| The Real Cost Of Wind Power
October 18, 2015
By Paul Homewood
https://notalotofpeopleknowthat.wordpress.com/2015/10/09/is-wind-power-really-cheaper/
We saw the headlines last week of claims that wind power is now the cheapest source of electricity. As I pointed out at the time, such claims ignore the fact that wind needs back up capacity, and therefore cannot be directly compared with conventional, dispatchable capacity.
I have now had a chance to do some detailed costing, based on the EIA calculations that they published in June.
http://www.eia.gov/forecasts/aeo/electricity_generation.cfm
My costings are derived from this table:
First, let’s convert these unit costs back to annual costs per MW capacity.
So using Advanced CCGT for instance, the capital cost of $15.9/MWh equals an annual cost of $121177. (EIA assume 30 yrs life span for all technologies, so we can project this to a total capital cost of $3.292 million per MW).
The calculation is :-
$15.9 x 8760 (hours/yr) x 87% (capacity factor)
We can do a similar calculation with fixed costs. Before variable costs, therefore, we get the following annual cost per MW in $.
| Adv CCGT | Offshore Wind | Onshore Wind | | Capital | 121177 | 561236 | 181962 | | Fixed | 15242 | 74898 | 40366 | | Total | 136419 | 636134 | 222328 |
Capacity Factors
Although the EIA have set assumptions for capacity utilisation, they don’t necessarily apply to the UK. For instance, according to DECC, onshore wind only produces 26% of its theoretical capacity.
Also, because of large variations in overall demand, conventional power does not always run at anywhere near its technical capability.
DECC data suggest that CCGT was operating at around 58% of capacity back in 2010, before subsidised renewables began to seriously distort the grid.
Using this figure, we can build up a cost for gas only, based on 1MW of capacity:
| Advanced CCGT | $ | | 1 MW @58%= 5080 MWh/yr | | | Capital+Fixed Costs/yr | 136419 | | Capital+Fixed Costs/MWh | 26.85 | | Variable Costs/MWh | 53.60 | | Total Cost /MWh | 80.45 |
Similarly for wind:
| Onshore Wind | $ | | 1 MW @26% = 2277 MWh/yr | | | Capital+Fixed Costs/yr | 222328 | | Capital+Fixed Costs/MWh | 97.64 | | Variable Costs/MWh | – | | Total Cost/MWh | 97.64 |
| Offshore Wind | S | | 1MW @37% = 3241 MWh/yr | | | Capital+Fixed Costs/yr | 636134 | | Capital+Fixed Costs/MWh | 196.27 | | Variable Costs/MWh | – | | Total Cost/MWh | 196.27 |
Standby Capacity
As we can see, even onshore wind is still more expensive than CCGT, but that is only half the story.
As wind power is inherently unreliable, every megawatt of wind capacity effectively needs to be backed up with something that is reliable. For the sake of this exercise, let us assume this will be in the shape of new advanced CCGT.
So the real capital and fixed cost to provide that 1MW of onshore wind capacity is:
| S | | Onshore Wind | 222328 | | CCGT | 136419 | | Total Capital+Fixed/yr | 358747 | | @26% capacity = 2277 MWh/yr | | | Cost/MWh | 157.55 |
And offshore:
| S | | Offshore Wind | 636134 | | CCGT | 136419 | | Total Capital+Fixed/yr | 772553 | | @37% capacity = 3241 MWh/yr | | | Cost/MWh | 238.37 |
Compared with the CCGT cost per MWh of $80.45, claims that wind power is now the cheapest source of electricity are utterly ludicrous.
NOTES
1) The EIA notes that transmission costs are higher for wind power. While this is certainly also true in the UK, I have not included these in the analysis because the costs may be different.
2) We are obviously comparing on a new for new basis. Given that the UK already has a certain amount of existing capacity to back up wind, the comparative costs of CCGT would be even lower.
3) Running gas turbines on an intermittent basis is an inherently costly thing to do, and would add more costs to the wind options outlined above.
4) EIA assume a life of 30 years for all technologies. This may well be an overestimate for wind, and is almost certainly an underestimate for CCGT.
5) Capacity assumptions are from DECC:
https://www.gov.uk/government/statistics/energy-trends-section-6-renewables
https://www.gov.uk/government/statistics/electricity-section-5-energy-trends
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