Wind Economics: The competition wind faces

WORLDWIDE: In previous months in this section, I have discussed the gradual convergence between the generation costs of photovoltaics and those of onshore wind, and the cost of nuclear. These are wind's principal competitors, but there are others.

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Carbon capture and storage (CCS) for coal or gas is often seen as an essential way forward in the quest to reduce CO2 emissions. While neither is a zero-carbon technology or renewable, they do store waste CO2 from fossil-fuel power plants so it will not enter the atmosphere. True renewable competitors include solar thermal, wave and tidal energy.

Hydroelectric energy is a competitor, although it is often excluded from discussions because large schemes take up a lot of land, so have significant environmental impacts. It is also difficult to characterise hydro-generation costs, as they vary widely, depending on the size of the installation and the degree of construction difficulty.

Considerable uncertainty also surrounds the costs of CCS, wave and tidal technologies. All come in various forms; there are shoreline wave-energy devices (generally fixed) and floating devices; and tidal devices are subdivided into "tidal stream" and "barrage" systems. There are too few operational devices for firm estimates of commercial generation costs to be made.

Gas generation cost

For generation of gas with CCS, the UK's Department of Energy and Climate Change (Decc), in its 2013 Electricity Generation Costs report, predicts a mid-range cost of EUR 114/MWh by 2025 — higher than what onshore wind will cost in most locations by then. This was calculated using an interest rate of 10%, in line with most Decc estimates, reflecting uncertainties in the UK market. If a lower interest rate were to be used, generation costs would come down — more so in the case of wind.

Gas construction cost

However, the cost of construction for gas-CCS quoted by Decc — around EUR1600/kW in 2025 — is lower than EUR1900/kW suggested in the EU's 2013 reference scenario. The latter figure more closely matches the one quoted by the US Energy Information Administration for 2013, in its most recent Annual Energy Outlook.

With the high interest rate roughly offset by the low capital cost estimate, the Decc estimate of EUR 114/MWh may be taken as representative in Europe. In the US, however, the lower gas prices bring down the generation cost; the figure for the US, therefore, is more like $81/MWh (EUR 62/MWh), which was suggested in 2012 by electricity generator and wind turbine manufacturer Alstom. This cost is roughly on a par with the cost of onshore wind.

Generation cost estimates for coal with CCS are harder to come by, but Alstom put forward a figure of $96/MWh (EUR 71/MWh) for 2015, falling to $81/MWh (EUR 60/MWh) by 2030. The capital costs of the plant are about 50% higher than those of conventional coal-fired power stations and the thermal efficiency is significantly lower.

Solar thermal power stations focus the sun's rays on a central receiver, where steam is generated and fed through a steam turbine, as in a conventional power station.

Estimates of installed costs vary, but are significantly higher (50-100%) than those of photovoltaic plant; operation and maintenance costs are also higher. An analysis by Lazard Bros in August 2013 estimated the cost at around EUR 100/MWh.

There are only a few operational tidal and wave energy devices, so prices are somewhat uncertain. Decc proposes strike prices (which it will guarantee for power generators) of EUR 365/MWh for both technologies under its 2013 Electricity Market Reform Delivery Plan. The American Institution of Electrical and Electronic Engineers suggests generation cost is "more than 1.5 times that of wind and nearly three times that of coal-based power", which would put the cost at around EUR 100/MWh. The UK Carbon Trust estimate comes in between these two figures, at EUR 240-300/MWh. An average of all these prices would give a projected cost of EUR 245/MWh

Little challenge to wind

With the exception of gas with CCS, none of these technologies seems likely to challenge onshore wind in the near future. Offshore wind could be undercut by gas and coal with CCS, but this depends on their successful commercial deployment. Tidal and wave energy also need to show viability and are not likely to challenge onshore or offshore wind in the near future. Solar thermal can undercut offshore wind — possibly onshore in very sunny climes — and there are a number of operational systems, but it is some way behind solar PV in terms of commercial exploitation.

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