This is poor reporting by Elektrek. The article compares wind and gas costs but completely fails to explain:
* the gas price in the article includes the government’s self-imposed carbon tax. The actual cost of gas (£55) is FAR lower than the £91.20 strike price Milibad has set for wind. And Miliband has locked in this terrible pricing for 20 years!
* there are huge extra costs for wind power that are not accounted for in this quoted strike price. The grid must be upgraded. Expensive new power generation capability will need to be built to compensate for the intermittency of wind
* the stated power capacity of wind generation is a theoretical maximum, and the actual capacity will be much lower in practice.
The article talks about strike prices but doesn't provide much context.
The context: this is about bids from wind farm operators to win "contracts for difference" with the Low Carbon Contracts Company, an entity owned by the UK government. It's essentially a subsidy scheme where the wind farms can lock in a specific price per MWh for all the electricity they will produce over a certain period. But only if they bid low enough to be among the winners of the auction.
1) Introduce a lot of intermittent generation into energy grid without sufficient amount of storage capacity.
2) Use marginal pricing model which effectively guarantees windfall profits for those sources.
3) Utilization of peaking power plants falls, but you still have to keep them because there is not enough storage capacity.
4) Peaking power plants rise generation costs to offset the lower utilization, further adding to the windfall profits.
5) You need more grid capacity to handle energy transfers from distributed generation sources.
5) ????
6) Act surprised when people loudly complain about electricity bills despite abundant "cheap" generation.
Intermittency of generation is an externality (same as CO2 emissions) and should be priced accordingly. People are willing to pay premium for supply stability, but the current pricing model does no account for that. Trying to change consumption habits (like smart grids, dynamic pricing, etc.) works poorly, especially for such vital resource as electricity.
I think there should be some kind of price penalty for intermittent sources dependent on total ratio of intermittent generation in the mix. At least until grid-scale energy storage technology will be advanced enough to store approximately week of total energy consumption.
This is an extremely misleading way to report the cost of energy. It’s almost meaningless to compare the cost of wind to the cost of gas because more wind does not reduce the need for gas plant. It may reduce gas utilization, but it will increase the cost of gas on a MWh basis by increasing capacity prices.
Yes, more wind will reduce emissions, but these prices don’t mean they will reduce total system cost.
Not only do the existing wind farms reduce the price of electricity by saving gas, they have had much larger effect on reducing the price households pay for gas itself, by reducing demand for that commodity.
Over the period 2010 to 2023 they reduced electric bills in the UK by about 14 billion, but reduced gas bills by about 140 billion!
The article quotes £147/MWh for CCGTs. These look to come from the Electricity Generation Costs 2025 [0] released on the same day as the CfD results. However there is no £147/MWh in Annex A [1]. There is a £145/MWh for CCGT delivered in 2030, but the way this was arrived at is interesting.
a) A load factor of 30% (which seems pretty low for a CCGT), that is actually ~28% (per Annex A [1] "Technical Costs and Assumptions" sheet);
b) fuel efficiency is set to be 54%, which is far lower than BAT CCGT of around 64%, which affects fuel and CO2 emissions costs;
c) the analysis missed out capacity market payments that one gets for having dispatchable power stations;
d) the analysis presumes £41/MWh of carbon costs.
The key drivers of the price are load factor (so amortised construction costs), conversion efficiency (fuel costs and carbon costs) and carbon costs themselves. These make up 90% of the LCOE.
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[ 2.7 ms ] story [ 32.5 ms ] threadi.e. if you're buy 99% cheap RE, 1% expensive gas then you're paying for 100% at the higher gas price.
UK secures record supply of offshore wind projects
https://news.ycombinator.com/item?id=46614777
* the gas price in the article includes the government’s self-imposed carbon tax. The actual cost of gas (£55) is FAR lower than the £91.20 strike price Milibad has set for wind. And Miliband has locked in this terrible pricing for 20 years!
* there are huge extra costs for wind power that are not accounted for in this quoted strike price. The grid must be upgraded. Expensive new power generation capability will need to be built to compensate for the intermittency of wind
* the stated power capacity of wind generation is a theoretical maximum, and the actual capacity will be much lower in practice.
The context: this is about bids from wind farm operators to win "contracts for difference" with the Low Carbon Contracts Company, an entity owned by the UK government. It's essentially a subsidy scheme where the wind farms can lock in a specific price per MWh for all the electricity they will produce over a certain period. But only if they bid low enough to be among the winners of the auction.
https://en.wikipedia.org/wiki/Contracts_for_Difference_(UK_e...
2) Use marginal pricing model which effectively guarantees windfall profits for those sources.
3) Utilization of peaking power plants falls, but you still have to keep them because there is not enough storage capacity.
4) Peaking power plants rise generation costs to offset the lower utilization, further adding to the windfall profits.
5) You need more grid capacity to handle energy transfers from distributed generation sources.
5) ????
6) Act surprised when people loudly complain about electricity bills despite abundant "cheap" generation.
Intermittency of generation is an externality (same as CO2 emissions) and should be priced accordingly. People are willing to pay premium for supply stability, but the current pricing model does no account for that. Trying to change consumption habits (like smart grids, dynamic pricing, etc.) works poorly, especially for such vital resource as electricity.
I think there should be some kind of price penalty for intermittent sources dependent on total ratio of intermittent generation in the mix. At least until grid-scale energy storage technology will be advanced enough to store approximately week of total energy consumption.
When the wholesale prices is about the CFD strike price then the excess funds are paid to the Low Carbon Company and used to reduce electricity bills
Storage capacity is being build out - it's one of the prime uses of old power station sites (because they already have grid connectivity)
Grid capacity is being built out e.g. the Eastern Green links to allow transfer of power from Scotland to England and reduce curtailment payments
Yes, more wind will reduce emissions, but these prices don’t mean they will reduce total system cost.
Over the period 2010 to 2023 they reduced electric bills in the UK by about 14 billion, but reduced gas bills by about 140 billion!
a) A load factor of 30% (which seems pretty low for a CCGT), that is actually ~28% (per Annex A [1] "Technical Costs and Assumptions" sheet);
b) fuel efficiency is set to be 54%, which is far lower than BAT CCGT of around 64%, which affects fuel and CO2 emissions costs;
c) the analysis missed out capacity market payments that one gets for having dispatchable power stations;
d) the analysis presumes £41/MWh of carbon costs.
The key drivers of the price are load factor (so amortised construction costs), conversion efficiency (fuel costs and carbon costs) and carbon costs themselves. These make up 90% of the LCOE.
[0] https://www.gov.uk/government/publications/electricity-gener... [1] https://assets.publishing.service.gov.uk/media/6967b0c806fab...