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UK Energy Projections & Costs

May 29, 2015

By Paul Homewood 

 

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I mentioned a few weeks ago that I had asked DECC for a list of power stations that were due to close in the next few years in the UK. As they previously intimated, they have decided not to release this information because of commercial confidentiality, which I can appreciate.

However, they have given me the information which I really wanted anyway, which is the overall assumptions they have made for planning purposes. This is part of their “Updated Energy & Emissions Projections 2014”, published last September. I would stress that this is not some secret document, but, as far as I know, it has not been widely reported on or analysed in the media.

 

The projections contain a range of scenarios, but I will concentrate on the “Reference Scenario”, which is based on central estimates of growth and fossil fuel prices.

 

Let’s start by looking at electrical generating capacity. The projections give annual figures up to 2035, but for clarity I am just showing the figures for 2014 and 2030.

 

 

Capacity

Capacity by fuel: all power producers
GW

2014 2030
Coal 21 0
Coal and natural gas CCS 0 5
Oil 2 0
Natural gas 38 39
Nuclear 9 14
Other Thermal 1 1
Renewables 25 62
Interconnectors 5 10
Storage 3 3
Total capacity 103 133

 

Highlights:

1) Coal is totally gone (by 2026).

2) There is an assumption that CCS will be commercially viable.

3) Doubling of interconnector capacity, which assumes that there will be surplus power that France and others will be prepared to sell.

4) Excluding renewables and CCS, the reliable baseload appears to be 67GW. Currently maximum demand is around 50GW, but allowing for cold winters, plant outages and sensible safety margins, 67GW appears to be exceptionally tight.

5) There is also the question of the extra power required if transport and domestic heat are to be decarbonised, as the govt plan. The Committee on Climate Change has already estimated that demand for electricity will increase by 30% by 2030.

Interestingly though, the projections only show a small reduction in the use of oil and gas in these sectors, suggesting that a swift changeover to electric cars, for instance, is regarded as unpractical.

 

New Build Capacity

The figures take on more meaning when we look at the extra capacity which needs to be built, to meet these targets as well as replace shut down of older plant.

 

Cumulative new build for all power producers
GW

2014 2030
Coal 0 0
Coal and natural gas CCS 0 5
Oil 0 0
Natural gas 1 17
Nuclear 0 10
Other Thermal 0 0
Renewables 4 43
Interconnectors 0 5
Storage 0 0
Total cumulative new build 5 80

 

 

Three things stand out:

1) Although the total gas fired capacity remains virtually unchanged, to offset closures an extra 17GW is required. The new gas power station being built at Carrington is 880MW, so another nineteen of these will be needed, more than one a year.

2) The 10GW of nuclear is equivalent to three Hinkley Points. With the prospect of Hinkley being delayed for several years by legal challenges to the EU, time must be soon running out to get two more on stream by 2030.

3) The extra renewable capacity, most of which can only logically be offshore wind, represents a ten-fold increase on current offshore capacity.

 

New build for gas poses problems, because many gas plants are being closed because of losses caused by intermittent working and competition from subsidised renewables. It is questionable whether utility companies will be prepared to invest billions in new plants under these circumstances, particularly since the govt projections plan for gas to be progessively phased out during the 2030’s. (Gas generation is projected to drop from 72TWh in 2030 to just 30TWh by 2035).

Investment in gas power stations needs an operational life of maybe 30 to 40 years for it to be properly economic. Who is going to build one when they know it will be turned off after a decade or so?

The only logical conclusion is that they will be paid enough compensation under the Capacity Market mechanism, in which case the cost to bill payers could be prohibitive.

 

Effectively, we are faced with a situation where we will need enough baseload capacity from gas and nuclear to supply all of the UK’s power needs, all running in parallel with a huge renewable capacity.

 

Capacity Utilisation

It is worth looking at this in more detail. Based on the above projections, the capacity utilisation for gas and renewables in 2030 would be 21% and 26% respectively.

The number for renewables is not surprising and is in line with past experience.

Utilisation of gas fired capacity fell from 60% in 2009 to 27% in 2013, hence the financial problems incurred. A further drop to 21% will simply add to losses already suffered.

