UK Power Reliability Given Zero Value

When HM Gov's latest electricity generation costs report fails to allocate any value to keeping the lights on, don't be surprised when they go off.

Summary

The Electricity Generation Costs Report 2023 was published (together with two annexes) by the Department for Energy Security and Net Zero (DESNZ) on 4 August 2023.

The fossil-fuel-burning technologies (currently essential for keeping the lights on when the sun isn’t up and the wind doesn’t blow) have no values in this report, only costs.

The report and the annexes are riddled with assumptions which slant only one way: in favour of unreliable power sources and against dispatchable ones.

Unless a more balanced view is adopted to inform HM Gov policy, I fear we will suffer power intermittency. This will persist for a decade or more until electricity storage or other energy transition necessities are fully developed / commercialised / adopted. In the meantime we will export what remains of our industrial capacity to those countries that remain coal-powered and keep their lights on.

Introduction

The Electricity Generation Costs Report 2023 was published by the Department for Energy Security and Net Zero (DESNZ) 4 August 2023.

I looked at what’s in the report as well as the data in “Annex A: Additional estimates and key assumptions”.

The report itself is a minor update of the much longer 2020 report from BEIS, the predecessor of the DESNZ. And that report references a 2010 report from Mott MacDonald: “UK Electricity Generation Costs Update”. And there are several other reports, such as one on the potential to improve load factors of UK offshore wind to 2035from DNV in October 2019. And so on, and on.

But the key thing is that the 2023 report only considers LCOE:
“… the Levelised Cost of Electricity (LCOE) is the discounted lifetime cost of building and operating a generation asset, expressed as a cost per unit of electricity generated (£/MWh). It covers all relevant costs faced by the generator, including pre-development, capital, operating, fuel, and financing costs.”
And
“The levelised cost of a generation technology is the ratio of the total costs of a generic plant to the total amount of electricity expected to be generated over the plant’s lifetime.”
And
“The main intention of a levelised cost metric is to provide a simple “rule of thumb” comparison between different types of generating technologies. However, the simplicity of this metric means some relevant issues are not considered.” [My italics]

In other words, LCOE is an accounting measure, useful to compare generating technologies with similar availabilities & load factors. For example coal, gas and nuclear, which can all run 90% or more of the time, day and night, winter and summer: if correctly maintained and if allowed.

LCOE is useless to compare, for example, a gas turbine with Solar PV which goes AWOL every night / for 89% of the time on average across the UK fleet. Or to compare Wind, which can be 100% on a good day and near-zero on a bad day, with coal. And so on.

LCOE does not recognise the value of having control over the means of generation. The Electricity Generation Costs Report 2023 gives zero value to keeping the lights on in the UK.

There are numerous other assumptions which slant only one way:

• Carbon costs¹ are allocated only to fossil-burning technologies, not to ‘renewable’ technologies mostly imported from distant countries which are substantially coal-powered. It appears that carbon costs will ratchet ever higher.

• Future Onshore Wind load factors [download .xlsx Annex_A] are assumed to be 38% from 2025 and 41% from 2030, despite the DUKES 6.3 five-year average across the entire GB fleet being 26.32 %. More than 10 percentage points increase. I’d like to see the real-world evidence that that is credible, otherwise in my sensitivity analysis I would be using lower load factors in case their models fail to live up to reality.

• Future Offshore Wind load factors [Annex_A] are assumed to be 61% from 2025, 65% from 2030, and 69% from 2035. Again, the DUKES 6.3 five-year average across the entire GB offshore wind fleet is 40.56 %. More than 20 percentage points increase. I understand that there are enormous offshore wind turbines under development, with nameplate capacity 15 MW or so. But these are first-of-a-kind prototypes with consequent uncertainties. In my sensitivity analysis I would be using lower load factors and/or lower availability factors, in case their models fail to live up to reality or these beasts need greater levels of maintenance down-time, etc.

Hoorah! Solar PV is given the realistic load factor of 11 % in Annex_A. Reminder: that means that *on average* you will get 1.1 MW power output from a 10 MWp *capacity* Solar PV facility. Zero at night, every night, of course. And if more and more Solar PV *capacity* is installed, on breezy summer days it will force more and more wind to be curtailed.

To put it another way: the only way Solar PV and Wind can currently be accommodated by the GB power grid, is by having an equal capacity of controllable dispatchable fossil generation available at all times. Even California is waking up to this reality on their grid.

So unless HM Gov and the DESNZ begin to recognise the value of dispatchable fossil generation in their reporting I fear that poorly-informed decisions will be made. Fossil generation will be shut down and even demolished before we’re ready. And then, sooner or later, the lights will go out. Worst-case, in the middle of winter.

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Disclaimer: Opinions expressed are solely my own.

This material is not peer-reviewed. This is why I stopped believing it would do any good, and this reinforces that conclusion.

I am against #GroupThink. And I am really pro #FreeSpeech.

Your feedback via polite factual comments / reasoned arguments welcome.

1. UK Emissions Trading Scheme (UK ETS) carbon price values in accordance with the Greenhouse Gas Emissions Trading Scheme Order 2020.
For 2021-2022:
"4. The UK ETS Authority therefore determines that:
· the carbon price for the scheme year beginning on 1 January 2021 is £47.96
· the carbon price for the scheme year beginning on 1 January 2022 is £52.56
29 November 2021

For 2023:
3. The UK ETS Authority therefore determines that:
· the carbon price for the scheme year beginning on 1 January 2023 is £83.03
29 November 2022