Bill Ponton

In this article, I will quantify the cost to UK electricity customers of doubling wind power generation. This cost would be in addition to what customers are paying currently. Think of it as a premium one pays to virtue signal.

Let’s start by taking a close look at the current state of electric power generation in the UK. In 2022, the UK derived: 24% of its electric energy from wind generation, 43% from gas turbine generation and 33% from other sources such as coal, nuclear, hydro and biomass. Table 1 details the exact quantities in MWH for each power generation source. The data used to derive these quantities was downloaded from GridWatch with power generation in MW from each source observed at 2.5 min intervals ^[1]. Figure 1 is a stacked graph of the wind, gas turbine and other power generation. The graph is instructive in that it shows wind generation varying in magnitude over time and gas turbine generation being dispatched to offset those fluctuations.

Table 1:

Figure 1:

The UK currently has 28 GW wind power capacity, 14 GW of onshore and 14 GW of offshore, with the potential to generate 245,280 GWH per year ^[2]. It actually generated 61,631 GWH in wind energy in 2022 or approximately 25% of the total wind power capacity.  

To understand the impact that a doubling of wind power capacity would have on wind energy generation, one needs to double the value of wind power generation at each observation point in the 2022 GridWatch dataset. It results in total wind generation of 123,311 GWH per year. In addition, gas turbine power generation needs to be reduced at each interval by the amount required to keep the new sum of wind and gas turbine power generation equal to the original sum.  However, at intervals where a doubling of wind power exceeds the original sum, wind power should be limited to the value of the original sum.  In addition, gas turbine power generation must not fall below 2,000 MW at any time. (This is also the case with the actual data where gas turbine power generation only falls below 2,000 MW for 0.25% of the time) These constraints result in a curtailment of wind energy generation of 31,438 GWH (or 25.5% of the total wind energy generated) and useful wind energy generation of 91,873 GWH (or 35% of the total energy provided to the grid) as detailed in Table 2. Figure 2 is a stacked graph of yearly data under the doubling of wind power scenario.

Table 2

Figure 2

It is important to understand that a doubling of wind power generation does not enable gas turbine generation capacity to be reduced. The legacy gas turbine capacity must be available at a moment’s notice to ramp up and compensate for vacillations in wind power. Therefore, the cost of operating and maintaining  (O&M) gas turbine generation is not diminished. However, gas turbine generation is reduced by 30,217 GWH per year resulting in 194,327,778 MMbtu of thermal energy savings or $971,638,889 of fuel cost savings per year as detailed in Table 3, assuming the prior 20-year average of $5 USD/MMbtu ^[3].

Table 3

The capital cost of building wind power generation, excluding financing expense, is $6,041 USD/kW for offshore and $1,718 USD/kw for onshore ^[4].  An additional 14 GW offshore and 14 GW onshore would cost in capital $84,574,000,000 and $24,052,000,000, respectively.  The additional wind power generation O&M cost is $115 USD/kW-y for offshore and $27 USD/kW-y for onshore ^[4].  An additional 14 GW offshore and 14 GW onshore would cost in O&M $1,610,000,000/year and $378,000,000/year, respectively, as shown in Table 4.

Table 4

Assuming a WACC after tax of 4.4% ^[5], financing the capital investment over the 20-year project life would cost UK electricity customers $8,260,542,875 per year. The wind power O&M cost minus the CCGT fuel savings add an additional $1,016,361,111 per year for a total of  $9,276,903,985 per year. The total cost over the life of the project is $185,538,079,707 (or NPV of $121,991,131,529). With approximately 28,000,000 electricity customers in the UK, the additional cost for doubling of wind power capacity is $6,626 (or NPV of $4,357) per customer.

Shifting the UK wind/CCGT generation mix from 24%/43% to 35%/31% by doubling wind power capacity at a cost of $185B must be disappointing to true believers in the virtue of wind power.  Moreover, the cost of this scheme dwarfs the cost of a scheme that includes battery storage as a way of increasing the contribution from wind power generation.

References:

1. http://www.gridwatch.templar.co.uk/download.php

2. https://www.thewindpower.net/statistics_countries_en.php

3. https://tradingeconomics.com/commodity/uk-natural-gas

4. https://www.eia.gov/outlooks/aeo/assumptions/pdf/table_8.2.pdf

5. https://www.iea.org/articles/the-cost-of-capital-in-clean-energy-transitions