Bill Ponton, Princeton Venture Advisory
There is a pervasive belief among green policy adherents that wind power saved the UK hundreds of millions during the natural gas crisis brought on by the disruption of gas flow to Europe from Russia. During a 15-month period, Oct 2021- Dec 2022, natural gas prices reached levels not seen during the prior 20-year period or in the subsequent years of 2023 -2024. If there were savings, then there should be a way to quantify it. Moreover, there should also be a way to quantify the savings or cost incurred from the use of wind power outside this window of interest. In the following article, I will describe a model for costing wind generation, gas generation and wind and gas generation together. From this model, I will determine the savings or cost that wind power incurred inside and outside the period in question.
In 2023, the UK had wind power capacity of 30 GW with onshore and offshore capacity of 15 GW each. The onshore capacity generated 38TWh, while the offshore capacity generated 53 TWh, for total wind generation of 91 TWh. The onshore and offshore capacity factors were 29% and 40%, respectively, with an overall capacity factor of 35%.
Wind power can not work in isolation but must be paired with natural gas-powered turbines. Gas turbine power capacity of which the UK has 32 GW must be available at a moment’s notice to ramp up and compensate for vacillations in wind power. The cost of operating and maintaining (O&M) gas turbine generation is not diminished with the advent of wind power. It is more expensive to operate as it must recoup capital, operating, and maintenance costs across a smaller window of power generation time as wind substitutes for gas turbine power. For this reason, it is best to conceive of wind and gas as working in tandem. In 2023, gas turbine generation was 99 TWh. Together, wind and gas generated 190 TWh.
The EIA estimate of offshore and onshore capital costs are 6,041 USD/kW and 1,718 USD/kW, respectively. Its estimate of offshore and onshore O&M costs is 115 USD/kW-yr and 27 USD/kW-yr, respectively. Assuming a useful project life of 20 years and a weighted average capital cost (WACC) of 6%, the yearly finance payment and O&M cost for offshore and onshore are 9.7 Billion USD/yr and 2.7 Billion USD/yr, respectively, for a total of 12.3 Billion USD/yr. That makes offshore and onshore wind energy cost 0.184 USD/kWh and 0.070 USD/kWh, respectively, or 0.135 USD/kWh combined. In terms of GBP/MWh, that would be 144 GBP/MWh for offshore, 55 GBP/MWh for onshore and 106 GBP/MWh combined.
The EIA estimate of gas turbine capital cost is 1201 USD/kW. Its estimate of O&M cost is 15USD/kW-yr. Assuming a useful project life of 20 years and a weighted average capital cost (WACC) of 6%, the yearly finance payment and O&M cost for gas turbine 3.9 billion USD/yr. Furthermore, assuming thermal efficiency of 60% and using the 25-year historical gas price average of 5 USD/mmBTU, the yearly fuel payment for 99TWh of gas generation is 3.2 billion USD/yr. The total yearly payment including capital finance, O&M and fuel is 7 billion USD/yr. That makes natural gas energy cost 0.071 USD/kWh. In terms of GBP/MWh, that would be 56 GBP/MWh. For comparison, without wind power, natural gas would need to generate 190 TWh. The yearly fuel payment would be 6.1 billion USD/yr. The total yearly payment including capital finance, O&M and fuel is 10 billion USD/yr. The natural gas energy cost is then 0.052 USD/kWh, or 41 GBP/MWh.
Together, natural gas and wind energy cost 0.102 USD/kWh or 80 GBP/MWh. The cost difference between natural gas and wind working in tandem versus natural gas working solo is 39 GBP/MWh. Energy from wind and gas combined is twice as expensive as gas alone. However, that inference is predicated on use of 25-year historical gas price average of 5 USD/mmBTU for fuel cost. As repeatedly pointed out by green advocates, natural gas price departed from the historic average from Oct 2021- Dec 2022. (see Fig 1)
Figure 1
The question is how much this departure from the historic norm impacted the relative cost of wind and gas working in tandem versus gas by itself. In order to answer it, I graphed wind power savings, defined as the difference in cost between wind and natural gas combined and natural gas alone, based on the price of natural gas in the UK at each period extending back five years to 2019. It shows that wind provided negative savings to the UK until the natural gas price spiked over the period Oct 2021- Dec 2022 where it provided positive savings, then it reverted to negative savings from Jan 2023 to present. (see Fig 2)
Figure 2
Even more revealing is the graph of cumulative wind power savings. It shows a steady decline in savings so that over the period from Jun 2019 – Sep 2021, wind power cost the UK cumulatively 18 billion GPB over gas power. From Oct 2021- Dec 2022, it recovered about 8 billion, but since then it has declined back to a cumulative loss of 18 billion GBP over the five-year period. (see Fig 3)
Figure 3
In a sense, wind power advocates are correct in saying that wind saved the UK billions during the gas crisis of 2022, but it was only within that narrow window of time that wind has provided the UK with any savings.
