A plan for
Clean British Energy
Powering the UK with renewables –
and without nuclear
September 2012
CLEAN
BRITISH
ENERGY
Contents
Section One
Page
1. The challenge ahead 4
2. Why a target for 2030 decarbonisation of the power sector is essential 4
The case for 2030 decarbonisation of the power sector
Section Two
The route to 2030
1. A renewable solution: decarbonising without nuclear power 7
2. An illustrative pathway 7
3. Trajectory to 2030 9
4. System balancing and keeping the lights on 12
Section Three
How this is a cost-effective route to take, and an economic benefit to the UK
1. Overview 14
2. Nuclear 16
3. Solar 17
4. Wind 18
5. Gas 19
6. Macro-economic benefits 21
Conclusion
Making the new Energy Bill deliver
22
References 23
2
A plan for Clean British Energy Powering the UK with renewables – and without nuclear
Introduction
T
he Government’s draft Energy Bill seeks to reform the electricity market
to deliver secure, affordable and low-carbon electricity. A fifth of the
UK’s electricity generating capacity is set to close over the next decade,
and it is estimated that over £100 billion in investment in Britain’s neglected
energy infrastructure is needed in the same period to secure our electricity
supply. As North Sea reserves run low, Britain is now a net importer of energy,
with important consequences for bill payers. The average energy bill rose by an
additional £150 in the last year - a rise of over 10% - of which £100 was due to
the increased price of gas driven by a volatile global market.
The Energy Bill is an opportunity to renew our energy system to deliver clean,
secure and affordable power, but the draft Bill needs key changes if it is to deliver
this. If it is done right, there is a huge opportunity for boosting jobs and growth
with inward investment in energy-saving and renewable energy industries. The
Government’s independent climate advisors, the Committee on Climate Change,
have said that the Energy Bill must contain a target to almost entirely remove
carbon emissions from electricity by 2030 as the most cost-effective way to meet
the UK’s commitments under the Climate Change Act.
This report brings together the existing evidence for 2030 decarbonisation of
the power sector. It shows that decarbonising electricity by 2030 is not only
necessary to deliver on the UK’s climate commitments, but is the most costeffective way to provide a secure and affordable electricity supply while seizing
the opportunity to build on the green growth of recent years.
Secondly, it examines how to reach this 2030 goal in a way that maximises
economic opportunities, and minimises the costs. An examination of the
existing evidence on the available energy technologies, their costs, build rates
and the energy demand profile of the economy shows that decarbonising
with renewables, and without nuclear power, is technically achievable and
economically the sensible path.
A plan for Clean British Energy Powering the UK with renewables – and without nuclear
“decarbonising with
renewables, and without
nuclear power, is
technically achievable and
economically the sensible
path...”
3
Section One
The case for 2030 decarbonisation of the power sector
1. The challenge ahead
The Government’s objectives are that the UK’s
electricity system should be low-carbon, secure and
affordable. Today’s system is reliable, but very highcarbon, and increasingly expensive. Major change is
essential, and this autumn’s Energy Bill has a crucial
role to ensure this happens.
Today’s electricity system is heavily reliant on fossil
fuels, mainly coal and gas, a dependency which
leads to major greenhouse gas emissions. This
has to change – the UK and other countries must
heavily cut these emissions to reduce the risk of
dangerous climate change to acceptable levels.
This is the consensus across all main UK political
parties, major business groups such as the CBI and
the World Economic Forum, almost all of the world’s
Governments, and even oil and gas corporations like
Shell and BP.1
The UK needs a rapid transition to low-carbon
electricity. The Committee on Climate Change have
said that average emissions need to fall to 50gCO2e/
kWh by 2030, compared with over 400g/kWh now.2
This is a challenge, but also a major economic
opportunity – innovation and deployment in
new technologies, energy efficiency, and smart
grids can become a major route out of recession,
creating many new jobs, businesses and whole
new business sectors. Indeed, the status quo would
be an extremely risky course for the UK – we are
importing more oil and gas every year, and their
prices are on a seemingly inexorable rise: an everincreasing burden on our balance of payments. Our
net imports of gas alone cost £6 billion in 2011,3
with heavy reliance on Qatar. DECC and other
analysts predict that gas prices will continue to
rise.4 And even with a UK shale gas boom, we would
still need to import a greater percentage of our gas
than we do now, as is shown later in this report.
Moving away from fossil fuels is the correct course
to avoid ever-increasing electricity costs. But this
transition needs to be managed well to ensure costs
of new technologies are driven down fast.
This transition can happen without recourse to
new nuclear power stations. New nuclear power is
not necessary, and carries major environmental,
economic and social risks: waste that remains toxic
for thousands of years, uninsurable risks of disaster
4 – risks which inevitably have to be borne by society
and not the industry itself – and stubbornly high
costs despite six decades of continuing subsidy.
2. Why a target for 2030
decarbonisation of the power
sector is essential
Decarbonisation of the electricity sector by 2030
is needed to meet our commitments under the
Climate Change Act to cut emissions by 80% by
2050. The science and dangers of climate change
grow more stark with every passing year, with this
summer’s record Arctic ice melt just one very visible
reminder.5 Here in the UK we are already seeing
the economic costs of extreme weather: insurers
are refusing to cover homes against flooding from
June 2013, and the Treasury is baulking at the cost
of increased flood defences.6 Other countries have
it even worse – droughts in the USA and Africa are
causing economic and social misery. It is right that
the main political parties are fully behind the UK’s
carbon budgets.
