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« A $100,000 climate prize | Main | Stuff their mouths with gold »
Wednesday
Nov182015

DECC consistently misled public over electricity costs

An interesting tweet from former DECC chief scientist David Mackay yesterday:

 

 

As readers here know, I have been quite strongly against the use of levelised costs (LCOE), referring to it as "the great levelised costs lie". It's therefore gratifying to see Mackay publicly agreeing with me.

I asked Mackay about this:

 

 

It's a pity that this use of whole system costs was not extended to, say, the regular statements on comparative costs of electricity generation that DECC has been putting out for years, including all the time that Mackay was in position as chief scientist. These have exclusively used levelised costs.

But it's good that an insider has finally admitted that the government has been misleading us about electricity costs for years.

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Reader Comments (19)

Amber Rudd has commissioned a study that is supposed to look at whole network costs of different technologies. I'm not sure when it is due to report. In the meantime IIRC this study was an attempt to get a first order estimate and posted at this site (or was it Euan Mearns?):

http://www.iesisenergy.org/lcost/LCost-Paper.pdf

It doesn't make pretty reading for advocates of wind.

I have long considered that we should look at comparisons for different grid and generation configurations to be evaluated on grounds of probabilistic cost distributions and supply resilience.

Nov 18, 2015 at 10:52 AM | Unregistered CommenterIt doesn't add up...

LCOE is the sleight-of-hand energy equivalent of the golf handicap system. It allows advocates to claim wind-generated electricity is as cheap as gas and coal in the same way I could claim to give Rory Gallagher a good game around St Andrews. It is plainly b******s.

Nov 18, 2015 at 11:26 AM | Unregistered CommenterCheshireRed

There is a good explanation of why here:
https://www.iea.org/publications/freepublications/publication/projected_costs.pdf
eg."The LCOE approach:-
a. does not adequately reflect the market realities characterised by uncertainties and dynamic pricing,
b. provides generation costs at the plant level and does not include the network costs of a power system,
c. reveals little information on the contribution of a given technology to addressing energy security and environmental sustainability,
d. does not indicate the relative likely stability of production costs over a plant’s lifetime, and therefore the potential contribution to cost and possibly price stability."

Nov 18, 2015 at 11:39 AM | Unregistered CommenterJamesG

@CheshireRed

Lovely analogy: I shall reuse that one (reuse is SO environmentally friendly, after all). :)

Only the other day I was telling some lame brain that spouting off about Denmark's wind turbines generating 140% of the country's electricity needs on one particular day was like me bragging about the one time I got a 180 in darts when my three-dart average is actually 26.

Nov 18, 2015 at 11:41 AM | Unregistered Commenterturningtide

Was DECC created as a Department of Propaganda? It is not clear that they have actually achieved anything, other than lies, and misinformation.

DECC is more toxic than the nuclear waste, they wants us all to remain frightened of. How long does DECC output have to remain buried and undisturbed, before it's potential to cause damage is reduced by 50%?

Nov 18, 2015 at 11:41 AM | Unregistered Commentergolf charlie

CheshireRed

Rory who?

Nov 18, 2015 at 12:55 PM | Unregistered CommenterOld Grumpy

Havent we had these discussion on false metrics, like, 10y ago ??

Nov 18, 2015 at 1:25 PM | Unregistered CommenterVenusCold

Rory who?

Old Grumpy
*******************

D'oh!

Foul! Two stroke penalty. Rory McIlroy.

Nov 18, 2015 at 1:30 PM | Unregistered CommenterCheshireRed

DECC has been so unfit for purpose for too long - but how do you sort that out? Let us ignore the hopeless incompetent way it has been politically led, that is a given. But, It has recruited in its own image for more than a decade and only a wholesale cull would make much change. DECC is not your old style Civil Service department that despite "Yes Minister" attitudes, gave fairly balanced advise.

I can't image that their interviewing (internal and external) has ever been looking for balance of view. Anyone who told the panel that he/she thought they should move to looking at the true cost of generation and wanted to re-appraise bio-mass projects would be applying to McDonalds for a job.

I guess you have the same problem in the Hadley Centre - Any applicant who suggested that they thought climate sensitivity was low and wanted to look for other causes for the warming, would only hear the word "NEXT".

Nov 18, 2015 at 2:41 PM | Unregistered CommenterRetired Dave

She mentioned governments need to keep out of it. Bit late for that and privatisation in this field is always going to be wrong. Money needs to be acquired by business and service for that money, thats something else!

They play with serious systems:

Gas
Coal
Nuke
Bio
Diesel
Hydro
Wind
Solar
Interconnector

Industry - Power Down

The actual fuel burners are based on imports largely. Play is more like dangerous gamble.

Nov 18, 2015 at 3:12 PM | Unregistered CommenterEx-expat Colin

I once posted a comment that referred to world superbike champion Francis Rossi.

