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Government Underestimates Cost Of Decarbonisation

November 2, 2014

By Paul Homewood





Back to the 2050 Pathways Analysis for a look at some of the financial assumptions made in the Annex.




In their Figure 4, they compare the cost of generation per MWh under the different pathways. Bear in mind that the current wholesale price of electricity is around £50/MWh.



Let’s recap on the two main pathways Alpha and Beta.




Given that CCS does not exist as a large scale technology at the moment, we should concentrate on Pathway Beta, which suggests a range of costs between about £60/MWh to £80/MWh. As these are expressed in 2009 prices, we can up these costs by about 15% to say £69 and £92 respectively, at today’s prices.

In contrast, the Reference Case, which is if we carry on as we are now, is substantially cheaper with low or central fossil fuel prices, and only overtakes Beta on the most extreme High-high option.


In the Annex, the Pathway Analysis tells us some more about how they define the bands of fuel prices.




Their “low price” for oil starts at £51 in 2010, and increases to £61 in 2020, where it remains in real prices. Again these are at 2009 prices, so we would be looking at ranging from £59 to £70 at today’s prices.

Currently, however, the world price for crude is $80.54, equating to about £50 per barrel, so clearly current prices are well below even the lowest assumptions made in the Pathways Analysis. Even the 1-Year forecast of $92 would still be below.





Gas prices have not gone quite so low, but are still below the central assumption of 59p at 2009 prices.




And thermal coal is running below $60, well below the lowest cost assumed in the Pathways Analysis.





Nobody knows how prices will pan out in thirty years time, but as things stand at the moment, even the low price assumption is significantly overestimated, meaning that the various low carbon pathways become even more expensive in relation to the “Do Nothing Option”.





The cost assumptions made for nuclear power may also be heavily understated, judging by the capital cost assumptions.





The cost of building Hinkley Point C is now likely to be at least £24 billion, equating to £7.5 billion/GW. This is more than double even the most pessimistic assumption of £3.125 billion.





It is time the government came clean and told us just how much its energy policies are going to cost us all.

  1. November 2, 2014 10:54 am

    Isn’t the real point that there is no need to decarbonise as CO2 has a negligible effect on climate?

  2. November 2, 2014 1:01 pm

    Hi Paul. I know this is not the right place to contact you but I could not find any other way. I wanted to ask if you could publicise an event that is taking place at Westminster on Wednesday 5th November from 1pm to 3pm It is being organised by Repeal the Climate Act. Entrance is free.

    Come via main – St Stephens (Cromwell Green) entrance

    Ask for Sammy Wilson’s (DUP MP) Meeting

    (Please allow 30 minutes for security)

    Speakers include

    * Roger Helmer UKIP MEP – A practical UK energy policy

    – explaining what is needed and how the EU is driving the UK’s energy crisis

    (Find UKIP’s Energy Policy Here)

    Piers Corbyn WeatherAction

    Will the lights go out this winter?

    – explaining the essential incredibility of the CO2 theory of Climate Change,

    the latest advances is solar-based Long Range forecasts and spelling out what will happen this winter.

    * Sammy Wilson DUP MP and other MPs

    (Graham Stringer Labour MP and Peter Lilley Conservative MP invited)

    The changing climate of Climate Change in Parliament and beyond.

    *Campaign Against the Climate Act News

    Discussion and Questions, Literature.

    I am sure some of your readers would like to attend this. Perhaps you can come yourself. I know you would receive a great welcome! Sorry for the short notice, but I only just found out about it myself, but I intend to be there.


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