London-based thinktank Carbon Tracker has claimed portfolios of clean energy and storage assets are already cheaper than new combined-cycle gas turbines in the U.K.–with last year proving the inflection point.
The cost of developing the 6.3 GW-capacity mix of clean energy assets Carbon Tracker estimated would be necessary to replace a 1.8 GW gas generation plant fell to the same price as the fossil fuel asset in 2020: £60/MWh (€69.93), according to a new report from the thinktank.
And solar would play a significant part in such a clean power portfolio at today's prices, according to Carbon Tracker, with each 1.8 GW of new gas capacity planned by the U.K. government requiring 1.7 GW of solar panels as part of the alternative, non-fossil-fuel power mix. The clean energy portfolio modeled by Carbon Tracker included 1.7 GW of energy storage facilities–contributing half the overall cost, at today's prices–with onshore wind generation, demand-response technology and energy efficiency investment completing the line-up.
The low, 11% capacity factor of solar–the energy output actually delivered as a percentage of nameplate generation capacity–means PV would contribute around 26% of the electricity required to supplant a gas turbine, falling to 1% during periods of peak demand, based on an even mix of residential and industrial power consumers. During peak periods, the 27% year-round-average share of the burden provided by energy storage would rise to 39%, with demand-response's contribution rising from 20% to 23%, as onshore wind falls from 18% to 10%. The energy efficiency investment opportunity offered by the U.K.'s aging housing stock means the contribution from that source–during the annual peak electricity demand periods, which occur in winter–would rise from 9% to 27%. However, the dismal failure of Westminster to deliver on its flagship green home improvement policy last year would cast significant doubt on the government's ability to guide energy efficiency investment effectively.
Carbon Tracker's Foot off the gas report estimates the cost of the renewables portfolio modeled would fall to £41/MWh by 2030, making it 39% cheaper than the gas plant required to fulfill the same job, with that margin rising to a 60% discount by mid century. However, that figure is posited on continuing falls in clean power technology–led by storage costs–as well as the prediction made by analyst Bloomberg New Energy Finance (BNEF) that gas prices will rise this decade, alongside an expected climb in carbon costs.
The report leans on another BNEF prediction when it posits the capital expenditure cost of a four-hour, utility scale battery in the U.K. will fall from £220,000/MW (€256,000) last year to £150,000/MW in 2025, and £120,000 in 2030.
Even if those predictions–described as “conservative” in the report–fail to materialize, the potential for clean energy facilities to reduce the U.K. carbon footprint, and to improve energy security are hard to question.
Carbon Tracker pointed out its proposed green generation facilities would drive 24 million tons fewer carbon emissions per year than the 14 GW of equivalent gas plants which are in the development pipeline. That would amount to 7% of the nation's emissions in 2019, in Europe's third largest power market. The thinktank added, the U.K. imported 54% of its natural gas, some 21% of which came in liquefied natural gas shipments.
Based on current estimated prices, Carbon Tracker stated each of the 17 combined-cycle gas turbines being planned in the U.K. would be more expensive than the equivalent fleet of clean power facilities in the same year it is planned to be commissioned, from this year to 2023. With the commissioning dates unknown for SSE Generation Ltd's two 1.1 GW facilities at Ferrybridge, in West Yorkshire, England, the report estimates both would already have been undercut by renewables and storage costs last year.
The picture for open-cycle, gas ‘peaker' plants–mobilized at short notice to supply peaks in demand–is less promising for renewables advocates, based on Carbon Tracker's estimates a 299 MW gas facility provided a levelized cost of energy of £200/MWh last year, versus £238 for the equivalent suite of renewables. However, that clean energy portfolio price will fall to £68/MWh by mid century, according to the study. That would mean, regarding the seven 299 MW gas peakers either commissioned last year or planned to 2024, the facilities would have a better business case for 12-16 years, with those developed in 2020 having the best longevity prospects, according to Carbon Tracker.
That said, the entire 14 GW new gas fleet planned in the U.K. up to 2030 still represents a £9 billion (€10.5 billion) stranded-asset risk, according to the report, even without factoring in government talk about the requirement to equip such facilities with carbon capture and storage and hydrogen and methane blending tech.
With the study also noting a government emphasis on scaling up offshore wind to drive down costs, and on securing more energy flexibility through access to more electricity interconnectors, the findings appear to make a compelling case for solar and other renewables against the conventional fossil fuel approach.
The government will only be able to realize the cost-saving potential of renewables, warns the report, if the pro-gas bias present in the capacity market–established to secure sufficient network peaker capacity–is turned into a level playing field for the participation of renewables, energy storage and demand-response.
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