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Fuel pricing depends on where you start from. …

Comment posted Wind energy may be controversial but the logistics and the skills are mesmeric by Dr Douglas McKenzie.

Fuel pricing depends on where you start from. You obviously don’t think that de-carbonisation is an issue (and hence fuels should just be priced at their intrinsic cost. I, on the other hand, believe that de-carbonisation is not just essential for environmental reasons but also makes sound economic sense and so carbon taxes are justified.

Let’s put that aside for a moment though and consider the various points you put forward.

One of the interesting differences between fossil fuels and renewables is that the former are commodities and fluctuate rapidly in price. Most renewable energies (wood and biofuels being the obvious exceptions)use what are effectively zero cost fuels. Once the capital costs are sunk into a wind turbine, the costs are limited to modest maintenance costs with the fuel itself being free. The amount of fuel that the turbine can use will depend on wind speeds but these will average out over the life of the turbine.

All of this means that the future costs of wind power on a per MWh basis is extremely easy to predict and should become significantly cheaper with time (as the electricity cost reflects capital costs and not operational costs, the subsidy declines in cost due to inflation also the subsidy regime declines in any case so new plant becomes cheaper).

For simplicity, let’s ignore coal and consider just gas. Gas plants aren’t cheap but they are quick to install and (depending on the actual type of plant being installed) are very flexible. Natural gas has the added advantage that it can also be used as a heating fuel as well as a generating fuel. These characteristics mean that it is much in demand (about 50% of the UK electricity is now generated by gas and once domestic heating is added in then it must be our dominant energy source in the UK). Unfortunately everyone else wants gas as well. Gas prices are obviously a tension between demand and supply. The current demand is at a low because of the global economic slowdown but the long term demand is clearly up. Shale gas is an interesting factor in the mix. I suspect that US shale gas will indeed be exported but largely to China rather than the EU. Prices in the US were initially suppressed but are now rising. The smart money is on shale gas helping the US economy through reducing energy imports rather than an overall reduction in fuel costs.

Anyway, the main point is that renewable electricity is pretty much immune to future price shocks whereas the fossil fuel market is very volatile. While renewables start off more expensive than gas, longer term they become cheaper due to the relentless increase in gas prices because of rising global demand.

Of course, something may happen to disturb that forecast (huge global recession or a large increase in supply) – futurology is an inexact science.

Just to deal with another of your points: I don’t think I denied that a warm summer will depress energy usage in the UK but what I was alluding to is that electricity usage is not so predictable as warm weather also results in much more energy being used for air conditioning. I seem to remember saying that this wasn’t much of a problem in Scotland but in the USA, power outages are usually the result of over-demand in the summer months due to massive use of air conditioning.

Dr Douglas McKenzie also commented

  • HB: Sorry, I had missed this earlier (not ignoring you!).

    I think the point about consultant reports is that they are meant to be more trustworthy because they DON’T come from government. However, we live in an imperfect world.

    Regarding the levelised costs: yes, wind is more expensive than gas but not hugely so and vulnerable to upswings in price. I haven’t looked to see just how levelised the costs are but it would be interesting to see if they include measures of energy security (which can be monetised) and future carbon taxes. If the latter rise to the levels that some are pushing for then wind would soon become cheaper than gas (and this is being used as an argument for nuclear which is much more expensive than on shore wind).

    Regarding future gas prices, the DECC projections are normalised to 2011 prices (from memory), so inflation has already been taken into account and all we are looking at are price increases due to supply/demand constraints. Predicting the future price of gas is, I’ll concur, difficult. The supply side is complicated by the emerging shale gas story which may decouple gas prices from oil (or may not) and the demand side which will, ironically, be affected by renewables: lots of renewables depresses gas demand, keeps gas cheap and means gas generation is still cheaper than renewables! However, I think gas demand will continue to grow strongly, particularly in the Far East but also in Europe as carbon taxes make it uneconomic to burn coal. I also suspect that shale gas will not be sufficient to remove supply side constraints (except perhaps in the USA) but I could be wrong in that. Time will tell.

    I repeat my earlier point: it is safer to assume that gas prices will rise and roll out alternatives accordingly than to do nothing in the hope that they don’t rise.

  • It should also be remembered that nuclear plants require quite large amounts of power when their reactors are off line because of a planned or unplanned outage to maintain cooling of the core as well as all of the reactor’s other safety systems.
  • Nuclear plants can, of course, also produce more than 100% of their power but that is usually a bad thing!

