Building new gas turbines risks stranding £9bn of assets

Building out the current pipeline of 14GW of new combined-cycle gas turbines risks stranding £9 billion of assets, Carbon Tracker has claimed in a new report.

The climate change think tank said the 15GW of coal and nuclear plants that are due to close by 2025 could already be replaced more cheaply with a portfolio of clean energy technologies and the savings are set to grow substantially over the coming years as costs continue to fall.

Carbon Tracker drew the comparison based on a hypothetical 1,800MW combined-cycle gas turbine (CCGT) power station, which was assumed to operate as a load following plant with an average capacity factor of 50 per cent. It sought to find the lowest cost portfolio of clean energy technologies that could fulfil the same functions, both in terms of the amount of energy produced each year – on average and during periods of peak demand – and grid services.

According to its modelling, the levelised cost of energy (LCOE) of such a portfolio stood at £182/MWh in 2010 but fell by 67 per cent over the following decade to £60/MWh, putting it on par with new CCGTs and making 2020 a “tipping point” for clean energy.

LCOE for clean energy portfolio versus CCGTs

Carbon Tracker said rising fuel and carbon costs are forecast to push the LCOE of new CCGTs to £67/MWh by 2030. By contrast, the think tank said the LCOE for the alternative portfolio of clean energy technologies is expected to fall £41/MWh over the same period, representing a 39 per cent saving over CCGTs. It predicted that this margin would widen to 60 per cent by 2050.

This portfolio would currently consist of 1.7GW of solar, 1.1GW of onshore wind, 1.7GW of energy storage, 1.2GW of demand-side response and 600MW of energy efficiency improvements, giving it a total nameplate capacity of 6.3GW.

Carbon Tracker said although offshore wind “generally exhibits a higher and more stable capacity factor than onshore wind”, the technology is still too expensive to make it into the portfolio. It acknowledged that inclusion of offshore windfarms would, for the time being, make CCGTs the lower cost option but this may change in the “near future” as they achieve greater economies of scale.

The report urged policy makers to embrace a transition from “coal-to-clean” rather than going from “clean-to-gas”. Its author and head of power and utilities at Carbon Tracker, Catharina Hillenbrand Von Der Neyen, said: “By ignoring a least cost clean energy solution, the UK risks veering off a net zero pathway and penalising consumers, as they will be the ones to bear the higher electricity prices.”

To enable this to happen, the report said the government will need to “level the playing” for clean energy technologies in the Capacity Market, in particular for battery storage and demand-side response.

Von Der Neyen told Utility Week there are a “multitude of issues” with the scheme, including the length of the agreements – “fifteen years is a very long contract” – and the minimum threshold for capital expenditure, which is “quite high” in the context of demand-side response.

She said in general: “It’s very important to look at all of this stuff in a system context and conjunctively together because there’s substitution effects, there’s optimisation effects. Storage will optimise wind and solar. These things act together. If you look at this from a portfolio approach, if something comes down the cost curve faster you can substitute it.”

She also said there is “a lot more scope” for improvements in energy efficiency: “Energy efficiency is always the poor cousin and it’s hard to incentivise but that is something where clearly great strides could be made.”