At Watts Up With That?, Willis Eschenbach has a post “The Levelized Cost of Electric Generation“. These are estimated figures by US Energy Information Agency (EIA) for the costs of power by fuel source, for plants with construction started now that would enter service in 2018. The full table from the EIA in $/MwH is reproduced as Table 1 below.

Willis makes the valid point that every unit of “non-dispatchable” power (i.e. renewables with no power on demand) capacity, there must be an equal amount of dispatchable power to back it up. He does not follow this up. Non-dispatchable power does not need to be fully-covered by the expensive high-efficiency fossil-fuelled power stations. The most extreme conditions of peak power demands but no wind can be met by diesel generators. These are relatively low capital cost, but with high unit costs of output. They still add to the costs of renewables, along with reducing the CO2 savings. In terms of the large scale fossil-fuelled power stations gas is clearly better than coal. Combined cycle gas has half the capital cost per unit as conventional coal so dropping the utilisation will have a much smaller impact on unit costs. Further it can be switched on or off much quicker than conventional coal. Combined the actual additional cost of renewables is lower than he implies.

As I have been looking into the subsidies that renewables receive in the UK, I would like to observations. To understand these comments in the context of Willis Eschenbach’s post please note:-

• In the UK, all generated electricity is paid the wholesale price (approx $0.09 kwh at present).
• In addition renewables receive renewables obligation credits or ROCs. Biomass (wood pellets usually imported from USA) and onshore wind receive 1 ROC per megawatt hour. Offshore wind receives 2 ROCs. With a ROC worth $0.07 kwh (£42.02 MwH), onshore wind and biomass receives $0.16 kwh and offshore wind $0.23 kwh.
• Currency conversion is at £1.00 = £1.66. Willis uses kilowatt hours for his simplified summary, whereas as the EIA uses megawatt hours.

Revenue is somewhat different to the costs, but there are a few observations possible.

1. Capacity utilisation for onshore wind is assumed at 34% and 37% for offshore. For the UK, actual average utilisation as 26% for onshore and 35% for offshore. On that basis, US costs for onshore wind would rise from $0.087 to $0.117 kwh. Here are the figures from the most recent four available years.

   

2. Biomass in the UK consists of burning non-fossil fuels in existing coal-fired power stations. It is more expensive than coal because (a) fuel cost per tonne is more than coal and (b) output per tonne is slightly less than coal. I would want to know why the capital cost per kwh is 20% lower and why the variable costs are just 45% higher. On fuel costs alone the 0.2 ROCs per Mwh would be more than generous for biomass. Based on figures from April to August 2013, the full year subsidy saving of this change would be in the order of £300m or $500m per annum.
3. The transmission investment is vastly understated. Like in the UK, the cost of transmission for a power station investor is likely in connecting the power station to the nearest point on the national grid, regardless of the capacity of the line. To obtain 34% efficiency, wind turbines need to be placed in highly exposed areas, such as hill-tops. Population centres, and established grid networks, tend to be on the plains, or in sheltered valleys. In the UK, the best locations for wind turbines are in the far North of Scotland. To effectively connect this to main grid means upgrading about 400 miles of transmission lines to enable around 5-10GW of power at peak generation. This capital cost could be as much as the wind turbines themselves. Fossil-fuelled power stations tend to be located near existing power stations. These in turn are near to the existing grid infrastructure. The upshot is that wind turbines have much higher transmission costs than fossil-fuelled power stations. The difference could be a number of cents per kilowatt hour.

Kevin Marshall