Examination of Witnesses (Questions 110
- 119)
TUESDAY 3 JUNE 2008
Mr Campbell Dunford and Dr John Constable
Q110 Chairman: Welcome
Mr Dunford and Dr Constable and thank you very much indeed for
coming to the Committee and spending some time with us. Before
we go on to questions, is there anything that you would like to
say by way of introductory remarks or shall we go straight into
questions?
Mr Dunford: Only
My Lord Chairman if there are any questions as to who we are,
who we represent; sometimes people are confused.
Q111 Chairman:
By all means do so, if you wish.
Mr Dunford: Quite simply, the Renewable
Energy Foundation is a charity. It is funded entirely by private
donation. It has no corporate affiliations or corporate funding
whatsoever; indeed, we have been at pains to ensure that that
should be the case. There are so many vested interests in the
renewables field that we have tried to remain truly as impartial
a voice as possible. Our purpose has always been to commission
and publish independent and empirical research in this field.
Q112 Chairman:
Thank you very much. Perhaps I might start by asking you a catch-all
series of questions. How do the costs of generating electricity
from renewables compare to fossil fuel and nuclear generation?
What are the current estimates for fuel generation with carbon
capture and storage? How do those costs compare with renewables?
Finally, what impact do these various forms of electricity generation
have on carbon emissions? A very simple set of questions.
Mr Dunford: Thank you. We have prepared
some detailed written responses which we would like to leave with
you, if we may, because we are dealing with an extremely complex
matter and there are no quick and easy answers to this. If you
are looking at the cost of energy from a generator in all terms,
you are looking firstly at the capital expenditure required, the
cost of that capital itself and that will, of course, be governed
by market perception of the risks, the cost of the fuel input,
the load factor which is achievable, the operation and maintenance
costs, the de-commissioning costs, which are often overlooked,
and integration costs, such as integrating a particular form of
generation into the grid so that it is actually of some value,
balancing costs and therefore, the overall impact on the system.
From a consumer's perspective or indeed from the UK's as an economy,
it is really the overall system cost that matters to people and
that really varies considerably according to the renewable technology
you are looking at and what you are comparing it with. Generally,
and right across the spectrum, it is true that renewables are
more expensive than their conventional counterparts. We have a
lot of data to leave with you on that. There are studies which
have been done for BERR, for example, which show the different
costs in pence and pounds per kilowatt hour for all of the renewables
and also we have had work done for us by IPA Energy which compares
conventional power and goes up from the lowest, which would be
gas, combined cycle gas turbines, up through the winds to the
highest, which was the point of this particular study that we
were doing which was the Severn barrage costs. Against the capital
cost of the renewable generators, you have to balance the fact
that some of them have very low or zero fuel costs and that is
a very real merit and an important consideration. However, to
a significant degree, that benefit is counter-balanced by load
factors for some of these technologies that are very low indeed
compared to conventional sources of generation. The load factor
for onshore wind, for example, is generally less than 30 per cent
and even offshore wind, which is something that we have championed,
is only 35 to 40 per cent. However, when you look at everything
in the round and you take all of the estimates together, which
we have, renewables are currently more expensive on a pence per
kilowatt hour basis than conventional generators and there is
no getting away from that, and we have provided charts for this.
There is also a balancing cost which must be taken into account
and this has been estimated by the UK Energy Research Centre at
anything between £5 and £8 per MWh for, say, wind energy
at a 20 per cent penetration. We would tend to feel that that
is probably a bit low, but that is the number which has to be
brought in. With regard to overall system impact, there is quite
a lot of confusion. It is generally assumed, at a public level,
that one unit of renewable energy will automatically replace one
unit of conventional power. That is sadly not the case. It could
possibly be the case, say, for biomass, because biomass is despatchable
power, you know when you are going to get it, so one MWh of biomass
power could replace one MWh of coal or gas, but that is not the
case for every other renewable that we are aware of. The Severn
barrage, for example, would have a capacity credit of only 17
per cent of its installed capacity, so if you had, technically
this value of 8.6 GW installed, the capacity credit to the system
would only be 1.5 GW, so much less than what you think you are
getting. We would like to refer the Committee to the experience
in Europe, in Germany and Denmark, for example, where there is
extensive renewables penetration and they are often cited as examples.
