Levelised Cost confusion disguises rate impact of intermittent renewables

Recently Subsidies and costs of EU energy: An interim report was released -within a week of my appearance on a panel discussing the policy implications of Hatch's Lifecycle Assessement Literature: Review of Nuclear, Wind and Natural Gas Power Generation.

Recharge's reporting of the EU Ecofys study (Study hails onshore wind cost lead) begins predictably:

Onshore wind is cheaper than gas, coal and nuclear when air quality, climate change and human toxicity are taken into account, according to a study published by the European Commission.
An analysis by the European Wind Energy Association (EWEA) of the data in the Ecofys report finds that onshore wind costs about €105 ($133) per MWh. Gas costs up to €164/MWh, nuclear €133 and coal €162-233.

Emphasis added.
The quality German Energy Blog reported on the study more intelligently:

The interim report also presents figures on the cost competitiveness of the different power generation technologies. The estimated ranges reflect costs of new power generation without public intervention (levelised costs). Costs for producing one MWh of electricity from coal are in a range around €75. Electricity from onshore wind is generated at only somewhat higher costs. Costs for power from nuclear and natural gas are in comparable ranges around €100/MWh. Solar power costs have fallen considerably since 2008 to about €100-115/MWh depending on the size of installations.
The interim report also presents estimates on external costs across power generation technologies. These are costs that are not reflected in market prices, such as costs of environmental and health impacts and the impact of climate change. The methods for quantifying external costs come with a high degree of uncertainty, and the report only aims to identify orders of magnitude for external costs.

Same emphasis added.

Here we have the basic challenges of a full-cost accounting of electricity supply options. Reporting on the same study shows widely divergent numbers.

Figure S-6 of Ecofys report

Looking through the Ecofys report, it appears to me the primary driver of price difference is the assumption of a 50 Euro dollars per metric ton of CO2 equivalent - which is reduced by 6.67 Euro dollars because that's what the actual cost was under the EU's Emissions trading system (ETS).

It just might be relevant that jurisdictions who want cheap power would likely just skip this accounting.

The further problems in calculating levelised unit costs is the actual costs will be established partly by the utilization rate of a generator, and funding generators with no fuel costs will almost certainly reduce the utilization rate of generators with fuel costs.

That's kind of the point.

The Ecofys report for the EU ignores that one policy decision impacts the pricing of others by assuming levelized costs if generators could run optimally.

Figure S-7 of Ecofys report

Figure S – 7 presents levelised cost ranges per power generation technology. Levelised costs for electricity range from around 20 €2012/MWh for hydropower running a full load to 200 €2012/MWh for offshore wind and biomass plants running at realised loads. Hard coal and natural gas have similar levelised costs (50 €2012/MWh) if running at full load but in recent years the low price of coal and the increase in renewable electricity production has resulted in lower running hours for gas. Levelised costs at realised loads for gas are hence higher and comparable to onshore wind and nuclear

Reporters on this report can add these two sets of calculations together, but they have little to do with pricing an electricity system. I argue the value of generation should be measured against the purchase/contract price. I believed I'd done something original in The Real High Price of Low-Value Electricity (July 2013), but I've found a better credentialed, and earlier, source in Don Dewees' The Economics of Renewable Electricity Policy in Ontario (March 2013). What the U.S. EIA refers to as non-dispatchable sources (wind, solar, run-of-the river) and Ontario's Society of Professional Engineers (OSPE) has called "displacement" sources, have lower value production, the prioritization of which will drive up the costs of the requisite firm/dispatchable generators on a grid.[1]

CPV Sentinel SCGT power plant, from article at powermag.com

It's difficult to believe so few models include if-then-else statements.

• If you have fuel-free variable intermittent generation (wind/solar)
• Then you have less utilized firm generators meeting demand as required
• Else you go dark

One cannot measure gas as more expensive than wind because wind only acts to reduce the utilisation of the natural gas generators - it is the presence of wind making all more expensive.

This cost impact is also likely to have an emissions impact.

I'm pleased to say that I was invited by the Canadian Nuclear Association to be part of a panel discussing the policy implications of professional engineering firm Hatch's Lifecycle Assessment Literature Review of Nuclear, Wind and Natural Gas Power Generation. The Hatch "meta-analysis" of independent Life Cycle Assessments (LCA) evaluates more realistic scenarios based on the choice of nuclear generation, which is traditionally operated as baseload supply, and intermittent generation's lower-cost wind option.[2]

see CNA Summary: Lifecycle emissions of nuclear,
wind and natural gas power generation

“The results of the assessment show that the lifecycle of nuclear and wind power generation produces a small fraction of the GHG and NOx emissions of the natural gas combined cycle (NGCC) lifecycle... Emissions of PM were more comparable across generation sources... Emissions of SOx were similarly comparable...” (p. 70)

“When considering wind backed by natural gas power (20%/80%) to compensate for intermittency, emissions from the modified grid mix closely resembles that of natural gas production, diluted by a low-emissions power source.” (p. 71)

For me, the Hatch meta-analysis supports works that have influenced me including The Market Value of Variable Renewables, by Lion Hirth, and the OECD Nuclear Energy Agency's System Effects in Low-Carbon Electricity Systems.

The Canadian Wind Energy Association (CanWEA) responded to the Hatch analysis:

...there are many potential supply mixes that can facilitate significant amounts of wind energy penetration in Canada and the vast majority of them are much less greenhouse gas intensive than the scenario described in the study. Realistic, alternative scenarios see wind energy partnered with hydroelectric power (60% of Canada’s electricity today), varying mixes of emerging renewable energy sources like solar energy, and the use of energy storage and demand side management technologies. Unfortunately, by choosing to focus on only one scenario, the study failed to consider a broad range of equally or more plausible scenarios for the future evolution of Canada’s electricity grid.

Emphasis is CanWEA's.

Again, the relevant measure is system costs.

Ontario's public hydroelectric assets are far less valuable working in a support role for must-take wind turbine and solar park operators than they would be in the absence of the turbines, as are Germany's pumped storage operators and Denmark's Combined Heat and Power producers.

The Hatch report for the CNA measured the environmental impacts of the cheapest twin for wind power, which when operated as a twin still isn't cheap - nor particularly clean.

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Endnotes

1. 3 years ago I wrote Value, LUEC Limitations, And FiT Failure - which is less polished than 2013's The Real High Price of Low-Value Electricity, but both show why I think the Ecofys report is an outdated methodology for evaluating electricity sector costs.

2. My Germany's Will to Power begins with a quote from a German politician now responsible for the energy file:

“If someone declares publicly that nuclear power would be needed in the baseload because of fluctuating energy from wind or sun in the grid, he has either not understood how an electricity grid or a nuclear power plant operates, or he consciously lies to the public. Nuclear energy and renewable energies cannot be combined.”—Siegmar Gabriel

Some argue this position.
I do not.