By Paul Homewood
The National Grid have just published the costings for their Future Energy Scenarios, which they issued in the summer.
Some of the assumptions used are dodgy to say the least, some might say crooked!
Our Future Energy Scenarios examine different pathways the energy system could take between now and 2050. Each scenario sees 30 years of change with more electric vehicles, renewable energy and different ways of heating our homes. Strategy Manager Rob Gibson explains our assessment of the relative costs of each of these scenarios.
Each year we produce four Future Energy scenarios – different pathways for the future of energy over the next 30 years. They are aimed at informing industry investment and supporting decisions on energy policy.
The potential changes to the energy sector are illustrated across the different scenarios, including assumptions around deployment of renewable energy, take up of electric vehicles, and investment in new technologies such as hydrogen and carbon capture technologies too. In three out of the four scenarios Great Britain achieves its Net Zero by 2050 target.
The aim of our project was to cost the scenarios for the energy sector to enable comparison across these four Future Energy scenarios. Importantly, our project doesn’t provide the total cost of meeting net zero to UK Plc and does not include costs related to energy demands from a number of areas such as aviation, shipping, rail, agriculture and industrial and commercial heat demand.
https://www.nationalgrideso.com/news/analysing-costs-our-future-energy-scenarios
The detailed document is here.
You may recall that I previously took a close look at one of the scenarios – Consumer Transformation, as this was the most likely one. Of the others, System Transformation assumed large scale roll out of hydrogen, and another, Leading the Way assumed the most rapid decarbonisation.
The fourth scenario was Steady Progression, which the Grid have tried to present as the base case in their new costings. However that is not the case, as this scenario also assumes decarbonisation in power and transport:
The message from the National Grid is that there is little difference in costs between any of the options, when accumulated between now and 2050. Consumer Transformation (CT) is for instance £110bn more expensive than SP, at current prices, small in total terms:
However, as we have already seen, there is no genuine base case shown. There are also a host of decidedly dodgy assumptions made.
For a start, all of the costings include a “carbon cost”, which rises from £47/MtCO2 in 2020, to £129 in 2050. Carbon does not have a “cost”, so it artificially increases the cost of Steady Progression (SP) by £93bn in the electricity generation sector alone. Quite ludicrously it shows as a saving of £124bn on Leading the Way (LW), simply because it includes negative emissions from BECCS (Biomass with Carbon Capture).
SP also has the highest costs shown for transport, £116bn more than CT. There are three reasons for this:
1) CT assumes there are fewer cars on the road, and that we use public transport more; therefore total costs will be lower. I somehow don’t believe people will regard themselves as being “better off” as a result!
2) The assumed price of an EV will drop by 25% between now and 2030. Of course it may, and people will no doubt flock to buy them then. But given the looming shortage of raw materials, the price is just as likely to rise.
3) Fuel costs for EVs are pitched at 5p/mile, which is realistic for home charging, but public charging will more than double that figure.
To make matters worse, they are assumed to be 11p/mile for petrol/diesel. Excluding fuel duty, costs will be around 7p/mile, based on 40mpg.
Then we come to residential heating, where CT adds £339bn to the cost of SP, which effectively assumes business as usual:
£339bn equates to £11.3bn a year between now and 2050, but this does not tell the whole story, because most this extra cost will be borne in a relatively short space of time, as gas boilers are phased out, and replaced by expensive heat pumps and the necessary insulation.
Depending on how quickly this phase out occurs, this will probably be during the 2030s.
Insulation under CT is estimated at £313bn over thirty years, which is about £12,000 per home.
To cap it all, the FES assumes that the wholesale cost of natural gas will rise from 43p/therm in 2020 to 70p in 2050. According to OFGEM, gas prices have been well 50p for most of the last few years, and at 25p pre-pandemic.
Certainly there is a case to be made for prices rising back to 2012 levels, but that cannot be regarded as a central scenario.
https://www.ofgem.gov.uk/data-portal/all-charts/policy-area/gas-wholesale-markets
If gas prices remain around 2019 levels, the SP heating cost has been overestimated by about £5bn a year – maybe £100bn till 2050.
By the way, I am a total loss as to how replacing gas heating with hydrogen can save money, as ST implies!
To summarise:
- Heating costs will rise by at least £400bn over the period.
- There is no evidence that EVs will lower driving costs.
- Carbon pricing has artificially lowered the cost of electricity generation by at least £100bn.
- Given the above, CT will likely cost at least £600bn more than SP.
- SP includes decarbonisation of power, a process that is already adding £10bn a year to electricity costs, a figure which will remorselessly rise for at least the next two decades.
- Adding this lot together, the cost of Net Zero will be at least £1 trillion over the next thirty years, even before other costs are added in, which have not been considered in this study.
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December 2, 2020 at 08:00AM
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