The Danish head of their equivalent of our National Grid has said
quite clearly that from a planning perspective, for example, wind
there achieves a capacity credit of zero for planning purposes.
This actually matters because quite a lot of the work that has
been done here, by National Grid for example, assumes that you
can take roughly the square root of the installed capacity as
firm capacity for the grid, so that from 25 GW of installed capacity
you get five GW of power. That is not the case. There is nothing
particularly unusual about British wind as opposed to German or
Danish wind and the work that we have done, with a very important
bit of work coming out shortly, shows the capacity credit for
wind in the UK would be very little different from that in Europe,
extremely low, about five per cent we think.
Dr Constable: I will take up the story
of the capacity credit issue. The capacity credit for renewables
is critical in the sense that it affects the cost of running other
generators alongside them and what you are doing is asking renewables
to produce a lot of megawatt hours but you are denying that production
to conventional capacity. However, you nevertheless need to retain
that conventional capacity, because the capacity credit of the
renewables is low and in the case of wind, practically zero. To
take a concrete example, there is much discussion at the moment
of producing about 45 per cent of our electricity from renewables,
and let us say that some 35 percentage points of those 45 points
come from wind, that would be something like 135 TWh of energy.
To generate that from wind, you would need something like 52 gigawatts
installed capacity, assuming a load factor of about 30 per cent.
That is a very large installed capacity indeed, a high capital
cost, somewhere in the region of £30 to £80 billion
depending on the mix of onshore and offshore. Nevertheless, it
supplies almost nothing towards the firm capacity requirements
of the UK, so its value, its counter-factual cost, is the fuel
saved, and that is a real value but it may be dearly bought, and
that is one of our concerns. Think of it this way, if you add
52 gigawatts of wind to the portfolio, you still have to have
enough conventional despatchable generation equivalent to the
peak load plus an acceptable capacity margin, probably 10 per
cent, a little bit more, and that would give you 70 gigawatts.
As the Committee will be aware, the UK is currently faced with
the necessity of rebuilding something like 30 gigawatts of its
fleet, about 40 per cent of the total fleet, by 2020. That in
itself is a very large capital burden, somewhere in the region
of £15 to £25 billion depending on the mixture of technologies.
The overall fleet therefore would be closer to 120 gigawatts in
total. You would move from a situation as it is today, where you
have about 70 gigawatts of plant, to a total grid capacity of
about 120 gigawatts, in other words a very large installed capacity,
but the gigawatt-hours market remains the same. So you have lots
of generators chasing the same size market and their load factor
will drop. By adding a very large quantity of renewables with
a low capacity credit, what you are doing is reducing the load
factor of the still indispensable conventional generators and
therefore driving up the costs of those conventional generators
and it could rise very significantly, between one pence per kilowatt
hour and two pence per kilowatt hour, which would represent an
ongoing cost burden of somewhere around about £5 billion
a year. Our point here is really that the cost of renewable generators
is complicated. It is probably much higher than is superficially
apparent and we conclude from this that there are thresholds beyond
which the UK should not go. Not that there should be no renewables
at all, of course not, but the key is the fuel saving. You must
not drive in more capacity than is justified by the fuel saved.
That limit may rise as the value of the fuel saving rises, if
the price of fossil fuel rises, but ensuring that you get the
right quantity to take the benefit of fuel saving without driving
up system costs beyond the value of fuel saving is critical. It
is not an easy problem to solve and, as far as we are aware, very
little attention has been paid to it.
