Offshore Wind: Definitely Expensive

vor 3 Std.
By Paul Homewood

From GWPF:

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Back in 2017, there was great excitement among environmentalists and the media, when it was announced that two offshore windfarms had bid remarkably low prices into the government’s Contracts for Difference auction, offering to supply electricity to the grid for around half the price that had been seen in earlier auctions.

How had this remarkable change in the economics of offshore wind power been achieved? Nobody really knew for sure, although eco-minded correspondents in the mainstream media were insistent that the change was real.

In a paper published shortly afterwards, Gordon Hughes et al. pointed out that there was little evidence that costs of offshore windfarms were falling at all. Indeed, they were generally rising, as developers moved into deeper waters in search of more reliable wind speeds. Even discounting factors like this, like-for-like costs seemed to be only falling slightly. There was absolutely no sign of revolutionary change. Defenders of the green orthodoxy argued that the Hughes analysis was backwards looking, and couldn’t take into account technological advances (although they never said clearly what these were).

In contrast, Hughes’ theory, outlined in a later paper, is that the low CfD bids are in essence a gamble on future electricity prices. He thinks that the developers are hoping that electricity prices will be so high by the time the windfarms come on stream in 2022 that they will be able to walk away from their CfDs and take the market price instead. There would be only small contactual penalties for doing so. Hughes et al. have continued to argue that the cost of offshore wind power remains very high to this day.

Recently, some more hard evidence appeared showing that Hughes is correct. One of the low-bidding windfarms published its latest financial accounts, and these allow us to get a feel for whether the cost reductions are real. Moray East is a 100-turbine, 950MW behemoth that is currently under development off the Scottish coast. The developers have said that it will cost £2.6 billion to build, although this figure comes with caveats. It almost certainly doesn’t include the offshore transmission assets that the company has to build and the sell back to the grid. Moreover, announced costs for windfarms are invariably understated. Hughes thinks that the ultimate cost will be somewhere around £3.8 billion. If the windfarm is to make a profit at around £60/MWh, its costs need to be less than half that level (on an optimistic assumption about how much electricity it will generate) and more realistically a third of it.

Full story here.

It is worth reflecting on historical electricity price trends and projections.

When Moray was being planned, wholesale power prices were typically between £40 and £50/MWh.

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https://www.ofgem.gov.uk/data-portal/all-charts/policy-area/electricity-wholesale-markets

The BEIS do not publish projections of power prices (as far as I am aware). But their projections for gas prices give us a clue:

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https://www.gov.uk/government/publications/fossil-fuel-price-assumptions-2017

With real prices rising from 44p per therm in 2017 to 67p by 2030, this would inevitably push up power prices in real terms. (Remember as well that CfD prices are index linked each year).

BEIS estimates of levelised costs, published in 2016, suggest that fuel costs account for about half of the total cost of CCGT generation. Therefore a 50% rise in gas prices could potentially add around £15/MWh.

But that is not the end of it, as carbon taxes need to be added. According to BEIS, this could double by 2030, adding £29/MWh to a CCGT plant commissioned in 2025, based on lifetime costs:

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As a result of carbon taxes, CCGT generation costs would rise to £82/MWh, at 2016 prices.

Add on inflation in the next five years, and wholesale power prices could be over £90/MWh. At this price, Moray can easily cancel its CfD, and cover its costs in the market place. Meanwhile, consumers will end up paying the price.

As for those promises of “cheap wind power”………………….

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August 12, 2020 at 09:15AM

A Few Months of Hindsight

Journalist George Gilder declared the pandemic over in April. Mathematician Isaac Ben-Israel insisted the virus would burn out everywhere 70 days after it began.

click for source

In March, the Los Angeles Times ran a hopeful headline: Why this Nobel laureate predicts a quicker coronavirus recovery: ‘We’re going to be fine’.

The news article reported that Michael Levitt, who won the Nobel for chemistry in 2013, believed our troubles with COVID-19 would be over sooner than many health experts expected. The article told us “the data simply don’t support” a dire scenario involving “months, or even years, of massive social disruption and millions of deaths.” It said Levitt’s prediction that China would quickly overcome the disease had been “remarkably accurate.”

But the article failed to mention that China’s data can’t necessarily be trusted, that the Communist Party often publishes false information. Despite grave concerns that Iranian data is equally suspect, the news article similarly told us Levitt thought Iran’s outbreak was already “past the halfway mark.” He definitely got that wrong. Total coronavirus deaths in Iran numbered 1,812 on the day the news article appeared, but now stand at 18,800. 

Levitt thought the outbreak appeared to be “winding down” in South Korea. At the time that country had 111 deaths. It now has a modest 306. He correctly judged Italian cases to still be “on the upswing.” At the time, 6,000 people had died – about one-sixth the current death toll.

In hindsight, March was a bit early for a Nobel Laureate to assure us “we’re going to be fine.” There were only 378,000 global cases then. The total now is 20.5 million.

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On April 25th, a day in which the deaths of 6,000 people from COVID-19 were recorded (including 2,000 in America), US conservative journalist George Gilder declared the pandemic over. Since then, US deaths have tripled: from 54,000 to 168,000.

They’ve also tripled globally – rising from 203,000 to 746,000.

In India, they’ve increased 46 times: from 1,000 to 46,000.

Gilder cited research by Isaac Ben-Israel, a mathematician and chair of Israel’s Space Agency, who was then loudly insisting lockdowns were unnecessary. The spread of the virus was a matter of simple math, he declared on April 19th. Infections would decline to almost nothing 70 days after they first appeared in any locale, regardless of what governments did or did not do.

Concerning the situation in Israel, he declared: “It turns out that the peak of the virus’ spread has been behind us for about two weeks now, and will probably fade within two more weeks” (bold added).

month later, on May 20th, Ben-Israel insisted he’d been proven correct. But while deaths have remained low in that country, they’ve more than doubled since he made that declaration (from 279 to 633).

click for source

More significantly, rather than diminishing to zero during the first week of May as Ben-Israel predicted they would, new infections have risen dramatically. The 16,000 Israeli cases recorded as of May 7th have increased five-fold to 87,000 cases.

click for source

Ben-Israel has no medical background. He has not put his own skin on the line by battling infectious diseases in remote, underdeveloped parts of the world – as many epidemiologists do. Yet he thought Israel’s government should make decisions based on his private, unvetted research. Publicly, he trashed the Prime Minister, insisting that the (short-lived) dip in Israeli cases and deaths was proof the PM’s policies had been pointless.

126 days have expired since Ben-Israel first posted his research online – rather longer than 70 days. 5,800 deaths from COVID-19 were recorded globally yesterday.

George Gilder likewise thought US officials should make decisions based on Ben-Israel’s research. The difference between elected officials and armchair quarterbacks is that the former are held accountable at the ballot box. The latter pay no price for being wrong. Ben-Israel won’t lose his job at the Space Agency. George Gilder will continue to express his opinions adamantly.

Perhaps it’s that tone which troubles me the most. How adamant so many people have been. How certain. How sure of themselves. And then a few months go by, and it becomes clear they had no idea what they were talking about.

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August 12, 2020 at 06:58AM