No, Wind Power is Not Cheaper Than Gas

by Alex Kriel and Duncan White
7 October 2023

Advocates of Net Zero policies repeatedly reassure the public that they are advancing cheap, green energy with the promise of vast numbers of lucrative green jobs and world leadership for the U.K. in selected green technologies.

Unfortunately for the hard pressed British electorate, ‘cheap, green energy’ is nothing more than an empty political slogan arrived at by a dishonest sleight of hand. Specifically, the politicians simply ignore the true costs of the ‘cheap, green energy’ which soon becomes very expensive when factoring in all costs.

The chart below is from the U.K. Government’s own Electricity Generation Costs 2023 report and forms the centrepiece of the green propaganda. It purportedly shows the ‘levelised cost of electricity’ (LCOE) for different generating technologies. The Government uses deceptive calculations to arrive at a distorted cost for electricity generated by wind-power over the lifetime of a plant, by which means the Government can falsely claim that offshore wind is 2.5 times cheaper than dirty old gas generation (CCGT).

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The most outrageous trick in this ‘analysis’ is that the Government has treated completely reliable electricity generated by gas (‘dispatchable’, in the trade jargon) in exactly the same way as extraordinarily unreliable electricity generated by a wind farm. This is not even an apples and oranges comparison, this is an elephant and microchips comparison. As a simple thought experiment, how much of a discount would you require for a car, cooker or washing machine whose operation was controlled externally and is very hard to predict versus the same equipment where you decide when you use it? For most people the answer would be an enormous discount, indicating that the true utility of variable electricity supply is very, very low.

There is really no comparison between an inexpensive tried-and-tested reliable power source and an exceptionally unreliable megawatt hour. We really are being had for a patsy.

To make costs comparable, you would need to state them on a comparable dispatchable basis, which means combining a wind farm with a battery storage facility to produce stable supply. At the moment there are only a handful of battery projects, which are very costly and provide only a short period of supply for their catchment area. As an indicator of the scale of battery backup required to ‘plug the gap’ when wind and solar power falter due to weather conditions, the Australian city of Melbourne has installed a ‘battery farm’ at Hornsdale at a cost of A$90m, covering 2.5 acres that can provide 28 minutes of electricity if there is a total failure of ‘renewable’ energy supply.

For reference, calculations by Bjorn Lomborg, the President of the Copenhagen Consensus Centre, indicate that the EU’s entire battery capacity is enough to cover one minute and 21 seconds of average demand. At this stage, it isn’t possible to calculate a cost per MWh (megawatt hour) for offshore wind farm plus battery installation, but it is clear that the resulting levelised cost would be very high and orders of magnitude (i.e., multiples of 10) higher than in the chart above (£44 per MWh).

In prior years, the Government at least made a half-hearted stab at acknowledging the enormous difference in utility between reliable and unreliable electricity by considering various downstream impacts of variable green electricity. The methodology was not fully disclosed, but it involved adding additional costs onto wind farms to adjust their levelised costs and then deducting costs from the levelised cost of combined cycle gas turbine plants, which have delivered uninterrupted, cheap energy for decades. That analysis resulted in a somewhat complex chart showing ‘enhanced levelised cost of electricity’, which we have simplified below.

It is plain to see that gas (CCGT) is the cheapest form of electricity generation on an enhanced levelised cost basis even when accounting only in this partial way for downstream network costs.

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The Government has not included any such assessment of downstream impacts in the 2023 analysis because so called ‘balancing costs’ have been shifted on to the consumer. This is an arbitrary accounting convention and ignores the fact that the same costs will need to be incurred, regardless of whom they are charged to.

Note also that between 2020 and 2023 assessments, the Government massively and somewhat arbitrarily inflated the cost of gas (CCGT) based on a very much higher ‘carbon costs’ from £32 per MWh to £60 per MWh (the carbon costs are a somewhat arbitrary value that the Government places on the ‘social cost’ of carbon emissions). By moving this assumption up, or down, the Government can itself alter CCGT levelised costs and attractiveness relative to other forms of generation. This huge increase has distorted the 2023 outcomes to make gas appear much less attractive compared to wind. Ultimately though this is a policy assumption rather than a physical or market factor and is driven by value judgements rather than scientific reasons.

We have illustrated that for the 2023 assessment, by using the Government’s own earlier method of analysis we have gone from a position where offshore wind appears to be 2.5 times cheaper than gas to a position were gas is the cheapest form of generation when factoring in the system impacts as they were accounted for in the 2020 assessment.

There are a number of other questionable assumptions that unsurprisingly all work towards inflating the levelised costs of electricity from gas and reducing the levelised cost of wind. The main such assumption being a very high 61% load factor for offshore wind, which as far as we are aware has not ever been achieved anywhere in practice (the ‘load factor’ is the amount of electricity produced by a wind farm over a year as a proportion of how much it would produce if the wind was always favourable). The Government itself shows actual load factors for offshore wind farms were in the range of 39% to 47% up to 2017.

If you were to go a stage further and construct a truly representative scenario where gas power generation was replaced by wind, you would have to factor in the reality that you would need to effectively keep your old gas generation in reserve in order to have an uninterrupted supply of electricity. This leads to suboptimal operation of the gas plant and very high unit costs with lower output on the same fixed cost base.

In the scenarios that we looked at, any saving from ‘low cost’ wind, primarily lower due to carbon costs, would be more than offset by the very high unit cost of electricity from gas which would have to be purchased at enormous ‘standby’ costs to cover every period of low or excessive wind to prevent blackouts.

Real world data – the acid test

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Observed data is always the acid test and in an excellent report by Mark P. Mills from the Manhattan Institute, he includes a chart of residential electricity prices versus wind and solar capacity per capita across European countries. Doubtless there may be some cofounding factors, but overall the trend is crystal clear: more ‘cheap’ renewable energy is directly linked to higher residential energy prices. Very much as we expected and the opposite outcome to that promised by the U.K. politicians.

The technocrats only real answer to the problem of unreliable renewables is to limit the ability of the consumer to use electricity. This is probably the main reason that smart meters and smart appliances are being rolled out to the end of 2025. Again the needs of the citizen will effectively be made subordinate to the needs of the system, itself dictated by ideology rather than supply problems or verifiable scientific reasons – a new and very unhealthy direction of travel.

Conclusions

You can see how easy it is to go from the fantasy of ‘cheap wind power’ promoted by the political class to the reality of very expensive wind, simply by including the real downstream costs. We have identified that the necessity of maintaining gas backup to wind power means that any savings from wind will often be more than negated by the costs of backup power. This proposition ties in with the observed reality that countries with higher levels of wind and solar capacity tend to have higher residential electricity prices.

The real problem though is the hell-for-leather dash for Net Zero and the accompanying plans produced by the unelected and unaccountable Climate Change Committee. This Soviet-style planning coupled with the Department for Business, Energy & Industrial Strategy arbitrating between different technologies and handing out billions in support of its favoured solution has all the characteristics of an accident waiting to happen. Bjorn Lomborg warned that “we are now going from wasting billions of dollars on ineffective policies to wasting trillions”.

The article continues at https://dailysceptic.org/2023/10/07/no-wind-power-is-not-cheaper-th...

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