Wind Economics: Competitive generation costs; future outlok; peak output

WORLDWIDE: Windpower Monthly's digest reveals that UK onshore wind will soon beat all but combined-cycle gas on generation costs; the outlook for wind is positive as generation costs are expected tofall steadily across Europe, and wind delivered delivered 14% of UK electricity demand on a single day in March.

Growth… Australia has installed 406MW of new wind capacity so far in 2013
Growth… Australia has installed 406MW of new wind capacity so far in 2013

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Onshore wind beats all but gas in the UK

Tucked away in an appendix to a report on energy in the EU, No Country is an Energy Island: Securing Investment for the EU's future from a UK House of Lords select committee is confirmation that onshore wind will shortly be second only to combined-cycle gas-turbine generation in terms of competitiveness for the electricity market, with gas only undercutting wind by a small margin.

The report shows a table of levelised costs for projects commissioned in 2018 that suggests the generation cost from gas will be £85/MWh (EUR100/MWh), compared with onshore wind at £90/MWh (EUR106/MWh).

It suggests that nuclear - in series production - will cost £73/MWh. Series production, however, is unlikely to be achieved before the middle of the next decade, at the earliest, with the UK government continuing its tortuous negotiations over the fixed "strike price" for the first of the new nuclear power stations. Latest speculation is that the contracts are likely to run for 35 years, in an effort to keep the strike price below £100/MWh.

Following gas and wind, the next technology expected up the cost scale in 2018 is gas with post-combustion carbon capture and storage (CCS), priced at £94/MWh. However, the report notes that it has proved challenging to make CCS commercially viable, "with repeated delays resulting in uncertainty". This situation also applies elsewhere in Europe.

The report then lists coal as the next best price for the UK in 2018, at £113/MWh - although it is extremely unlikely that any plant of this kind will be built in the foreseeable future. The same technology with CCS is estimated to be priced at £116/MWh. The additional cost associated with CCS seems quite small, especially as the price relates to the "first of a kind" plant.

Offshore wind is priced by the report at £113/MWh - less than coal with CCS, and less than medium/large (250-5,000kW) photovoltaic plants, which are priced at £129/MWh.


Hopes for stability in Europe

Although UK generation costs are higher than those in the US and some parts of Europe, the relative position of the various technologies is similar. While shale gas has led to lower gas prices in the US, there are still conflicting views on the prospects for shale gas in Europe. According to Bloomberg New Energy Finance's (BNEF) recent Market Outlook report, there does not appear to be any expectation of significant reductions in gas prices across Europe. It is expected that there will be some exploitation, but as the gas is unlikely to be cheap, the net effect may be to stabilise prices and inhibit further increases.

BNEF's report suggests that the generation cost from wind will fall steadily over the next 15-20 years and on the best wind sites will undercut European gas-fired generation costs in the next five years or so, and US coal-fired generation costs from about 2018. Parity with US gas-fired generation will start to be achieved around 2027.

Another BNEF study, for the Australian market, which is currently dominated by cheap coal, suggests that wind has already achieved parity with new coal-fired generation, even without factoring in the appropriate carbon price.

In Australia, wind power has already achieved parity with new coal-fired generation, even without factoring in the appropriate carbon price


Wind delivers 14% of electricity demand

On 22 March this year, the UK system recorded a 24-hour consistent output from metered wind energy, that topped 5GW. Metered output only includes wind installations that are connected to the transmission network and the system operator estimates that total generation, including wind power connected to the local distribution networks, is about 25% higher.

The highest recorded metered output during the period reached 5.296GW, at 1530hrs, making total wind power output likely to be around 6.5GW, or nearly 14% of total electricity demand at the time.

UK trade association RenewableUK calculates that for this 24-hour period, wind was generating enough to power the equivalent of nearly four out of every ten UK homes and more than 10% of the country's overall electricity needs.

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