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Renewable Strike Price Assumptions In Fifth Carbon Budget

August 20, 2016

By Paul Homewood 

 

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As I mentioned the other day, the Committee on Climate Change have sent me their detailed costings for the Fifth Carbon Budget.

Part of these are the projected strike prices for various forms of renewable energy between now and 2030. By comparing these with the predicted wholesale electricity prices, the CCC is able to work out how much extra renewable energy will cost the country.

Of particular interest are the prices for wind and solar power. We are regularly told that technology is driving down costs so quickly that wind and solar will soon be cheaper than conventional sources, such as CCGT.

The CCC’s projections suggest otherwise!

 

 

Below are the projected prices for onshore, offshore wind and solar power. Note that these are all at constant 2014 prices. Also note that the figures refer to prices awarded to new developments commissioned in each year.

 

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  • Onshore wind is assumed to stay unchanged at £83.40/MWh throughout the period.
  • Offshore wind gradually gets cheaper, but still costs £94.69/MWh for new windfarms commissioned in 2030.
  • Solar power starts at £82.63/MWh for plants commissioned this year. By 2030, new solar farms will still be paid £59.61/MWh

 

A lot of detailed analysis has gone into the CCC’s numbers, and they are certainly not plucked out of the air. It is fair, I think, to assume that they would have wanted to put renewable technology into the best possible light.

Given that the present wholesale price is below £50/MWh, and their central projection for 2030 is still well below £60/MWh, it is clear that renewable energy is still a long way away from becoming competitive.

Perhaps Ambrose Evans Pritchard might like to take notice!

 

 

APPENDIX

The spreadsheet the CCC sent me is a bit of a jumble, but a couple of screenshots below show the numbers for offshore and solar.

 

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10 Comments leave one →
  1. Oliver K. Manuel permalink
    August 20, 2016 5:18 pm

    Thanks, Paul.

    Humanity lost its natural frame of reference.

    We will regain contact with reality, or become extinct – a goose without an internal compass – unless we establish contact with the internal compass in every atom, life and planet in the solar system – indelibly recorded in precise rest mass measurements of every known atom:

    http://ierj.in/journal/index.php/ierj/article/view/409/386

  2. martinbrumby permalink
    August 20, 2016 5:25 pm

    “A lot of detailed analysis has gone into the CCC’s numbers, and they are certainly not plucked out of the air.”

    Possibly not. But I’m sure we can rely on our Activist / Civil “Servants” to have spent many happy hours torturing the raw data until it was willing to confess to anything, be it never so improbable.

    I wouldn’t trust the combined forces of DECC to give me a truthful time of day.

  3. Graeme No.3 permalink
    August 20, 2016 5:37 pm

    That £50 per MWh is 3 times the wholesale price of coal fired generation in Australia, but our gullible politicians want to get rid of those cheap generators and replace them with “cheap, reliable wind”. Even after South Australia starts blacking out the consumer, although current prices in SA make yours look OK.
    Curiously there is hesitation in business circles about installing more wind farms and even one large electricity producer selling that division. There is more interest in building another inter-connector to SA ( from NSW ) to bring more coal fired electricity to the highest price market in Australia.

    • August 22, 2016 2:10 pm

      Sounds as though Australia is trying to vie with Norway as leaders in common sense power economics, even tho’ SA looks as eco-daft as California, or even the EU.

    • manicbeancounter permalink
      August 22, 2016 6:37 pm

      Greame,
      It is nearer £40/MWh at present. See my comment August 22, 2016 6:18 pm

      However, the wholesale price is inflated by two factors. First is that the market is rigged, and electricity supply requirements, depending not just on fluctuating demand but infilling between the fluctuating supply of renewables and the constant supply of nuclear. Second is the impact if the carbon price. As page 23 of the OFGEM report states:-

      2.20. Power prices have also been influenced in recent years by changes in carbon
      prices (see Figure 4). Although not as important as the impact of changes in gas
      prices, carbon costs have still played their part in the long-term trend of increasing
      wholesale electricity prices.

  4. August 20, 2016 9:29 pm

    ‘We are regularly told that technology is driving down costs so quickly that wind and solar will soon be cheaper than conventional sources, such as CCGT.’

    We’ll know when that’s true because our bills should obviously start to go down instead of up. Don’t hold your breath waiting for the day though.

  5. CheshireRed permalink
    August 21, 2016 8:51 am

    Whatever the strike of price ‘renewables’ they’ll continue to need backing-up from reliable stuff that works on demand 24/7 for years to come, ensuring this remains as the single most deluded wild goose chase in UK politics. Legendarily stupid.

  6. Harry Passfield permalink
    August 21, 2016 10:25 am

    The only “notice” I would be happy with AEP taking would be a one-month’s severance from the DT.

  7. Harry Passfield permalink
    August 21, 2016 11:52 am

    Now that’s curious – in the offshore wind it is not expected that any improvement in technology over the next 14 years is likely to improve the load factor. 45% for ever? Where did that number come from?

  8. manicbeancounter permalink
    August 22, 2016 6:18 pm

    I would guess at a reason that the wholesale electricity prices appear rather high at £50/MWh, compared with the low £40s at present. The top spreadsheet capture is headed “Overview of LCF Spend 2013-2030. In 2013 wholesale prices were indeed about £50/MWh.
    From an OFGEM report is the following table.
    https://www.ofgem.gov.uk/sites/default/files/docs/2015/09/wholesale_energy_markets_in_2015_final_0.pdf

    The level of subsidy is the difference between the strike price and the wholesale price. With more realistic wholesale prices, the subsidies could be 15-20% higher.
    Also, wholesale prices are assumed to rise in real terms. But the annual % rise is very uneven. On the previous year the % rises are
    2017 1.11%
    2018 0.38%
    2019 0.49%
    2020 3.66%
    It would be interesting to see some more of the spreadsheet.

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