My previous blog
post considered the impact of plant service life and capacity factor on
wind and nuclear generation. We
used very round numbers (ignoring OPEX and financing) to illustrate how hard
our investments in capital will work for us, both in terms of electrical energy
generated and carbon displaced. The basic point was that nuclear has an
advantage of 3 in capacity factor (90% nuclear against 30% wind) and another
advantage of 3 in plant life (60 years nuclear, 20 years wind). So whatever
wind does, nuclear has an in-built order of magnitude advantage. That’s a tough
challenge.
But if we follow the advice of most environmental NGOs and don’t
use nuclear, how else can we generate cost effective electrical energy and
displace carbon dioxide. Well, the Institute for Public Policy Research think
that wind can be part of the answer, as detailed in their recent report,
Beyond the Bluster.
The IPPR report noted that in 2011 UK wind (let’s assume mostly
onshore) delivered about 15 TW-hrs of electricity energy and displaced about 5
MT (million tonnes) of carbon dioxide. IPRR claim this is the minimum amount
displaced. However, empirical
data produced by Mark Lynas and Chris Goodal in the Guardian appears to
show that wind only displaces efficient Combined Cycle Gas Turbine generation
MW-hr for MW-hr, and does not displace coal generation. And at Renewable
Obligation Costs of about £50 per MW-hr, this quantity of wind generation
requires support costs of order £750M per year. We’ll come back to this later.
We’ll also use round numbers to keep the arithmetic simple.
So, how could we displace 5 MT of CO2 if not through wind or
nuclear? Well, we know that efficient Combined Cycle Gas Turbines produce 350
kg CO2 per MW-hr, and coal more than double at 900 kg per MW-hr. Let’s assume we have 1 GW of coal plant
running at 100% capacity factor. The plant will produce 1 GW-yr of electrical
energy and about 8 MT of CO2 per year.
Let’s also assume we have 1 GW of Combined Cycle Gas Turbine plant
running at 100% capacity factor. The plant will again produce 1 GW-yr of
electrical energy, but only about 3 MT of CO2.
Now, suppose we have 2 GW of coal running at baseload
(assume 100% capacity factor) and 2 GW of load following gas running at 50%
capacity factor. The total carbon emissions are 19 MT of CO2 (16 MT for coal
and 3 MT for gas) for a total of 3 GW-yrs of electrical energy generated. Let’s
now assume that, using exactly the same plant, we ramp up gas
to 100% and ramp down coal to 50%. We still produce 3 GW-yrs of electrical
energy, but we’ve saved 5 MT of CO2 (we incur an additional 3 MT from gas, but save
8 MT from coal). By coincidence, this is exactly the same quantity of CO2 that
wind displaced in 2011 according to the IPPR report, but wind incurred ROC support
costs of £750M.
But what about the cost of the extra gas burned? Well, according
to DECC, in 2011 the differential between coal and gas fuel costs was apparently
about £5 per MW-hr, so the cost of ramping up our 2 GW of gas and ramping down our
2 GW of coal is of order £100M.
So, without much effort, we’ve apparently saved 5 MT of CO2
(the same as wind in 2011), but the cost was only £100M, rather than £750M for
wind based on ROC costs alone. And, we’ve not incurred any capital costs for
new plant. In fact, the cost of substituting
gas for coal in this simple example seems to be about £20 per tonne of CO2
(£100M in extra fuel costs to save 5 MT CO2). By happy coincidence this is about the expected carbon floor price of £30 per tonne in 2020.
To put this all into perspective, the entire capital
investment in UK wind up to 2011, which required ROC support costs of about £750M,
only saved 5 MT of CO2 - less than a single 1 GW coal plant. Without much
effort we could have saved the same 5 MT of CO2 in 2011 by working our Combined
Cycle Gas Turbines a little harder and ramping down coal slightly, and so saved
ourselves £650M relative to wind. And remember, the carbon cost for the modest coal-to-gas
switch in this example appears to be about the same as the carbon floor price
in 2020, so the numbers look good.
Of course, to generate our 3 GW-yrs of electrical energy in
the example above, we could just run 3 GW of nuclear plant (single site with 2
EPRs). Rather than saving 5 MT of CO2, we would then save a whopping 24 MT of
CO2 every year for the next 60 years by displacing baseload coal. But that was
the message from the
previous post. Let’s work our investments in capital, steel and concrete
hard, displacing coal first and leaving methane well alone.