My excel calculations are here and here.
Wind is a waste of everything and a blight on the landscape.
There is only one party opposing Net Zero and you can be sure the media reverts to a tried and trusted angle
A number of wealthy climate sceptics are giving funding to Nigel Farage’s Reform UK, rightwing Conservatives, and the climate science-denying thinktank the Global Warming Policy Foundation. But who are they and how are they linked?
https://www.theguardian.com/politics/article/2024/jun/07/who-are-the-wealthy-climate-sceptics-funding-rightwing-uk-politics
Right wing conservatives? There aren’t any.
It’s hilarious that the Guardian is accusing someone else of being a climate science denier.
In the mainstream any failure to agree with the narrative[s] is automatically [far-]right wing. Period. You could even be Lenin himself, but if you don’t agree with them… As I said, the media reverts to tried and trusted angles.
“The scientific evidence for climate change is unequivocal: 97 per cent of actively publishing climate scientists agree that human activities are causing global warming. Given the same evidence, why do some people become concerned about human-caused climate change while others deny it? In particular, why are people who remain skeptical about climate change often identified as right-wing conservatives?”
https://theconversation.com/climate-explained-why-are-climate-change-skeptics-often-right-wing-conservatives-123549
Appeals to authority, appeals to some notion of science as a votive democracy etc
“The scientific evidence for climate change is unequivocal it has and always will change.
97% of scientists who actively publish papers asserting climate change is caused by human activities, agree that climate change is caused by human activities. 97% of not many is… not many.
The trick here is limiting your sample to “climate scientists”. And how does one earn the label “climate scientists”? By agreeing with all the people who label themselves as “climate scientists”.
Anyone who disagrees with the consensus is automatically dismissed as not a “climate scientist”.
That started with their hero Stalin. When Hitler launched Operation Barbarossa and became an enemy, Stalin started calling him right wing even though he was a staunch Socialist..
“The scientific evidence for climate change is unequivocal”
That is not even close to being true.
The climate science isn’t settled. Anyone who says it is, doesn’t know what they are talking about.
I assume you mean anthropogenic climate change. I would agree with you on that. Climate has always been changing. The evidence for that is overwhelming, with ice ages and interglacial periods being a extreme examples.
It is somewhat less funny when so many believe what is printed and when that belief supports very expensive and insane policy.
Right wing is how the left describes anything they don’t like.
To them, if you like socialism, but just want to introduce it a little more slowly, you are a right winger.
Thanks, sure looks like a good report. Wait a minute, offshore wind is more than twice as expensive as onshore wind? What reason would a sane person choose offshore wind? Other than mis-guided virtue signaling? Whales are less important than birds? Out of sight – out of mind?
“What reason would a sane person choose offshore wind?”
To harvest the massive subsidies its capacity owners receive!
The Renewables Obligation (RO) buy-out price for 2024 to 2025 is £64.73 per Certificate.
Owners of offshore capacity receive 2x ROCs/MWh
https://www.ofgem.gov.uk/publications/renewables-obligation-ro-buy-out-price-mutualisation-threshold-and-mutualisation-ceilings-2024-2025
Owners of Contracts for Difference (CfDs) at low prices tended to renege on the contracts when electricity prices were low, and there were zero bids for new offshore capacity in the Sept 2023 auction.
https://www.bbc.co.uk/news/business-66749344
Consequently, CfD subsidies were raised to up to £241/MWh (at Nov 2023 prices) for the Nov 2023 Allocation Round 6.
https://assets.publishing.service.gov.uk/media/6555dca8d03a8d000d07fa12/cfd-ar6-administrative-strike-price-methodology.pdf
It’s ironic that green advocates who formerly opposed energy infrastructure (i.e. gas pipelines, nuclear power plants), are now telling us to go full steam ahead with the largest infrastructure project in history and not let the birds, bats and whales get in the way.