Nov 18, 2015 at 3:16 PM | Unregistered CommenterStonyground

I don't accept McKay's view (nor the Bish's I assume). There's nothing wrong with LCOE analysis provided the reader is aware of what the analysis should cover. I assume McKay is aware of what an LCOE analysis should include.

JamesG has outlined some of the issues. Network and transmission should be included and cover issues such as reserve, response, black station start, and capacity credit. Some of the issues JamesG mentions are difficult to include without a complete system analysis but nevertheless, LCOE is a good, simple method of identifying a power strategy. If you want to see LCOE done well, look at Colin Gibson's work fully displayed on the IESIS web site:
http://www.iesisenergy.org/tsa.html
and more specifically, here:
http://www.iesisenergy.org/lcost/LCost-Paper.pdf
What has happened with LCOE in practice is that the green spivs have mauled the technique so that it displays green technology in a good light. McKay of all people should see this as plane as a pike-staff.

A good example of LCOE to mislead is here (albeit, KPMG do hint that their analysis given therein is not quite complete:
http://www.kpmg.com/UK/en/IssuesAndInsights/ArticlesPublications/Documents/PDF/Market%20Sector/Power_and_Utilities/uk-solar-beyond-the-subsidy.pdf

Nov 18, 2015 at 4:17 PM | Unregistered CommenterCapell

Looks like National Grid (and us) might get lucky. The much vaunted 'cold snap' lands over the weekend. The low w/k end demand should reduce the number of £2,500 per megawatt hour NG will commit to?

Nov 18, 2015 at 4:24 PM | Registered CommenterGreen Sand

Capell, I am no accountant or statistician, but when politicians get dragged into numerical methods that are not easily understood, to prove that something is to good to be true, it normally means that the politicians have been fooled, and that Sir Humphrey has a contented smug grin. 97% of taxpayers won't be happy either.

Nov 18, 2015 at 4:58 PM | Unregistered Commentergolf charlie

The concept of LCOE was developed by planners to compare the costs of firm sources of electricity generation (reliability being considered equivalent) where the useful lifetimes and capital costs of the sources differed, such as coal-fired versus hydraulic or nuclear plant. All of which must of course be considered only in the context of the operation of the electric system in its entirety with regard for security of supply - as in an Integrated Resource Plan (IRP). Even so, LCOE is open to much gaming through the use of differing discount rates and forecast fuel costs etc. chosen to favour a praticular source. A high discount rate ( assumed cheap money) or a high gas price forecast would for instance favour the nuclear decision.

Proponents of intermitent wind and solar power have constantly abused LCOE to present disengenuous comparisons between renewable and conventional (dispatchable) sources of electricity. Claims of "grid parity" or lower costs for wind and solar always neglect to mention that the sources are intermittent, highly variable, not dispacthable at all.

Imagine being offered a pizza delivery service that was cheaper than the regular pizza services, but could never confirm if the pizza delivered would match the order or requested timing in any way. Sometimes a feast for many would arrive, other times a couple of slices, and many times nothing at all or everything would be two days late. The LCOP would not be relevant. Could Amber really be this dim?

Nov 18, 2015 at 10:30 PM | Unregistered CommenterRichard Stout

Er..I meant low discount rate will favour nuclear and a high discount rate favours gas. Never mind, the real probem is the use of LCOE to compare intermittent sources with firm dispatchable sources.

Nov 18, 2015 at 11:26 PM | Unregistered Commenterrichard stout

Richard Stout

"Could Amber really be this dim?"

The jury is, just, still out, seriously, it is possible we are watching a political finesse!

Most cost effective and greenest possible 'lights on' secure policy?

In real life, if the lights cost too much we are in deep, if lights go out we are toast!

Edit: weird squarespace formatting? [Done TM]

Nov 19, 2015 at 12:18 AM | Registered CommenterGreen Sand

Could she be dim? That's the way to bet. The man who stood to take over from Davey, the previous Minister for Energy, saw the writing on the wall and obviously turned down the job -- he had to be given the ludicrous Minister for the Cabinet Office and Paymaster General position to move him closer to Osborne. He was out of his depth and perhaps he knew it.

Look at the evidence. We are making conventional generation unprofitable. We have been reducing energy security year by year until now we reach the breaking point. There are stopgap measures which will allow some investors to offer STOR power at ruinous prices*. We are not exploring the possibility of shale gas which would cut prices and CO2 emissions at a stroke. Nuclear plants are planned which will rip off the customer for thirty years.

Contracts are written such that the only way we could recoup the subsidies is by introducing a windfall tax, but when TTIP is signed then even that will be impossible: HMG could be sued by the corporations which will buy into the boondoggle as soon as they have that as a cover.

Maybe it's not a bug. Maybe it's a feature. Maybe some people in the process will become very rich indeed.

Don't blame me, I stood for UKIP.

JF
*£2,500 /MWh, as opposed to £60ish.

Nov 19, 2015 at 10:52 AM | Unregistered CommenterJulian Flood

Could you provide a link to your critique of LCOE?

Nov 19, 2015 at 3:25 PM | Unregistered CommenterMikeN

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