    Capacity efficiency is in many ways a red herring: what actually matters is output and the levelised cost of that output. However, it isn’t true to say that nuclear plants ever approach anything like 90% energy efficiency: they are only about 36% efficient because of the huge energy losses in converting heat into electricity
    http://www.imeche.org/knowledge/themes/energy/nuclear-power/about-nuclear-power/how-does-it-work/nuclear-power-stations

    Since uranium is a cheap fuel (only 10% of the cost of operating a nuclear plant is fuel costs compared to 90% for gas) this efficiency doesn’t really matter. The high capacity efficiency (rated output to actual output) of nuclear plants is of course because they cannot be made to operate at fluctuating outputs easily so are always run at high outputs whereas gas and to a lesser extent coal are operated as grid balancing and thus are deliberately run at less than their possible capacity efficiencies.

    The UK energy output graphs I have previously referenced reward careful scrutiny.
    http://www.geog.ox.ac.uk/~dcurtis/NETA.html

    They clearly show nuclear being used as a steady base load and gas and coal being used to smooth the daily fluctuations. Wind usually gently ramps up and down (certainly more gently than the big daily swings of the others) and hydro relatively unimportant. One thing that has changed recently is that they have started showing pumped storage in terms of its balance of power ie when it is consuming power rather than generating (pumped storage consumes more electricity than it generates). It did occur to me last night that we shouldn’t count Cruachan in the balance of Argyll’s renewable energy as it consumes more power than it releases.

  • Keith: if you read through the thread a bit you will find that you illustrate my point perfectly.

    Plenty of evidence that governments lie and cover up things (Tony Blair and Iraq’s weapons of mass destruction or the lies about North Sea oil reserves in the 70’s immediately spring to mind).

    So government conspiracies do occur. There is nothing wrong with conjecture that things may not be as they seem. I also have no problem with people arguing that climate change isn’t occurring or that the UK policy towards wind generation is foolish. In the same vein there is nothing wrong with advancing the theory that 9/11 was a US Government conspiracy – it’s a valid hypothesis albeit a highly improbable one.

    Where I do have problems with “truthers” is them failing to recognise contrary evidence, promulgating demonstrably false “facts” and decrying everyone who doesn’t agree with them as dupes, sheep or part of the “conspiracy”.

    The “truth” may be very difficult to ascertain but if you think that every fact contrary to your hypothesis is a deliberate falsehood then that way lies madness.

  • HB seems to be correct: Nuclear capacity in the UK is usually quoted as being 10GW (sometimes 11)and NETA figures in August showed a high of 9GW.
    http://www.geog.ox.ac.uk/~dcurtis/NETA.html

    Nuclear seems to average about 8GW though there are quite frequent spikes where it falls to less than 4GW.

    I suspect that you are actually both right (SR and HB). Nuclear does appear to hit 90% at times but the average performance is less than this.

    There is a good review from the House of Commons Library (Nuclear Energy Statistics 2012).

    I must confess to being puzzled as to how it gets to 90% though as some stations are “governed” to lower outputs (such as Hunterston B and Hinkley Point B both at 70%).

Recent comments by Dr Douglas McKenzie

  • Rustle with Russell
    More utter rubbish from Lynda Henderson. Have you actually spoken to Bob Allen? Whoever told you the story sold you a pup and in your arrogance you cannot admit to be wrong so you make up this story that he was persuaded not to resign.

    Your position is completely untenable.

  • Russell back in the bathtub, now trying to sink Keith Brown’s boat
    I’m afraid you condemn yourself by your own words. I don’t think that anyone reading what you have written here and the language you have used would conclude anything other than that you have a deep dislike for Mr Russell and that dislike is leading you to basically lose all sense of either proportion or impartiality. It doesn’t matter how well (or otherwise) you know Mr Russell you are clearly exercised by your interpretation of his actions and it is leading you well beyond the pale in what I would consider fair comment.

    This vendetta against Mr Russell and the SNP is destroying FA’s credibility and I have to confess that I’m seriously considering whether or not to continue reading FA (which will cheer Malcolm up if nothing else). I for one am becoming increasingly disenchanted by the constant negativity and sheer nastiness that has crept into this blog. I say that with a lot more sorrow than anger because I think that FA could have been great and indeed still could but there has to be a degree of balance, civility and indeed humour. All we are getting here is bile and it is causing me heartburn.

  • Russell back in the bathtub, now trying to sink Keith Brown’s boat
    To be honest, this post clearly shows that you are speaking from your personal dislike of Mr Russell rather than an unbiased analysis of the man. Phrases such as “publicity hungry coward” are well beyond what is reasonable comment.
  • Russell back in the bathtub, now trying to sink Keith Brown’s boat
    You don’t seem to understand the separation of a MSP’s duty to his or her constituency and their responsibilities as a Government Minister.

    Yet again, this is another instance where a member of the Government can do no right: speak up and be condemned as “desperate” or stay silent and be accused of not serving your constituents’ interests.

    It is just as well that Mr Russell has broad shoulders!

  • Atlantic Islands Centre for Luing: biggest investment in island’s history
    Well done Luing – an inspiration to all of Argyll’s communities.

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