Q113 Chairman:
I asked you the blockbuster question so you gave me the blockbuster
answer, but if you are going to answer all the questions we are
going to go for, we will need to be a bit briefer.
Dr Constable: Certainly, but that is
a very critical reply from us.
Chairman: It is extremely critical and
we very much look forward to your written submission on this as
well.
Q114 Lord Moonie:
In 2006, you wrote that the Government "has not yet recognised
the acute need for security of supply of imported fossil fuels"
and that it was "naively sanguine about future fossil fuel
prices and availability". What are the implications of this
for renewable energy policy? How do, and should, renewables fit
into our overall energy policy?
Mr Dunford: The background to that of
course is that our existing fleet is in decline and a whole chunk
of it is being closed, so we have that investment to make. Renewables
will have a role to play and indeed rising fossil fuel prices
and rising electricity rises generally will encourage renewables
to come in, that goes without saying. We have to make a considerable
effort in improvement in our thermal efficiencies. We can do that
quite well in this country because our stations are so old; just
putting a new kit in is going to make things a great deal better.
Renewable generation can only be helpful to that if it is a team
player, if it fits in with the rest. If it is supplementary to
and sits alongside but does not support the conventional generator,
then it is frankly wasted money and wasted effort, and not getting
the benefit down to the consumers. We believe that it is very
important to go for things where the renewable generators can
make a contribution. The big unsung area is in heat where a third
of our energy goes and where existing renewable technologies can
more of less immediately be applied at a domestic level and at
a commercial level; you can use solar thermal, you can use ground
source heat pumps and do that sort of thing. You can make a material
contribution to the third of all our energy needs that is used
in heating, for example. Transport? Much more difficult. Without
getting into the whole thing about biofuels, we believe that the
existing penetration should be really rather local where there
is reasonable manufacture of, say, biodiesels or what have you.
For transport the long term future is going to be electric vehicles
of some sort, however that is fuelled.
Dr Constable: I should like to say something
quickly about ground source heat pumps. Our view is that ground
source heat could play a very significant part in a gas depletion
policy and we believe the UK needs a gas depletion policy very
badly. Here are technologies which have a potential for cutting
gas demand, which is desirable in itself, and also reducing household
expenditure; they deliver immediate returns and it is a very desirable
thing to do. It is a pity that more is not happening, although
with rising fossil fuel prices, they are becoming spontaneously
attractive.
Q115 Chairman:
Do you think that in the UK we are spending too much time thinking
about electricity generation and not enough on heat?
Mr Dunford: Yes; absolutely.
Dr Constable: Yes; certainly in the renewables
sector.
Mr Dunford: In the renewables sector
everybody is fixated with the holy grail of generating electricity
at a micro and a macro level, and it is a considerable waste of
resource and attention and the low-hanging fruit is being missed.
Renewables can make an immediate contribution, if encouraged,
on the heating sector and on the domestic sector.
Dr Constable: Particularly because the
UK has become so gas-dependent for its domestic heating.
Q116 Lord Moonie:
Following on from what you said about cars, you talked about electric
power, are you talking about batteries particularly or some sort
of hydrogen system?
Dr Constable: The market will decide
on that.
Q117 Lord Moonie:
What is your hunch?
Dr Constable: My hunch is batteries.
Mr Dunford: Yes, battery technology will
crack it, in the fullness of time.
Q118 Lord Layard:
I would like to go back to what you said about wind and the zero
number that you mentioned for Germany. Is it not the case that
if you look at the thing on a national basis, a system-wide basis,
you get a different line of thought from if you try to imagine
a bit of wind power and the associated backup capacity and diesel?
How do you actually look at the thing? What conclusion do you
come to when you look at the thing on a system-wide basis?
Mr Dunford: We have done this work.
Dr Constable: The German and Danish wind
carpets are reasonably distributed so that their experience is
relevant, although I agree that they are relatively concentrated.
