Government slashes renewable cost forecasts

The government has slashed its forecasts for renewable energy costs over the next decade, with offshore wind projects commissioned in 2030 now expected to supply power at less than half of the rate predicted when it last conducted the analysis in 2016.

Over the course of their lifetimes, these hypothetical projects are expected to produce power at an average cost of £47/MWh (2018 prices). The Department for Business, Energy and Industrial Strategy (BEIS) had previously forecast a levelised cost of energy (LCOE) of £103/MWh.

From both being forecast at £64/MWh in 2016, the equivalent figures for onshore wind and large-scale solar have fallen to £45/MWh and £39/MWh respectively.

“Since 2016, renewables costs have declined compared to gas, particularly steeply in the case of offshore wind,” BEIS explained in its updated analysis. “Across the renewable technologies, increased deployment has led to decreased costs via learning, which has then incentivised further deployment, and so on.

“For offshore wind, significant technological improvements – for example, large increases in individual turbine capacity – have driven down costs faster than other renewable technologies – and will continue to do so. Lower hurdle rates have also contributed to the decline in renewables costs.”

The department has also extended its forecasts out to 2040, by which point offshore wind is expected to have become cheaper than onshore wind at £40/MWh versus £44/MWh. However, large-scale solar is anticipated to be the least expensive form of generation on a per megawatt-hour basis, coming in at just £33/MWh in the central scenario.

“The industry has known for a long time that large-scale solar is one of the cheapest power technologies available today, and we are pleased that this has now been officially recognised,” said Chris Hewitt, chief executive of the Solar Trade Association.

“Now it is time for the government to set an ambitious target for the deployment of solar PV in the UK, as it has done with offshore wind. Our favoured goal, 40GW by 2030, aligns with recommendations made by the Committee on Climate Change and the National Infrastructure Commission, and is achievable with moderate policy support.”

With regards to offshore wind, BEIS noted: “There are significant differences of opinion over future turbine sizes; some stakeholders are predicting 20MW turbines as early as 2030, while others doubt the feasibility of such large turbines.” The analysis assumed turbines would eventually reach this size but not until a decade later.

The LCOE of the newest and most efficient H-class combined-cycle gas turbines (CCGTs) is forecast to increase significantly over the next few decades, almost entirely driven by rising carbon costs, which are assumed to reach £45/MWh by 2030 and £70/MWh by 2040.

The other costs of building and operating such a CCGT are expected to stay within the mid-fifties, with fuel accounting around fourth fifths of the remaining total.

Both onshore wind and large-scale solar are both expected to be cheaper sources of power than CCGTs in 2025 – even excluding carbon levies – whilst offshore wind is forecast to reach the same milestone within the following five years. By 2030, large-scale solar power is also forecast to become cheaper on a per megawatt-hour basis than just the fuel needed run a CCGT power station, with the same being true for offshore wind by 2040.

Whilst the government’s forecasts for CCGTs are relatively unchanged when compared to its 2016 report – down only slightly – BEIS has made more significant reductions to its estimates for plants fitted with post-combustion carbon capture and storage (CCS).

Due to a combination of factors, including reduced construction, financing and operating costs and the increased efficiency of the generation and capture processes, the department has lowered its central LCOE forecast for 2030 from £118/MWh to £87MWh.

The new figure is lower than the LCOE for an unabated CCGT, indicating that the costs incurred by capturing and storing the carbon dioxide emissions is less than their assumed social cost, but is still around double the predicted cost of renewables.

Meanwhile, National Grid Electricity System Operator has revealed that windfarms recorded their highest ever share of generation over the weekend, reaching 59.1 per cent on Saturday afternoon as Storm Ellen blew through Britain.