The Vast Gamble On Wind Power
By Paul Homewood
AEP follows up last week’s piece on energy storage with another attempt to flog the dead horse known as offshore wind:
Wind power has few friends on the political Right. No other industry elicits such protest from the conservative press, Tory backbenchers, and free market economists.
The vehemence is odd since wind generates home-made energy and could be considered a ‘patriotic choice’. It dates back to the 1990s and early 2000s when the national wind venture seemed a bottomless pit for taxpayer subsidies.
The UK is already world leader in offshore wind. The strategic choice now is whether to go for broke… My own view is that the gamble is worth taking
Pre-modern turbines captured trivial amounts of energy. The electrical control systems and gearboxes broke down. Repair costs were prohibitive.
Yet as so often with infant industries, early mishaps tell us little. Costs are coming down faster than almost anybody thought possible. As the technology comes of age – akin to gains in US shale fracking – the calculus is starting to vindicate Britain’s vast investment in wind power.
The UK is already world leader in offshore wind. The strategic choice now is whether to go for broke, tripling offshore capacity to 15 gigawatts (GW) by 2030. The decision is doubly-hard because there is no point dabbling in offshore wind. Scale is the crucial factor in slashing costs, so either we do it with conviction or we do not do it all. My own view is that the gamble is worth taking.
Shallow British waters to offer optimal sites of 40m depth. The oil and gas industry knows how to operate offshore. Atkins has switched its North Sea skills seamlessly to building substations for wind. JDR in Hartlepool sells submarine cables across the world. Wind power is a natural fit.
We live in a world that has just signed the COP21 climate deal in Paris. That implies a steadily rising penalty on carbon emissions. It also implies that those dragging their feet on renewables will ultimately be punished, as the Chinese have grasped.
As I write this August series on the UK’s energy woes, some readers have written suggesting that we exploit Brexit to walk away from our climate pledges and opt for the cheapest forms of fossil power. I rule this out entirely. Nothing would be more disastrous for the diplomatic credibility of this country in the febrile post-Brexit mood than to resile from core global commitments. Nor is it necessary.
The vast new turbines are five times taller than their primitive 20th Century ancestors, reaching 720 feet and generating seven or eight megawatts (MW) each. Most no longer have gear boxes. Drones are replacing inspectors dangling on ropes.………….
The biggest offshore companies have together vowed to cut costs to €80 per MWh – or £69 – by 2025. If so, the strike prices may start to match the wholesale price of electricity in the UK market. They may even come below the market price, in which case they will pay money back to society under Britain’s ‘contract for difference’ system.
The Government’s next three offshore auctions will see a staggered fall in strike prices to a maximum of £85 per MWh by 2020, and they will arguably keep falling step by step thereafter until market forces prevail.
He rambles on about various improvements to wind power technology. But the bottom line, of course, is cost and intermittency.
Despite his claims about costs falling to £69/MWh, the reality is utterly different. At the most recent CfD auction, conducted last year, offshore wind farms were awarded contacts between £120.49 and £158.61/MWh (at current prices).
We await what the results will be from the next round. But it is worth pointing out that the Committee on Climate Change, in their calculations for the recent Fifth Carbon Budget, are assuming the strike price for offshore wind power will still be as high as £94.69/MWh for new capacity added in 2030. (Again, this is at current prices). Their estimate for 2020 is £105.82. (More on this later!)
With market prices still below £50/MWH, this is a huge subsidy, which will have to be met by consumers.
It is ironic that he wants to ring the death knell for Hinkley Point, because it is too expensive at £92.50.
He then goes on to dismiss concerns about intermittency:
Intermittency remains a curse but claims that anticyclones can halt the offshore wind industry for weeks at a time are a dinner party myth. "Calm conditions persisting for one day are extremely rare. When they do occur, they cover a small fraction of the UK, and there is no evidence to suggest that they persist for long periods of time," says Graham Sinden from Oxford University.
Regardless, sufficient back up capacity has to be set aside to cover for this, as even the CCC admit. They estimate this will add £10/MWh to the headline price of wind power.
Before AEP gets too excited, maybe he should look at what the National Grid are projecting for future energy scenarios. This is the one for Gone Green, the most ambitious option:
Offshore will so wildly successful that its output will actually decline in the 2030s, dropping back to 70 TWh by 2040, only 15% of total generation.
The proof of the pudding is, of course, in the eating. When offshore wind operators can compete on a level playing field with other suppliers, with no subsidies or guarantees, then good luck to them.
AEP brags that the UK is the world leader in offshore wind. This is hardly surprising, as no other countries seem to be potty enough to throw billions down the drain in subsidising it.
In a way, AEP’s headline says it all. What on earth are we doing making “vast gambles” with the nation’s energy strategy?