The UK is a small geographical area and weather systems are very
large. It is therefore interesting to try to model the impact
and indeed we have done this; we have obtained the Met Office
wind speed database and we have asked consultants, Oswald Consultantcy,
who have done quite a lot of work for us, to construct a power
flow model assuming 25 gigawatts of wind distributed in eight
locations, eight regions over the UK to test the smoothing hypothesis.
That work is now forthcoming in the journal Energy Policy.
We are very happy to provide a preprint of that study for you.
What the study shows is that, yes, you do get smoothing, a not
insignificant smoothing but, nevertheless, during the course of
a typical January, the wind output will vary between very close
to zero, a couple of percent of its theoretical maximum output,
and nearly 100 per cent. So the capacity credit is low. Smoothing
affects the rates of ramp and decline, yes, but the capacity credit
is low.
Mr Dunford: It is important to say that
we took the data right across the entire UK, from the very north
of the islands of Scotland, from Shetland right the way down to
Cornwall and extrapolated that out and used the actual numbers
that the companies themselves and the units were reporting back
and even so, you get very, very alarming rises and drops in power
in a very short period, which the grid has to cope with or cannot.
Dr Constable: They would be manageable
but it might be costly to manage them. From the point of view
of providing firm capacity to meet peak load, the experience would
be almost identical to that in Germany and Denmark. There is no
reason to suppose that smoothing would deliver a significantly
higher degree of capacity credit. That is the outcome of this
study which I am very happy to provide you.
Chairman: If you could, that would be
very useful.
Q119 Lord Griffiths of Fforestfach:
Your manifesto of 2005 went on record as saying that the Government
are asking "more of renewables than can be reasonably delivered
and is thus condemning the sector to failure". Is this still
the case and, if so, why and how much renewable energy can "be
reasonably delivered"?
Dr Constable: It is not only still the
case but the problem has, if anything, intensified. The EU renewables
targets is proposing that some 20 per cent of Europe's final energy
consumption should come from renewables, with at least 10 per
cent from transport fuels. This is an extraordinary target; for
the UK it has been rendered as a target of 15 per cent of final
energy consumption by 2020. That would probably entail an enormous
burden on the electricity sector. Even if we assume the 10 per
cent of transport fuels can be met and the current climate suggests
that there will be little political will for biofuels so the burden
on electricity will be still greater—45 per cent of electrical
energy from renewable sources, 50 per cent—you are looking
at an extraordinary wind fleet to achieve that, somewhere between
50 and 70 gigawatts, vast, resulting in a grid, the total capacity
of which is 100 to 120, in excess of 120, and nobody has any idea
how to run such a grid, it has never been tried anywhere, nobody
has the faintest idea. It is particularly critical because if
you have that much fluctuating output, there will be times during
the year, perhaps very frequently, when the output from that combined
wind fleet exceeds demand, you cannot store the electrical energy
and the wind will have to be curtailed, in which case you have
less energy than you thought you were going to have and you will
miss your targets. Curtailment is little discussed, and most of
the models assume unconstrained output from the wind fleet. It
is quite clear from this that the targets are, practically speaking
as things stand, unobtainable and nobody in the electricity industry
would privately tell you anything different. However, there is
a real risk that governments throughout Europe will succumb to
panic and introduce very strong mandates to attempt or to show
willingness to meet these targets, and from the perspective of
the renewables industry, that would be disastrous because it will
result, as it is actually already resulting, in the adoption of
sub-optimal technology. Much of the material that we are putting
before you today is concerned with economic costs, but this is
a very significant opportunity cost. Renewables are very good
things and we will need them in the future, but driving them in
and driving in the adoption of sub-optimal technology may well
present a very significant opportunity cost for the UK; we will
be damaging the prospects for this industry.
Mr Dunford: To put a number to that,
we think that the UK could probably stand about 10 gigawatts of
renewable power.
Dr Constable: Ten gigawatts of wind probably;
it may be a little bit more, it is very hard to say.
|
