AEP’s Wishful Thinking
By Paul Homewood
The GWPF responds to Ambrose Evans-Pritchard’s recent articles on renewable energy:
There is excitement in one prominent part of the UK press regarding the prospects for a new generation of low-cost offshore wind, and for a near-term breakthrough in electricity storage. Is this justified, or just wishful thinking?
The upbeat tone of two recent articles by Ambrose Evans-Pritchard, one on the promise of electricity storage technologies and the other discussing claimed reductions in offshore wind costs, will come as no surprise to his regular readers. As long ago as April 2008 he published a strikingly similar piece on the benefits of Spanish wind power, “Spain’s Gain from Windpower is Plain to See”. The following is a representative sample:
Years of nurture by the Spanish government have paid off. Spain is a global superpower in the wind race, with 15,000 MW of capacity. The region of Navarra is 70pc green, shielded against gas-shocks, Russian politics and soaring oil prices.
However, as was in fact evident at the time, the Spanish renewables policies were already showing signs of failure. The subsidies were vast and insupportable, amounting to €3 billion of state backed debt in 2008, doubling in the following year and continuing to balloon thereafter. Dramatic cuts were inevitable. Furthermore, and unsurprisingly given the subsidies, Spain’s indigenous wind industry was a hothouse plant and uncompetitive with manufacturers in Germany and Denmark, let alone China, and as a result one of its leading lights, Gamesa, has now been absorbed by Siemens.
As for Mr Evans-Pritchard’s suggestion that Spain had protected itself against gas shocks and soaring oil prices, we all know how that has worked out; fossil prices are extremely low and the relative cost of the subsidised renewables is mind-bogglingly high. The insurance policy was exorbitantly expensive, and in fact offered no cover at all. Evans-Pritchard was perfectly well aware of this danger and wrote:
If the prices of oil and gas fall sharply – and stay low – as they did in the 1980s and again in the late 1990s, the huge gamble on renewables may prove a costly flop. But demand suggests that is unlikely to happen.
But far from recognising or perhaps even remembering the logic of these earlier remarks on fossil prices, in his latest articles he simply evades the issue of the ‘costly flop’ and repeats the claims of the earlier piece, namely that the capital costs of renewable generation are falling fast, that solutions to intermittency are just around the corner, and that the future already belongs to renewables.
However, none of these claims survives closer inspection quite intact, or seems more likely to be a successful general prophecy than his 2008 predictions of enduringly high oil and gas prices.
Beginning with the first, Evans-Pritchard remarks of offshore wind that “Costs are coming down faster than almost anybody thought possible”, and that this progress is “akin to gains in US shale fracking”, with the implication that the technology will become economically competitive in short order. But, as everyone familiar with the field knows, there is much more to the cost of electricity from wind power than the capital expenditure on the turbines. Namely, wind power also entails a) the cost of extensive grid infrastructure, b) the cost of rapid response plant to deal with errors in the wind forecast, and c) the cost of running an under-utilised but undiminished conventional fleet equivalent to peak load plus a margin to guarantee security of supply, for example on a cold windless winter’s afternoon when the UK’s wind fleet will be all but totally becalmed. (Evans-Pritchard, as it happens, claims that such calm conditions are very rare, but his source for this view is an obsolete 2004 study, the conclusions of which have been shown to be largely mistaken by subsequent data and power flow modelling.)
As a result, even if the CAPEX of offshore wind (and onshore turbines, for that matter) falls to £0/MW installed, the system costs will ensure that the cost of the energy generated is more expensive to consumers than energy from Combined Cycle Gas Turbines at current gas prices.
It is obvious, then, that reducing the system costs is a prime requirement, and in response Evans-Pritchard would doubtless point to his second article, on electricity storage and say that a resolution is near at hand. But is it?
Evans-Pritchard bases his optimism on the US Department of Energy’s ARPA-E, GRIDS Program, which is supporting intensive work on the storage of electrical energy, with the principal aim, amongst others, of reducing the capital cost of the storage volume to less than $100/kWh (current costs for most technologies are five to ten times that).
There is no question that GRIDS is interesting, even important, but neither the program’s current achievements, nor its ambitions, support the hyperbole of Evans-Pritchard’s suggestion that the “Holy Grail of energy policy [is] in sight as battery technology smashes the old order”. As is obvious from the heavy involvement of the Federal Government, there is a very long way to go before storage begins to be spontaneously economically attractive. This is a research project; not an investment prospect.
The first thing to note is that the GRIDS target figure of $100/kWh (£77) is still extremely expensive. The US Department of Energy estimates the market for electrical storage to assist with the short term problems arising from the present relatively low levels renewables would require a storage capacity of 5 GWh, which at $100/kWh would cost about $500 million dollars. And 5 GWh is not a very large volume of electrical energy. The UK consumes annually about 300,000 GWh, an average of about 1000 GWh a day.
So the capital cost of the volume, even assuming that the GRIDS Project is successful in reducing those costs, would still be high. Recovering such a capital expenditure at a reasonable cost per unit of electricity stored requires frequent utilisation of the equipment over its lifetime. Indeed, the US Department of Energy itself estimates that 5,000 cycles over a ten year lifetime, i.e. more than one charge discharge cycle per day, would be necessary to bring the premium cost, i.e. the cost over the cost of unstored electricity, down to about 2.5 cents per kWh.
5,000 cycles over ten years is a high level of utilisation, and such cycling is in itself a very demanding requirement; not all technologies will be able to take that strain without degradation of power or storage capacity. Indeed, such resilience is another aim of the GRIDS program.
Furthermore, frequent utilisation is a serious limiting factor if the equipment is to work with renewables, since it means that storage can only assist with intermittency over short time scales, where the are numerous occasions for charge-discharge cycles, and will not be able to address the larger, and much less frequent macro-cycles to which Evans-Pritchard refers when he correctly notes that it is much windier in some seasons than others. In other words, while you might want to smooth wind power output over a year by storing some of the UK’s winter wind for summer use, the cost per kWh of a single charge discharge cycle would mean that the capital cost of $100/kWh of volume would have to be recovered from that one cycle per year, over say a ten year lifetime, meaning that each kWh stored would cost at least $10/kWh to the consumer. This is extremely expensive (upwards of 40 times the UK retail price), and in reality the cost would be rather higher, since the stored electricity would itself have to be paid for, as would the Operation and Maintenance of the storage device.
Frequent charge-discharge cycles are therefore essential to bring the unit cost of electricity stored down to reasonable levels. But that means addressing the frequent short-term problems, over seconds, minutes, and hours, not the larger but less frequent scales of variability, extending over days, weeks and months, and seasons, that are also a significant concern, and where the large potential volumes for storage actually lie.
Thus, even if these 80–90% cost reductions can be achieved, and that is a major undertaking, the remedies that such technologies can supply to the intermittency of renewable energy will be limited in character and volume, and, in spite of the cost reductions, still relatively expensive, particularly in a world of low fossil fuel prices. There is some, modest, long-term promise here, but anyone reading Mr Evans-Pritchard’s articles and concluding that the world’s energy woes were on the point of solution, and he himself encourages this with a rousing call to “Rejoice”, would have been seriously misled.