 

Electricity Generation

 

Projection of electricity generation by source: all power producers
TWh

2014 2030
Coal 135 0
Coal and natural gas CCS 0 32
Oil 2 1
Natural gas 87 72
Nuclear 59 103
Other Thermal 2 2
Renewables 59 148
Storage 4 4
Total electricity supplied (gross) 348 362
Used in pumping 5 5
Total electricity supplied (net of pumping) 343 357

 

 

These figures largely follow on from the capacity figures.

 

 

Cost of Subsidies

Now we come to the $64000 question – just how much will all this cost?

 

We can make a few informed guesstimates.

 

1) Renewables

Compared with 2014, there is projected to be an extra 89TWh. The govt has already announced its intention to wind down any new onshore capacity, and with solar being a dead duck, most of this extra requirement can only come from offshore.

Based on the published Strike Prices of £140/MWh (for new capacity coming on  stream after 2017, at 2012 prices), and a current wholesale price of under £50/MWh, the subsidy would equate to around £97/MWh. Therefore the extra 89TWh will attract a subsidy of £8.6bn a year by 2030.

 

2) Nuclear

On a pro-rata basis, the extra 10GW of nuclear capacity will generate 74TWh a year.

The agreed Strike Price, assuming two or more stations are built is £89.50/MWh, again in 2012 prices. This would equate to a subsidy of about £44/MWh, giving a total subsidy of £3.2bn a year by 2030.

 

3) Other costs

As we have already seen, there will be a need to pay massive payments under the Capacity Market mechanism, for gas power stations to operate on standby.

The recent auction to provide back up for 2018 has cost £990 million, but most of this has gone to existing plants where fixed costs are already being covered. To persuade energy companies to build new plants, fixed costs will need to be covered as well, so the cost will certainly be much greater by the time we get to 2030.

 

Even based on £990 million, the cost of this together with the subsidies to nuclear and renewables is already going to be in excess of £12bn a year by 2030. And, of course, this is in addition to the £3.3bn in subsidies that we are currently paying out.

 

 

Source

Updated energy and emissions projections: 2014 – DECC

https://www.gov.uk/government/publications/updated-energy-and-emissions-projections-2014

24 Comments
  1. May 29, 2015 4:55 pm

    Humanity was denied the promise in Francis William Aston’s Noble Lecture of 12 Dec 1922 access to “powers beyond the dreams of scientific fiction” by the decision to unite nations [UN] and independent national academies of science [NAS] into an Orwellian Ministry of Consensus Science Truth on 24 Oct 1945:

    Click to access Introduction.pdf

    • Kartoffel permalink
      June 1, 2015 9:44 am

      Discovering Maurice Strong on Climat Controversy, and Who is Maurice Strong?
      wish you good reading

  2. A C Osborn permalink
    May 29, 2015 5:11 pm

    They have a “Plan”, but it is looking ever more that they have no idea of how to impliment it or what it is going to cost the country initial Cash outlay and in terms of competitiveness.
    Of course if, and it is a big IF the whole of Europe follows suit it will only make us uncompetitive with the rest of the world.
    But we already know that some European countries are saying no to renewables and YES to coal.
    All this in the name of non existent CAGW.

  3. Chilli permalink
    May 29, 2015 5:46 pm

    Well, the majority voted to continue hosing £12Bn pa up the wall on foreign aid, so there’s no reason to think they’ll object to hosing a further £12Bn pa up the wall on ruinable subsidies – especially if the politicians keep blaming the ‘big energy companies’ for all price rises – a strategy which seems to be working so far.

    • Bloke down the pub permalink
      May 30, 2015 9:17 am

      ruinable subsidies, that’s a keeper.

  4. MattS permalink
    May 29, 2015 6:19 pm

    Total subsidy’s of £15bn, 26million households, is £575pa. For what purpose? To stop 0 degrees of temperature change, but get a 1 world socialist government!

  5. May 29, 2015 6:35 pm

    They are afraid to admit now that the Great Social Experiment of 1945-2015 failed!

  6. Andrew permalink
    May 29, 2015 7:41 pm

    Legal challenges are the least of Hinkley’s troubles. It looks like the reactor design is a lemon

  7. Joe Public permalink
    May 29, 2015 8:46 pm

    Putting that Strike Price of £140/MWh into perspective:

    The Strike Prices is 14p/kWh

    My June 2015 electricity contract is (just) 9.726 p/kWh day rate, & 7.979 p/kWh night rate.

