Open thread: the cost of renewable energy

2014-01-26

in Economics, Geek stuff, Politics, The environment

Especially in comparison with energy conservation, carbon capture and storage, and nuclear power, much of the debate about renewable energy as a climate change solution concerns cost. Which forms are most and least affordable? How do they compare to other energy options? How should intermittancy and energy storage issues be incorporated?

Another set of questions concerns the rate and scale of deployment. How much of the carbon challenge can renewables address, and how quickly can they do so relative to the timescales necessary to stabilize emissions safely?

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{ 6 comments… read them below or add one }

Milan January 27, 2014 at 4:20 pm
. January 27, 2014 at 4:20 pm

“Britain gets more electricity from offshore wind farms than all other countries combined. In 2012 it added nearly five times more offshore capacity than Belgium, the next keenest nation, and ten times more than Germany. Its waters already contain more than 1,000 turbines, and the government thinks capacity could triple in six years. Boosters think Britain a global pioneer. Critics say ministers are flogging a costly boondoggle.

China and Japan have a growing appetite for offshore generators but little capacity. America has only a single prototype turbine.

Unfortunately, offshore wind power is staggeringly expensive. Dieter Helm, an economist at Oxford University, describes it as “among the most expensive ways of marginally reducing carbon emissions known to man”. Under a subsidy system unveiled late in 2013, the government guarantees farms at sea £155 ($250) per megawatt hour for their juice. That is three times the current wholesale price of electricity and about 60% more than is promised to onshore turbines. It is also more than the £92.50 which Britain’s new nuclear plant at Hinkley Point will get—though that deal is for 35 years, not 15.

The industry says offshore wind power would become cheaper more quickly, and boost Britain’s economy, if the government agrees to build lots more offshore farms. The Department of Energy and Climate Change (DECC) says that 10 gigawatts (GW) of offshore capacity is “achievable” by 2020. That is three times the amount already deployed, and would provide about the same capacity as Britain’s nine nuclear power stations combined (although wind farms produce power only about a third of the time). Still, ministers once had loftier ambitions. Wind-farm operators worry that the government will divert subsidies to other kinds of low-carbon generation, such as nuclear and gas-fired stations.”

. February 17, 2014 at 7:08 pm

But Mr Gabriel, who is mulling a run for chancellor in 2017, will by then be judged on a more daring project. As part of his coalition deal with Mrs Merkel, he is now a “super minister” combining two portfolios, energy and the economy. He is thus in charge of rescuing Germany’s most ambitious and risky domestic reform: the simultaneous exits from nuclear and fossil-fuel energy, collectively known as the Energiewende, a term that means energy “turn” or “revolution”.

More a marketing slogan than a coherent policy, the Energiewende is mainly a set of timetables for different goals. Germany’s last nuclear plant is to be switched off in 2022. The share of renewable energy from sun, wind and biomass is meant to rise to 80% of electricity production, and 60% of overall energy use, by 2050. And emissions of greenhouse gases are supposed to fall, relative to those in 1990, by 70% in 2040 and 80-95% by 2050.

German consumers and voters like these targets. But they increasingly dislike their side-effects. First, there is the rising cost of electricity. This is a consequence of a renewable-energy law passed in 2000 which guarantees not only 20 years of fixed high prices for solar and wind producers but also preferred access to the electricity grid. As a result, Bavarian roofs now gleam with solar panels and windmills dominate entire landscapes. Last year, the share of renewables in electricity production hit a record 23.4%.

This subsidy is costly. The difference between the market price for electricity and the higher fixed price for renewables is passed on to consumers, whose bills have been rising for years. An average household now pays an extra €260 ($355) a year to subsidise renewables: the total cost of renewable subsidies in 2013 was €16 billion. Costs are also going up for companies, making them less competitive than rivals from America, where energy prices are falling thanks to the fracking boom.

The Energiewende has, in effect, upset the economics of building new conventional power plants, especially those fired by gas, which is cleaner but more expensive than coal. So existing coal plants are doing more duty. Last year electricity production from brown coal (lignite), the least efficient and dirtiest sort, reached its highest level since 1990. Gas-fired power production, by contrast, has been declining (see chart). In effect, the Energiewende has so far increased, not decreased, emissions of greenhouse gases.

. February 17, 2014 at 7:14 pm

Europe’s confusion is due, in part, to conflicting national priorities. Germany is giving up nuclear power and betting heavily on solar and wind energy (all while burning more coal). France remains heavily committed to nuclear and bans shale-gas exploration. Britain is going all-out for shale gas (and nuclear), being a laggard in renewables. But it also does not help that Brussels has too many commissioners with overlapping responsibilities. The latest package was agreed on only after an 11th-hour battle between Ms Hedegaard and Günther Oettinger, the German energy commissioner who, unlike the German government, wanted only a modest emissions-reduction target of 35%.

. September 11, 2017 at 9:21 am

Huge boost for renewables as offshore windfarm costs fall to record low

Green groups say record low price should sound death knell for Hinkley Point C after subsidy auction sets price for windpower below even lowest forecast

. September 11, 2017 at 9:21 am

Industry watchers had expected the guaranteed price for power from windfarms around Britain’s coast to come in somewhere between £70 and £80 per megawatt hour, below the £92.50 for a new nuclear power station at Hinkley Point.

But the “exceptionally low” results of a government auction on Monday for subsidy contracts show two offshore windfarms will be built for £57.50 per MWh, way below even the most extreme predictions. The price is half of what new offshore windfarms were being awarded just two years ago.

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