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Bloomberg’s Renewable Fantasyland

March 23, 2016

By Paul Homewood 

 

ScreenHunter_3829 Mar. 23 15.44

http://about.bnef.com/blog/liebreich-europe-at-a-clean-energy-crossroads/

 

Further to my last post.

Liebreich, having described why the push to renewables in the EU has fallen flat on its face, then goes on to say:

 

The tragedy of all this is that Europe lost its renewable energy mojo just as costs were plummeting to the point where green power is fully competitive without subsidies in more and more parts of the world. If solar power can be built for 5.85 U.S. cents per kilowatt-hour in Dubai, or $4.8 cents per kWh in Peru, or 6.4 cents per kWh in India, why not in Italy, Spain, Portugal, Greece or Croatia? If wind power can be delivered for 3 U.S. cents per kWh in Morocco and 4 cents per kWh in the US, why not in France, Spain, Portugal, or, heaven forbid, the U.K.? When British commentators and politicians refer to renewable energy as “ludicrously expensive”, they clearly don’t realize how foolish they sound to anyone acquainted with cost data from around the world; and they have failed to grasp that one of the reasons why costs are higher in the U.K. is because of the policy uncertainty they have themselves helped to create.

 

He fails to explain why, if costs of wind/solar are so low, they need any subsidies at all.

But let’s look more closely at his claimed costings, which I always take with a large pinch of salt. They certainly don’t stack up against what the US EIA is saying.

 

According to them, the cost of onshore wind is $73.60/MWh, and solar $125.30. Note also that they are based on unrealistically high capacity factors of 36% and 25%. DECC’s figures for the UK are 26% and 11%.

 

 

image_thumb147

https://notalotofpeopleknowthat.wordpress.com/2015/10/18/the-real-cost-of-wind-power/

 

Whether the cost of solar actually is 5.85 cents in Dubai, I really don’t know. But solar panels in the desert are hardly comparable to those in northern Europe.

So how do renewable costs compare to conventional in the UK?

 

Solar

Let’s start by looking at the outcome of the first CfD auction last year:

 

image

image

https://www.gov.uk/government/statistics/contracts-for-difference-cfd-allocation-round-one-outcome

 

Remember that these are only the successful bidders – rejected bids would be higher still. Three out of the four solar bids obtained a guaranteed strike price of £79.23/MWh, far above the supposed Dubai costs.

Furthermore, these are at 2012 prices. The CfD register conveniently shows us the current price standing at £83.22/MWh, which will be index linked for the next fifteen years.

 

image

https://lowcarboncontracts.uk/cfds

 

 

 

This is pretty consistent with the Committee on Climate Change’s assumptions in their Fifth Carbon Budget Report:

 

image

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https://www.theccc.org.uk/publication/sectoral-scenarios-for-the-fifth-carbon-budget-technical-report/

 

On top of this is the intermittency factor, which the CCC estimates will cost £10/MWh:

 

image

 

 

With wholesale market prices close to £35/MWh, solar is clearly a non starter, but what about wind?

 

Wind

Again, claims of “3 cents/KWh” appear well wide of the mark, with the EIA suggesting $73.60/MWh for onshore, even based on unrealistically high capacity factors.

Going back to the CfD auction shown above, successful bids were between £79.23 and £82.50/MWh, or up to £86.66/MWh at today’s prices.

 

And the CCC are forecasting between £67 and £102/MWh for 2020.

 

image

 

And again we have that £10/MWh to add on for intermittency.

 

Conclusion

It is not difficult to see why renewables are seen in the UK as ludicrously expensive.

It is a sad state of affairs when a supposed expert from Bloomberg has such difficulty with simple facts.

If costs really are as Mr Leibreich suggests, then let wind and solar operators bring their installations to the UK, and operate without subsidies, and on the basis that they will have to compete on the open market to sell their output with no guarantee that they will be able to sell it all.

Somehow, I don’t think we’ll be buried in the rush!  

11 Comments leave one →
  1. A C Osborn permalink
    March 23, 2016 6:17 pm

    Is the £10 for intermittency or to provide “back up”?

