Saving carbon, pounds and pence

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.