  8. May 29, 2015 9:38 pm

    Pay more, get less electricity is the UK policy. Anyone who votes or voted for that will soon regret it.

  9. JWood-the-other permalink
    May 30, 2015 4:17 am

    Centralized planning…Ain’t it a wonderful thing! Its never worked in the past and it won’t work in the future. Government needs to get out of the way and let the market make the decisions.

  10. May 30, 2015 7:10 am

    Since it is extremely unlikely that Hinkley will be built, any new NPSs are likely to be AP1000s or ABWRs. These are simpler designs, would be much quicker to construct and would need less subsidy (tho based on past performance DECC will completely mess up negotiations on strike price).

    Successful technologies are chosen by the consumer in a free market – all that is left for Governments to chose are failed technologies. History has shown this always to be the case and here is another fine example.

    In your assessment of the cost to the consumer, I think you have forgotten to include the horrendous constraint payments that will be given to unreliables. With a huge amount of solar and wind capacity (exceeding maximum demand throughout the year), there will be almost continuous need to constrain solar off in summer (if it can be done) and wind whenever it blows strongly, otherwise the grid will become unstable and exceed the various limits set by the grid code, leading to blackouts.

    Basically, DECC is ensuring that this country is well and truly stuffed.

  11. Bloke down the pub permalink
    May 30, 2015 9:20 am

    Highlights:

    1) Coal is totally gone (by 2026).

    Not if you include the admittedly unlikely CCS.

  12. May 30, 2015 9:56 am

    How is the vast increase in the so called renewables to be achieved? 30,000 windmills on a calm day produce zilch — 100,000 still produces zilch. It does not make sense. I think they (DECC) listen to the ‘green groups’ who have no engineering knowledge whatsoever — I know, I’ve tried debating with them and gave up.

  13. Max Stavros permalink
    May 30, 2015 1:32 pm

    The decision to phase out coal-fired plants and increase offshore wind will have unfortunate consequences for load balancing, as it appears this task is to be delegated to gas CCGT plant.

    The problem is that the CCGT turbine and alternator share a common shaft, so any sudden increase in load tends to slow the gas turbine down, which in turn slows the compressor, leading to a reduction in alternator output, which is precisely the opposite of the response required.

    For this reason, load balancing is normally accomplished by coal fired steam plants which can react quickly by opening the throttle to the steam turbine.

    • Ben Vorlich permalink
      May 30, 2015 6:37 pm

      I hadn’t realised that. As there is no increase in pumped storage then the likelihood of problems is compounded rather than alleviated.

  14. May 30, 2015 1:35 pm

    Very interesting – and thanks for the link to the DECC document. I am not sure that solar is a dead duck. Amber Rudd said recently ” ‘I want to unleash a new solar revolution – we have a million people living under roofs with solar panels and that number needs to increase,’ she told her local newspaper, the Hastings & St Leonards Observer.
    (http://www.powerengineeringint.com/articles/2015/05/new-uk-energy-chief-promises-solar-revolution.html). Interestingly from your tables the capacity factors for renewables in 2014 and 2030 are both 27%, which does not suggest any change in the mix of renewables.

    • May 30, 2015 3:01 pm

      Good point!

      Liz Truss of course has indicated that she does not want to see many more solar farms.

  15. May 31, 2015 7:12 pm

    Assuming that you mean with “used in pumping” the loss during transmission the given number seems light.
    The average world wide loss in transmission and “misuse” is about 17% of total generated. Providing this is correct it is hard to believe that the UK would only lose 1.5%. This in itself would alter the available totals quite a bit.
    Very hard to get actual numbers on transmission loss for wind power but since there is hardly any produced on a world wide scale this loss will not have much upwards effect on the total loss at the moment. The transmission loss and misuse for wind power can well exceed 25% depending on how far the electricity has to travel. And that would leave a huge gap in the TWh produced and what is available to the users.

    • AndyG55 permalink
      June 1, 2015 3:29 am

      Nice, but you can see the left-wing news headlines.

      “Oil fired power station forced to close due to alternative power supplies” !

  16. Kartoffel permalink
    June 1, 2015 9:31 am

    there is hope, don’t you ever forget about Red Ed’s Climat Change Low,
    tell me why it could not help itself, the f… climat is changing all the time

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