The largest useless infrastructure project in history. The only ones who might benefit are the investors and they hope to make trillions.
When you are the lunatic Government on a small island off the West Coast of Europe with seasonal and variable wind speeds and not enough land for the millions of wind mills needed, but next to the Irish Sea with its constant air stream from the West… and plenty of space for your wind-powered Britain fantasy.
It seems you have derived gas cost from an inherent assumption that the amount of gas consumed is proprietorial to gas plant power level. It is not. Some gas turbines consume as much as 40% of their full power fuel rate just to be held at hot idle ready to go as they must be when backing up wind power.
Good point. In my attached excel calculations, I have provided two separate inputs for gas turbine thermal efficiency, one for gas in tandem with wind and another for gas solo. In both cases, I input 60%. As you pointed out this does not reflect reality. Closer to the truth might be 30% and 50%, respectively. (I left it at 60% for both, to deflect criticism from wind advocates that I was skewing results by manipulating thermal efficiencies) The reader is certainly welcome to input different thermal efficiencies and see the results.
After further investigation, I was surprised to discover that gas turbine thermal efficiency for gas in tandem with wind is 49% – statista.com/statistics/548943/thermal-efficiency-gas-turbine-stations-uk/
The gas turbine thermal efficiency for gas solo is reflected by the US CCGT thermal efficiency average of 55%
The new inputs do not materially change the results
Nick Stokes has argued, if I understood him correctly, that to use wind you have to have a hybrid system of gas and wind. That the installation of the wind is justified by the gas fuel savings, because there is no fuel cost for the wind.
This piece appears to be a pretty definitive refutation of that argument.
That is correct. The capital cost of wind power outweighs any fuel cost savings (except in the rare case where the gas price hits record levels as with the disruption of gas to Europe from Russia in 2022).
Without sufficient storage, both wind and solar are redundant capacity and redundancy costs. Arguably, with sufficient storage to make wind and/or solar dispatchable, they could actually replace gas turbines, rather than just displace a portion of their output potential. However, the economics of dispatchable wind and/or solar are currently onerous and would likely remain onerous for the foreseeable future.
Ed,
sufficient storage is the stumbling block, you will not have that, it’s far too expensive and needs even more wind genertaion capcity,. It”s a false idea and makes wind and solar unviable.
Gt Britain currently has a piffling 27GWh of pumped hydro plus ~3GWh of grid battery storage capacity.
c.f. Our ~34,000GWh of underground natural gas storage capacity plus a further ~13,000GWh of LNG storage capacity.
Hydrogen storage might seem to be a cost effective solution. However, that is only true if one believes the commonly cited installation capital cost estimate for hydrogen energy storage of $19/kg. The cost estimate comes from a report, by Dennis Papadias of Argonne National Lab, entitled, Bulk Storage of Hydrogen. The author looks closely at salt cavern storage and comes to the conclusion that installation capital cost will decline exponentially with the amount of hydrogen stored. He believes that for stored quantities of hydrogen greater than 1,000 Tonnes, construction cost will be less than $19/kg. Since hydrogen has an energy density of 33 kWh/kg, it implies $0.58/kWh. In reality, until salt cavern storage construction is completed on the massive scale required, it is difficult to estimate the cost. The Advanced Clean Energy Storage (ACES) project under development in Utah will construct two salt caverns with the potential to hold 150,000 MWh. In order to store 20 TWh, one would need 133 caverns similar in size to those caverns. According to Williams et al. (2022) [12] which assessed the potential of salt cavern storage in U.K. to support storage for a large-scale hydrogen economy, the theoretical hydrogen storage potential in new dedicated caverns (Cheshire, Wessex and East Yorkshire) is 2150 TWh.
Per unit volume hydrogen has a bit less than half of the energy density of natural gas. Only rocket scientists use energy per unit weight because weight is more important to them than volume. As a general purpose home and industrial fuel its hydrogen’s volume that counts. And that volume causes many problems. Consider that it takes twice or so as much energy to simply compress hydrogen to any higher pressure than natural gas. Consider that hydrogen must be distributed by all-welded systems because it leaks easily through gaskets. As a car fuel, it takes around a dozen tractor trailer trucks of compressed hydrogen to deliver to a “gas” station as a single gasoline tanker does today. And the tankers or the station must have a hydrogen compressor to transfer the fuel. Gravity won’t do it as with gasoline. Unless cost is no object to “save the planet” hydrogen doesn’t seem to have much of a future as a general purpose fuel.
