• UK government study finds significant additional system costs in renewables and system savings for baseload power

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      Patrick Lavery

      Combustion Industry News Editor

The Financial Times has reported on a study by the UK’s Department of Business, Energy and Industrial Strategy which has attempted to estimate the “system costs” of renewable energies – the need to manage the intermittency of producing either too much or not enough electricity. While the costs of the installation of renewables has been falling significantly, these do not factor in the system effects, leading to a somewhat distorted picture of the overall costs of a grid running on high proportions of renewables. BEIS’s analysis is that when wider system costs are included in the price of electricity, in what it terms its “enhanced levelized cost”, renewable sources will have a comparable range of costs to gas-fired power generation with post combustion carbon capture, utilisation and storage. The report stresses that estimates are difficult and depend highly on circumstances, but it is clear that with higher proportions of renewables, the system costs increase (a finding that echoes that of The Brattle Group’s study in the US context reported in the last edition of the Combustion Industry News). By 2035, BEIS estimates the following “enhanced levelized costs” of electricity:

  • Combined cycle gas turbine H class: £27-127/MWh (from an original levelized cost of £112/MWh)
  • CCGT with carbon capture, utilisation and/or storage (assuming mature technology): £38-61/MWh (from an original levelized cost of £78/MWh)
  • Onshore wind: £60-87/MWh (from an original levelized cost of £42/MWh)
  • Offshore wind: £59-79/MWh (from an original levelized cost of £41/MWh)
  • Large-scale solar: £45-61/MWh (from an original levelized cost of £33/MWh)

These figures support the idea – suggested by the IEA’s alternative Value-Adjusted Levelized Cost of Electricity – that the levelized costs of electricity that have traditionally been used to help for long-term planning are no longer suitable for grids that contain large amounts of intermittent generation. For renewables in the UK context, it suggests that the end costs of renewables are being underestimated by ~40% to ~100%, whereas the cost of gas-fired electricity generation with CCUS is being overestimated by ~20% to ~50%. These are highly important findings that one would expect will cause the UK government to further its analysis and which might lead to a refining of its approach to net-zero carbon emissions.