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Costs and carbon

Worldwide interest in the fledgling carbon trade is on the rise. Currently, the market price for a tonne of carbon avoided lies within the $20-60 range. The good news is that wind can meet or beat that price according to a new International Energy Agency report on the potential of wind energy to reduce carbon dioxide emissions. The conclusions of the IEA report should be enthusiastically embraced by the wind energy community, which needs to be engaged more fully in the ongoing discussions on carbon trading. The message is simple: wind has enormous potential, attractive costs and excellent carbon reduction potential. That fact must no longer remain privy to a small elite within the industry.

Although carbon trading is in its infancy, there is enormous worldwide interest in the concept. Most of the trade is within companies or national boundaries, but there has been some cross-border trading. The indication is that the market price for a tonne of carbon avoided lies within the $20-60 range.

A new International Energy Agency report on the potential of wind energy to reduce carbon dioxide emissions contains a lot of good news for the industry. First, it suggests that there is a small, but significant, amount of wind energy that already has the potential to match -- or undercut -- that market price for reducing carbon emissions. That market price has, not surprisingly, been set by some of the cheapest options for carbon reduction, such as new forests and combined cycle gas turbine plant, so it is no mean feat for wind to match it. Second, the report goes on to quantify the generation cost, total resource and carbon reduction potential of wind energy on a worldwide basis.

Sadly, it does not set the results in context of the global carbon saving scene, or make comparisons with other carbon reduction options; nor does it acknowledge that there is more than one way of calculating the cost per tonne of carbon saved. To be fair, these aspects appear to be outside the brief given to the authors, but their absence tends to blunt the impact of the report's conclusions. Here is an extra fact, though: wind energy has the potential to reduce world carbon emissions by 11% by 2020 at an average cost of around $70 per tonne of carbon (page 46). This cost is based on the calculations of the authors, but it is almost certainly too high; they even admit that their assumptions of the cost of assimilating wind energy into electricity networks are fairly severe. Indeed, the real-world costs of integrating wind, based on actual experience, are beginning to be studied and assessed in detail (page 46). Invariably these show that fewer difficulties are encountered in real life than were expected.

The conclusions of the IEA report should be enthusiastically embraced by the wind energy community, which needs to be engaged more fully in the ongoing discussions on carbon trading. The message is simple: wind has enormous potential, attractive costs and excellent carbon reduction potential. The potential is spelled out in the report: 76% of world electricity demand in 2020 could be met by wind, and nearly 30% of the EU demand, at under five cents a kilowatt hour. In stressing wind's carbon reduction potential the industry also needs to drive home that across most of Europe, the Americas and Asia wind displaces coal fired generation. That means every kilowatt hour of wind energy saves just under 1 kg of carbon dioxide. In the longer term, it is the coal stations, which will close as renewables build up, so the same CO2 savings, 1 kg/kWh, will be made.

Unbelievably, the British government's environment ministry suggests this is too complex an issue to grasp and puts forward a CO2 saving figure based on the year-round average fuel mix of 0.44 kg/kWh. This implies that some nuclear and gas output is cut back when renewables come on stream. In practice, the nuclear stations operate on base load so their output is, and will be, completely unaffected by the introduction of renewables. Just to complicate matters further, the energy ministry, using even more tortuous reasoning, downgrades the potential of renewables even further by suggesting they displace gas, with even lower CO2 savings. Based on this nonsensical approach, the cost of Britain's new renewable energy regulation becomes horrifyingly high, especially as it rises to more than twice that of the old Non-Fossil Fuel Obligation. The conclusion to be drawn from the government's wisdom is that its proposed obligation on electricity retailers to include a fixed percentage of renewables in their supply portfolios will cost $400/tonne of carbon saved. Using realistic data for carbon savings, the actual cost would only be about $60/tonne.

wind's the winner

This reinforces the maxim: treat all statistics with caution. These issues matter. Once carbon trading becomes established, realistic methods for determining the savings must be in place otherwise the markets will pick up the wrong signals and deliver the wrong results. Equally seriously, if countries such as Britain estimate carbon savings on an arbitrary basis, thus doubling the real cost of carbon trades, they will not be saleable. The wind industry therefore has several battles to fight, in Britain and globally, to ram these messages home. None of the other renewables has as much to gain -- or lose.

Wind holds pole position alongside other carbon reduction options. Most studies suggest energy efficiency and combined heat and power (CHP) deliver the cheapest costs per tonne of carbon saved (sometimes negative). Next in the ranking comes gas-fired generation (at least until the latest surge in gas prices); this saves emissions, but is clearly not a zero-emission option. Landfill gas, hydro and geothermal follow, all more or less in the same cost bracket as wind, but with finite resources. Last comes nuclear. Like wind, it is free of emissions but significantly more expensive in most locations. The upshot is that wind that has the best combination of resource, cost and carbon-saving credentials. That fact must no longer remain privy to a small elite within the industry.

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