At a markedly higher cost
Since wind is intermittent, its revenue is intermittent, so its wholesale price is marked up to a level to give it a revenue as if it had continuous output in order to cover operating costs and contribute to profit.
In the UK, among other things, wind power generators which are able to produce power at times of low demand, are compensated for disconnecting from the grid and thus not able to generate revenue. In other words they are paid NOT to supply electricity. In 2022, the UK grid paid wind companies £125 million to switch off.
It is a complete shambles, trying to make what cannot work, appear to work.
The true cost of wind is its actual cost plus the intermittency cost.
Nick’s problem is that he assumes that there is a linear relationship between the cost of a power plant and the amount of power it is producing. In other words, when wind is blowing hard enough to provide all the power, the cost of the fossil fuel plant is zero.
That has never been true, and it has been explained to Nick multiple times. As poster Denis points out above, a natural gas plant is still burning 40% of the gas it would at full power. Beyond that, the plant needs to be fully staffed, there is still wear and tear on the plant, etc.
“a hybrid system of gas and wind.” (sounds like a vegan bean diet response)
You mean like in South Australia yesterday morning? (see image)
Basically no wind.. and using a lot of diesel (orange)
At least this morning there is a small amount of wind.. Still using 87% gas.
Nick’s home state is running 83% brown coal.
Does the wind O&M figure include the cost of maintaining the distribution network to get the power on shore? Offshore wind has very significant distribution costs that usually get ignored in these calculations. Gas plants tend to be closer to the end users.
They haven’t built that on-shore delivery bit yet! As with everything Net Zero it’s a cat-fight about wind v fossil.fuels, electric cars and heat pumps, but any thoughts about delivering increased loads to points of use simply do not occur.
If wind and solar are supposed to reduce fossil fuel use, why has the implementation of wind and solar NEVER led to a reduction in fossil fuel use?
Power demand has always increased faster than the build out of wind and solar: i.e. more FF required.
From the article:
“The EIA estimate of gas turbine capital cost is 1201 USD/kW. Its estimate of O&M cost is 15USD/kW-yr. Assuming a useful project life of 20 years and a weighted average capital cost (WACC) of 6%, the yearly finance payment and O&M cost for gas turbine 3.9 billion USD/yr.” (My bold)
Is 20 years a reasonable assumption? It seems short. What happens to those numbers if the useful project life is 40 years? 60 years?
20 years would be the minimum lifespan of a gas turbine. The typical lifespan of a gas-fired power plant can vary depending on several factors such as the type of technology used, operating conditions, and maintenance practices. However, a well-maintained gas-fired power plant can typically last for 30 to 40 years or more.
I will run the calculations with longer turbine lifespans (30, 40 yr) but lower thermal efficiencies (40%, 30%) for gas in tandem with wind along with (60%, 50%) for gas turbine solo
Nice writeup.
You should probably also add in the curtailment costs – you can find the data here: https://www.ref.org.uk/constraints/index.php?tab=yr
It won’t change the graph shape but will change the area under it as easily over 1 billion GBP has been spent on wind power curtailment just in the past 6 or 7 years.
Very nice, this is really important. The other side is lying, that has to stop. Lying is not okay.
Truth is what the Party declares it to be. Attempting to relate truth to the real world is a useless occupation.
That is why I don’t much stock in parties.
Political parties are the great curse upon the USA.
Three-quarters of Scots support oil and gas production from the North Sea, according to a new poll.
Less than a month out from the general election, the findings will stoke debate about Scottish and UK energy policies
https://www.energyvoice.com/oilandgas/north-sea/554845/75-of-scots-back-north-sea-oil-and-gas/
A lot of Scots depend directly or indirectly on oil and gas for their livelihoods. Persuading them that destroying the countryside with windfarms and pylons might be more difficult than politicians imagine.
Some may find language and content offensive and hard to understand
https://youtu.be/QjJPiCEwW2U?si=IDSMMVbGJhnS311Y
There is one minor problem with the analysis of cost savings during the Gas price hike.
There was NONE to the customer, because the price paid to the wind generators is based on the current market price.
So the wind companies ate the savings.