How much does wind power really cost?

Last week, Chris Huhne, the Secretary of State for Energy & Climate Change, gave the first annual energy statement to Parliament, putting reducing carbon emissions by 80% by 2050 at the heart of the UK’s energy strategy.

To achieve this is going to require an enormous expansion of renewable energy – and Huhne has been immediately leaped on by the usual suspects for daring to claim that wind power can be ‘incredibly competitive’.

How much does wind actually cost? Christopher Booker, in the Daily Mail article linked above, claims that wind is twice as expensive to build as gas, coal or nuclear, and that the electricity from offshore wind turbines is three times as expensive as that from conventional power plants. It’s not clear where these figures are from – but one can’t really blame an op-ed in a tabloid newspaper for not including references (especially a tabloid who specifically doesn’t require op-eds to be able to back up their factual claims).

Part of the problem in this debate is that there’s a wide variety of range in cost estimates for costs for energy generation. Let’s take three examples: the RenewableUK briefing sheet on costs, the PB Power Study for the Royal Academy of Engineering, and the estimates given by DECC in their ‘Pathways’ document which was released to coincide with Huhne’s energy statement.

RenewableUK claims that onshore wind (£1,600/kw) is cheaper to build than coal(£1,650/kw) and nuclear(£3,000/kw), although more expensive than gas (£650/kw). Offshore wind costs are £3,600/kw at the top end. DECC’s figures are similar, although they include the cost of Carbon Capture and Storage when considering coal, which comes out as £2,500/kw. The PB Power report is very different, which may be an artefact of its age. It says the cost of building new coal plant is £820/kw, gas is £300/kw for a combined-cycle plant, nuclear is £1,150/kw, onshore wind is £740/kw, and offshore is £920/kw.

It’s therefore not clear where Booker got his numbers from – none of our sources show that the cost of building onshore or offshore wind is twice the price of gas, coal and nuclear, although it is clear that gas is by far the cheapest to build. Offshore wind is comparable to nuclear in terms of construction costs.

Let’s look at the second challenge: how much electricity actually costs from each of these types of generation. The DECC report doesn’t include this cost, so we’ll concentrate on the PB Power Report and the RenewableUK Briefing Sheet.

RenewableUK claims that electricity from onshore wind costs on average £90/MWh, while gas is £49/MWh, coal is £69/MWh, and nuclear is between £57MW/h and £86MW/h. Offshore wind is significantly more expensive at £160MW/h. Of course, this is largely dependent on the cost of fuel – RenewableUK uses a price of £14/MWh for gas. The 2009 prices used in the DECC report gives a cost of about £20/MWh for gas, rising to £26MW/h by 2030 on a likely case scenario.

The PB Power Report claims that power from gas costs £22/MWh, coal £25, and nuclear £23. Onshore wind and offshore wind are treated differently; their costs are given so as to include additional back-up to account for the variability of wind. Onshore costs £37/MWh without backup, and £54/MWh including it. Offshore is £55/MWh and £72/MWh correspondingly.

The cost for nuclear-generated electricity seems out of place compared to every other report – it seems that PB Power dramatically underestimated the cost of nuclear by specifically excluding financing costs, which are considerable for long-term projects such as nuclear. The biggest single factor in the cost of nuclear power is the price of money. Nuclear plants are a long-term risk, and financing costs reflect that.

The PB Power report only applies the cost of standby generation to wind, despite the fact that the current standby generation capacity in the UK stands at about 14GW out of 80GW – compared to 4 GW of wind. This is because the grid requires the ability to quickly compensate for major reactors ‘tripping’ (i.e. unexpectedly going offline) simultaneously – for example, this report shows that Sizewell B, representing 0.85GW of the UK’s generation capacity, ‘tripped’ four times over the 18 months prior to the end of the first quarter of 2009. On average about 1GW of thermal plant in the UK ‘trips’ every week, and so requires back-up – but for some reason this wasn’t included in the PB Power report. Indeed, in the past quarter Sizewell B has been down entirely owing to water leakage: http://www.hse.gov.uk/nuclear/llc/2010/sizewellb2.htm. It’s therefore not correct to claim that only wind requires back-up – any analysis needs to apportion back-up costs relative to the amount of time they’ll be required by each type of generation.

Despite this, it does seem that wind generation is more expensive than fossil fuel generation, although it’s competitive with nuclear. However, the costs given above don’t tell the whole story – the cost of fossil fuel generation isn’t just in its market price, but in its long-term impact on the environment. This is why part of the Secretary of State’s statement involved the price of carbon – the future cost of pollution emitted by fossil fuel plants, hypothecated into a cost for producers of that pollution now. The PB Power report adds a potential price of carbon to each of the fossil fuels, and it’s immediately clear that even including the full price of back-up generation, onshore wind is very competitive against fossil fuel generation. It’s also clear that offshore wind is not three times more expensive than other forms of generation – unless you don’t think carbon emissions have any impact on the environment. Of course, Christopher Booker doesn’t think that – but somehow he neglects to mention it when talking about wind.