UK study: New nuclear plants will be cheapest power option

In a report published on 10 March 2004, the UK's Royal Academy of Engineering revealed that electricity from offshore wind farms, currently Britain's most viable renewable energy source, will cost at least twice as much as that from conventional sources.

The independent study, commissioned from international energy consultants PB Power, placed all energy sources on a level playing field by comparing the costs of generating electricity from new plants using a range of different technologies and energy sources. It was found that the cheapest electricity would come from gas turbines and nuclear stations, costing just 2.3 p/kWh, compared with 3.7 p/kWh for onshore wind and 5.5 p/kWh for offshore wind farms.

“This may sound surprising,” says Academy vice president Philip Ruffles, who chaired the study group, “especially as we have included the cost of decommissioning in our assessment of the nuclear generation costs. The weakness of the (UK) Government’s Energy White Paper was that it saw nuclear power as very expensive. But modern nuclear stations are far simpler and more streamlined than the old generation – the latest are only about half the size of Sizewell B – and far cheaper to build and run.

“In the case of wind energy it is also necessary to provide back-up capacity for when the wind does not blow. In this report, we have been rather generous with the wind generation figures – we assumed you’d need about 65 percent back-up power from conventional sources for this study. The Academy has previously called for even higher back-up, more like 75 to 80 percent.”

Even so the cost of back-up capacity adds 1.7 p/kWh to the costs. Onshore wind generation is the cheapest renewable, but with back-up, it costs two and a half times as much as gas or nuclear.

Wind, nuclear and biomass generation all have the benefit of not emitting carbon dioxide, and the Academy/PB Power study also looked at the impact on costs of capturing carbon dioxide for all fossil fuels. This could add at least 2 p/kWh for coal-fired generators and 1-2 p/kWh for gas generators. “Coal looks uneconomic in the future,” says Mr Ruffles, “by the time you capture the carbon dioxide it’s going to cost as much as onshore wind.”

This study did not consider transmission costs to individual technologies or storage costs for gas to ensure security of supply – the market currently absorbs these through system operating costs or the cost of gas. However, providing energy a long way from the eventual customer will add to its cost. “The renewables sector already benefits from subsidies worth around £485 million* a year through the Renewables Objective,” says Mr Ruffles. “The Government is also planning to offer further subsidies in the form of reductions in transmission charges – this may run counter to the spirit of the new European Electricity Directive aimed at promoting competitive energy markets.

“The value of our report is that it puts a price on the policy decisions we must take to sustain a vibrant economy, avoid the lights going out and meet our emissions targets. The report does not take sides in the energy debate but it does introduce transparency.”

*around €737 million

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1. Costs in p/kWh of generating electricity for ‘base-load’ plants considered in the study:
   Gas-fired combined-cycle gas turbine 2.2
   Gas-fired open-cycle gas turbine 3.1*
   Nuclear fission plant 2.3
   Coal-fired pulverised fuel steam plant 2.5
   Coal-fired circulating fluidised bed steam plant 2.6
   Coal-fired integrated gasification combined cycle 3.2
   (* Open-cycle gas turbines are usually used for short periods to meet peaks in demand, so a more realistic cost is around 6.2 p/kWh when used for only 15 percent of the time.)

2. Costs in p/kWh of generating electricity for selected renewables considered in this study (figures in brackets allow for necessary standby generation):
   Poultry litter-fired bubbling fluidised bed steam plant 6.8
   Onshore wind farm 3.7 (5.4)
   Offshore wind farm 5.5 (7.2)
   Wave and marine technologies 6.6 (standby not considered)