we firstly need to remember that low cost energy drives our economy and underpins the historically unprecedented prosperity we now enjoy. In choosing a future energy mix we therefore firstly need to ensure that it is low cost (£/MW-hr), and then that it efficiently displaces carbon dioxide (£/tonne CO2). We need our investments to be productive and to work hard for us.

At present however, we pay a premium of order £50 per MW-hr for onshore wind and £100 per MW-hr for offshore wind through renewable obligation costs (ROC). Based on ROC costs alone, the cost of displacing carbon dioxide is therefore at least £140 per tonne for onshore wind and £290 per tonne for offshore wind, compared to an expected carbon floor price of £30 per tonne in 2020. Wind therefore seems to be an expensive means both of generating electrical energy and displacing carbon. 

In addition to cost, per unit of energy produced, wind requires extremely large quantities of steel, concrete and of course land, due its diffuse nature, poor capacity factor and its short service, compared to compact, efficient and longer lived thermal plant. Whether in terms of capital, land or material resources, wind just doesn’t seem to be working hard enough for us in generating cost effective electrical energy, or displacing carbon from our economy.

The issue of wind’s short 20 year service life is largely ignored, but it is important. Energy policy should not be about meeting arbitrary targets for renewables or carbon at some specific date. It needs to be about generating low cost, clean electrical energy for the long-term. Therefore, if we make significant investments in wind, both onshore and offshore, but need to repeat the process 20 years later we will eventually need to run just to stand still.

Finally, let’s take some very round numbers to finish* - not to get absolute costs, but to illustrate the impacts of plant life and capacity factor. To give an advantage to wind, we’ll assume onshore plant and ignore renewable obligation costs. We know that onshore wind has a capital cost of order £1B per GW installed capacity. Assuming a capacity factor of 30%, our £1B investment will therefore buy 6 GW-yrs of energy over a 20 year service life, and will save about 20 million tonnes of carbon dioxide by displacing an equivalent amount of gas generation.

For comparison, and to be conservative with nuclear, we’ll assume a 1.6 GW EPR nuclear plant requires up to £7B of capital (worst case cost overrun). With a capacity factor of 90%, each £1B of investment buys 12 GW-yrs of energy over a service life of 60 years and will save about 100 million tones of carbon dioxide by displacing an equivalent amount of coal generation.

If we want our investments in capital and material resources to work hard for us, £1B invested in nuclear rather than wind apparently buys at least double the amount of electrical energy and displaces at least five times as much carbon dioxide. This is the key issue, not whether wind displaces carbon dioxide. So, if we’re interested in cost effective electrical energy for the long term, and displacing carbon from our economy out towards the end of the century, let’s start with the most carbon intensive generation. Coal is the issue, both for national policy and globally, not plentiful and relatively clean methane. Uranium and methane can be the fuels of the future and follow the long historical path of improving energy density and decreasing carbon intensity.

*Both nuclear and wind have high capital (CAPEX) costs and low operational (OPEX) costs, so for simplicity we consider CAPEX only and ignore both OPEX and financing. Decommissioning costs for nuclear represent a modest additional cost over the long plant life.