  2. martinbrumby permalink
    March 23, 2016 6:25 pm

    My guess is that it is much worse than this. Do the bidders pay for all the costs of the distribution lines and the equipment to safely and effectively feed in the intermittent, out of phase electricity these con artists produce?

    Thought not.

    Is £10 a reasonable allowance for intermittency?

    Doubtful.

    But if Amber Rudd had an ounce of nous, she’d latch onto Bloomberg’s figures and state unequivocally that we’d pay no more than (say) 5% more than Leibreich suggests.

  3. Don Keiller permalink
    March 23, 2016 6:46 pm

    That’s the problem with all these “supposed experts” on “renewables”..
    They view the World through green distortion glasses/

  4. March 23, 2016 7:02 pm

    There was a scandalous piece of green journalism on BBC Panorama a few days ago, about people in fuel poverty, there was no mention at all about the price of electricity, it was all left-looking insinuation that the govt was evil for ignoring the fuel poverty problem.

    One of the many hidden costs of renewables, paid for by guess-who, is the large number of people in fuel debt, either because they can’t afford “green” energy, or because they choose not to pay and are increasingly untouchable by “wet” politicians.

    The rapacious energy companies should also take some of the blame, privatisation was a license to print money for them, especially National Grid, the only ones no longer on the gravy train are the ones not tapping into renewables mania.

  5. March 23, 2016 7:18 pm

    We reworked EIA onshore wind for correct lifetime, capacity factor, and such. About $122/ MWh. At current excange rates, about £86/MHh. Reckon the numbers above are about correct.
    We also worked out the ADDITIONAL intermitent backup cost for the Texas ERCOT grid, which has about the same 10% wind penetration as the UK. Converted, is about £17, near twice the £10 swag. ERCOT should be less than UK, because peak is summer daytime AC accomodated OCGT peakers fired with cheap natural gas. It isn’t cheap in the UK. My swag is the incremental intermittency cost of UK wind is actually about £20/MWh.

    The general idiocy of Bloomberg’s report is self evident from the simple fact subsidies are necessary for renewables. Why I cancelled Bloomberg BusinessWeek. Untrustworthy.

  6. March 23, 2016 10:08 pm

    The 4c/kWh in America was real, but a long term, mildly subsidised price. The reason that they were able to get it so low was because it was a guaranteed contract and because the size of the wind turbines was particularly tall; this increases the capacity factor; the winds are stronger and more reliable at higher altitudes.

    Unfortunately, for various reasons there’s a moratorium in the UK on turbine height for onshore wind power; and it’s being held well below that of the continent (even) and far below that in America. That reduces the capacity factor and pushes up the price per kWh.

    So really, it’s a legal restriction; the technology can do better.

    Note that you can’t directly compare the cost per kWh of gas turbine technology with wind turbines; you have to allow for the pollution generated by gas turbines; this has real-world impact on health services and carbon emissions cause real-world climate changes, the subsidies are there to level out the playing field, those externalities are real world costs the UK population is actually paying out of our pockets.

    • 3x2 permalink
      March 24, 2016 3:53 pm

      […] you have to allow for the pollution generated by gas turbines; this has real-world impact on health services […]

      Pollution such as …

    • March 24, 2016 6:05 pm

      “Mildly subsidised” LOL!!

      No doubt you can provide all of the detailed costings for the 4c/KWh

  7. March 24, 2016 5:37 pm

    And there is also the stranded Capital. You can capture the depreciation cost if you choose to. (I’ll bet much of this analysis does not). But you can never calculate the lost opportunity costs. The Capital deployed is being utterly wasted and depleted. What might that money have funded? What sort of increase might have come from a sensible investment. Spread those positives and negatives over decades and you can imagine some staggering gaps.

    In simple terms what did you really get when you bought that wind tower? What might you have got if you have purchased a gas turbine peaking unit? Treasury Bonds would be a great investment compared to the lost capital opportunity we get when we ‘invest’ in ‘renewables’.

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