Can we afford to keep the lights on?

In a report published yesterday, The Royal Academy of Engineering revealed that electricity from offshore wind farms, currently the most viable renewable source, will cost at least twice as much as that from conventional sources.

In a report published yesterday, The UK-based Royal Academy of Engineering revealed that electricity from offshore wind farms, currently the most viable renewable source, will cost at least twice as much as that from conventional sources.

The independent study, commissioned from international energy consultants PB Power, puts all energy sources on a level playing field by comparing the costs of generating electricity from new plants using a range of different technologies and energy sources.

The cheapest electricity will come from gas turbines and nuclear stations, costing just 2.3 p/kWh, compared with 3.7 p/kWh for onshore wind and 5.5 p/kWh for offshore wind farms.

‘This may sound surprising,’ said Academy Vice President Philip Ruffles, who chaired the study group, ‘especially as we have included the cost of decommissioning in our assessment of the nuclear generation costs.

The report says that the weakness of the Government’s Energy White Paper was that it saw nuclear power as very expensive. But modern nuclear stations, it claims, are far simpler and more streamlined than the old generation – the latest are only about half the size of Sizewell B – and far cheaper to build and run.

In the case of wind energy it is also necessary to provide back up capacity for when the wind does not blow.

‘In this report, we have been rather generous with the wind generation figures – we assumed you’d need about 65% back-up power from conventional sources for this study. The Academy has previously called for even higher back-up, more like 75 to 80%,’ added Ruffles.

Even so, the cost of back up capacity adds 1.7 p/kWh to the costs. Onshore wind generation is the cheapest renewable, but with back up, it costs two and a half times as much as gas or nuclear.

Wind, nuclear and biomass generation all have the benefit of not emitting carbon dioxide, and the Academy/PB Power study also looked at the impact on costs of capturing carbon dioxide for all fossil fuels. This could add at least 2 p/kWh for coal-fired generators and 1-2 p/kWh for gas generators.

‘Coal looks uneconomic in the future,’ said Ruffles, ‘by the time you capture the carbon dioxide it’s going to cost as much as onshore wind.’

This study did not consider transmission costs to individual technologies or storage costs for gas to ensure security of supply -the market currently absorbs these through system operating costs or the cost of gas.

However, providing energy a long way from the eventual customer will add to its cost.

‘The renewables sector already benefits from subsidies worth around £485 million a year through the Renewables Objective,’ said Ruffles.

‘The Government is also planning to offer further subsidies in the form of reductions in transmission charges – this may run counter to the spirit of the new European Electricity Directive aimed at promoting competitive energy markets.’

‘Our report puts a price on the policy decisions we must take to sustain a vibrant economy, avoid the lights going out and meet our emissions targets. The report does not take sides in the energy debate but it does introduce transparency. People need to appreciate the real costs of generating electricity including wind power which may be, as the Renewables Innovation Review said last week, our best hope for renewable technology until 2020,’ he concluded.