“Offshore wind power is not affordable” – KPMG

Any Old Wind That Blows

There are some simple and rather obvious matters that the “green” lobbies prefer to ignore.

  1. In spite of twenty years of subsidies wind power is still not commercially viable without subsidy. Solar thermal power plants enjoy feed in tariffs some 3 times higher than the cost of conventional fossil power generation. Wherever renewables have been used to any extent, electricity prices for the consumer have increased.
  2. Intermittent sources of power (which cease when the wind does not blow, or blows too hard or when the sun does not shine at night or when clouds appear) are – by definition – unreliable. They do not add to the reliable, base-load, generating capacity that any electricity grid requires and must be backed up.  In Scotland for example – as Professor Colin McInnes points out – wind power capacity now exceeds nuclear capacity but only produces about one-third of the energy.
  3. Electricity is energy in motion and cannot be stored as electricity. For any electrical grid, at any instant, generation must, perforce, equal demand – and pumped storage schemes are merely devices to try and ensure such balance. Since the outages of wind and solar power are unpredictable (though it is generally predictable that solar power will not be available at night), and cannot be relied on to meet load demand fluctuations, “balancing power” (usually from gas turbines) must be arranged for whenever wind or solar capacity is added.
  4. In addition to the direct subsidies, whenever wind or solar power is available at times when there is low load, the subsidised regime forces the turning-down of other capacity – to the detriment of that capacity – and adds to the total cost of the grid.
Now – finally – some of the real numbers are beginning to be acknowledged but not, of course, by the green lobbies. KPMG has produced a new report “Thinking about the Affordable” and Power Engineering International reports that:
The UK could save £34bn ($54bn) by ditching its plans for wind farms and meeting carbon commitments through gas and nuclear, finds a report by the accountants KPMG. Thinking About the Affordable estimates that relying on new nuclear and gas fired plants could enable the UK to hit its goal of a 34 per cent cut in carbon dioxide emissions from 1990 levels by 2020 at a cost of £74bn.But current plans require spending £108bn by 2020 on wind, solar and nuclear capacity, as well as billions more for grid connections, according to the report to be published on 8 November. KMPG highlights the potential savings from abandoning wind in the contrasting costs of new gas, wind and nuclear capacity. An 800 MW gas fired plant is estimated to cost £400m, while the equivalent capacity in either nuclear or offshore wind would cost £2.4bn.Yet offshore wind imposes the additional burden of ancillary gas fired plants to accommodate its fluctuating output. “Trying to meet our carbon targets with a heavy reliance on renewable energy was a laudable vision, but surely it’s time to face the facts on how the huge level of investment may translate into fuel poverty,” the report’s author Mark Powell told the UK’s Sunday Times.

As Professor McInnes, Professor of Engineering Science at the University of Strathclyde writes:

Citigroup recently claimed that without the deep pockets of our friends in the south the Scots would be lumbered with a crippling energy bill, while Altium Securities immediately fell over themselves to defend Scotland’s renewable Grands Projets. For an honest engineer this all gets a bit much. Particularly when WWF Scotland bemoan “whinging” engineers who refuse to get with the renewables programme. While rhetoric may be good enough for Scotland’s politicians and Greens, it doesn’t cut it for engineers. We deal in inconvenient truths measured in Joules and Watts. For example, WWF Scotland make the claim that “Scotland’s onshore wind capacity is now greater than both our nuclear stations put together”, implying that we can pull down the shutters at Hunterston and Torness.

In the real world of numbers and units, Scotland’s onshore and offshore wind energy output was 4.9 TW-hrs in 2010, while the combined output of Hunterston B and Torness was a hefty 13.9 TW-hrs. WWF ignore the distinction between energy generated and peak power, and the distinction between base-load and intermittent production. These concepts aren’t just engineering details. …. 

Citigroup pointed out that Scotland’s renewable energy ambitions could eventually be skewered by shale gas. Through innovations in drilling technology gas can now be extracted from deep shale bed rock. Horrified at the prospect of many decades worth of low cost energy, Greens have not surprisingly called for an immediate ban.

…. Stepping back from the claims and counterclaims of the City and the ever precautionary Greens, Scotland needs answers to a number of serious questions. Specifically, is it possible to create prosperity by paying production subsidy for offshore wind worth twice the market value of the electrical energy itself? And as a supplementary, can we create real jobs through an industry dependant on government mandate? ….. Offshore wind represents painfully expensive energy which can only be made viable by dipping the pockets of industry and domestic consumers for renewable obligation payments. Jobs are of course created, but at someone else’s expense. This is a negative sum game. Genuine prosperity is a positive sum game, the outcome of which is that everyone becomes a bit richer.

Building an industry on the basis of government mandate and subsidy is also an inherently risky proposition. Any jobs created are then entirely at the whim of government and can quickly evaporate when policy changes. The UK solar industry learned this to its cost when Westminster recently slashed feed-in tariffs worth up to ten times the value of the electrical energy being produced. .. 

The renewed ascendancy of gas isn’t just idle academic speculation. It is the path offered by KPMG in their widely trailed report “Thinking about the Affordable”. The ubiquitous accountants re-visit prior assessments of the cost of de-carbonising electrical energy supply via renewables. They conclude that pulling back from offshore wind and relying on load-following gas plants and base-load nuclear would save capital costs of £34B from a £108B bill run up by 2020. This could be difficult for the Chancellor to resist.

So let’s be clear, there is nothing remotely controversial about copious, low cost and relatively clean energy production from shale gas or elsewhere. If it creates badly needed economic growth though lower energy prices then we should rejoice rather bemoan. And if it undermines Scotland’s massive bet on renewable energy, then we should seek answers from the politicians who were so sure they picked a winner and the Greens who egged them on.

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3 Responses to ““Offshore wind power is not affordable” – KPMG”

  1. roberto Says:

    hi K2P
    off topic.
    One commentary about it:

    Click to access TIP-Report-Review-2011.pdf


  2. Prince Philip gets it right – for a change « The k2p blog Says:

    […] Wind power capacity must be backed up by other capacity. In large electrical grid systems it is fundamentally flawed in meeting the requirements to have a continuous and instantaneous balance between electricity […]

  3. The Sudden Popularity of Wind and Solar Power | Best Match Results - Blog Network Says:

    […] The Sun Make Your ElectricityIs wind power another ‘ethanol-style’ knee-jerk reaction?“Offshore wind power is not affordable” – KPMG /* Link color */ a, #site-title a:focus, #site-title a:hover, #site-title a:active, .entry-title […]

  4. John Sturman Says:

    The KPMG Report focuses solely on up front costs of building new power plants and ignores other lifecycle costs such as fuel and decommissioning, the report states, misleadingly, that concentrating on nuclear and gas would be cheaper than relying on renewable energy sources.

    The recent rises in electricity bills have been caused by the global increase in the price of gas. Between 2004 and 2009 gas prices increased by over 122 per cent, whilst the cost of generating electricity from wind continues to fall as the industry develops. So relying heavily on gas will not drive fuel bills down in the future.

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