These targets should also be seen as an absolute
minimum – they are based on a 60% chance of
exceeding two degrees global warming. This is a
very high level of risk for a temperature rise the G8,
EU and UK have rightly said “must” be avoided.
But decarbonising our economy does not simply
need the right end-goal, it also needs a credible path
to get us there. The Committee on Climate Change
(CCC) have set a target of 60% cuts in emissions by
2030 as an essential staging-post on the road to
20507. They state that:
“Moving away
from fossil fuels is
the correct course
to avoid everincreasing electricity
costs. But this
transition needs to
be managed well to
ensure costs of new
technologies are
driven down fast.”
“any less ambitious target for 2030 would
endanger the feasibility of the path to 2050”.
To meet this goal the CCC has concluded that
“It is crucial that the power sector is almost
fully decarbonised by 2030”8.
Nearly 30 per cent of UK greenhouse gas emissions
currently come from the electricity system. There
is broad agreement that decarbonising the power
sector first is the best-fit and most cost-effective
pathway to decarbonising the economy as a whole:
the technology exists, and it helps sectors such as
transport and heat to follow as they switch from oil
A plan for Clean British Energy Powering the UK with renewables – and without nuclear
and gas to clean electricity. Not only is electricity
crucial because it is one of the largest sectors, but
also because:
• A large amount of power generation
infrastructure will be built in the next ten years.
It is crucial to avoid ‘carbon lock-in’ and make the
right decisions now about power sources that will
still be operating in decades to come.
• A decarbonised electricity sector will help
sectors like homes and transport decarbonise by
swapping gas heating for electric heating, and
swapping petrol/diesel vehicles for electric ones.
• It has high potential for rapid and large
emissions reductions.
• Focus on the electricity sector offers the most
cost-effective way to meet overall carbon
targets, according to the CCC and others.9
However, the Government remains unclear about
its intentions, and this is damaging prospects for
low-carbon investment. It has accepted the carbon
budgets for 2023-2027, but not yet come to a firm
view on what is appropriate for the electricity sector
to 2030, preferring to say that flexibility is required
and that the electricity sector will be “largely
decarbonised during the 2030s” [our emphasis].
This “largely” and “during” formulation would allow
extensive use of unabated gas-fired capacity in
2030 and beyond, which the CCC said in September
2012 was “incompatible with meeting legislated
carbon budgets”. They went on to argue that its lack
of clear direction is undermining investment:
“The apparent ambivalence of the Government
about whether it is trying to build a low-carbon
or a gas-based power system weakens the
signal provided by carbon budgets to investors…
damaging prospects for required low-carbon
investments. This has been made clear to us in
our extensive discussions with the energy and
supply chain companies who it is hoped will
fund the very significant investments needed in
power generation over the next two decades,
and who have suggested to us that the sector
investment climate is currently very poor.” 10
The CCC had previously written to Secretary of State
Ed Davey in March, 11 in advance of the draft Energy
Bill being published, recommending that the Bill
set a “clear decarbonisation target” based on 50g/
kWh by 2030 and “a process to achieve it”. Following
Pre-Legislative Scrutiny of the Bill, the Energy and
Climate Change Select Committee echoed this
recommendation; and the CCC’s September letter
to Davey12 argues this should be included in the Bill
when it is laid before Parliament. Ed Davey has told
the Energy and Climate Committee that he has “an
open mind” about the target, and that Government
is currently considering it.
The Chancellor, George Osborne, privately disagrees.
He has argued that “setting inflexible targets on the
energy sector is inefficient”.13 In fact the opposite is
true – decarbonising power is the cheaper option
and setting a target helps lower costs. Without a
clear and certain electricity decarbonisation target
for 2030, there is a major danger of over-reliance on
gas and coal, requiring much more costly action in
sectors such as transport and industry.
Indeed, the CCC say that “decarbonising to around
50g/kWh [by 2030] is desirable across a wide range
of fossil fuel prices, even in the absence of one of
CCS or new nuclear… this reflects the significantly
lower costs of reducing emissions in the power sector,
compared with other marginal options to 2030”.14
AEA’s modelling for DECC states that “to minimise
welfare loss”, the 2020s would see “extremely rapid
decarbonisation of grid electricity”15.
Other sources agree:
• A meta-study by the Energy Research
Partnership in 2010 (chaired by DECC’s Chief
Scientific Advisor David MacKay) reviewed 20
decarbonisation scenarios and concluded that
there was “consensus on [the] need for rapid
decarbonisation of power generation”.
“decarbonising
power is the
cheaper option and
setting a target
helps lower costs.
Without a clear
and certain
electricity
decarbonisation
target for 2030,
there is a major
danger of overreliance on gas
and coal”
• UKERC, in their report Decarbonising the UK
Energy System (2009), state: “In all scenarios, the
electricity supply sector decarbonises first and
most thoroughly, and, in 80% [emissions cuts by
2050] scenarios, is substantially decarbonised by
2030”.
• The CBI said in their written evidence to the
Energy and Climate Change’s Committee’s
inquiry that “CBI analysis (Decision Time, 2009)16
supports the Government and Committee on
Climate Change view that the UK needs to largely
A plan for Clean British Energy Powering the UK with renewables – and without nuclear
5
decarbonise its electricity grid by 2030.”17
To date, DECC have not published any alternative
scenarios that show other sectors picking up the
slack to make up for deferred decarbonisation of the
power sector.
A decarbonisation target would also give greater
certainty to investors wanting to invest in the UK’s
power sector. Lowering this ‘policy risk’ would lower
the cost of capital, and make it cheaper to achieve
climate goals. The CBI say that “for policy risk to
be minimised, potential investors need to see clear
long-term trajectories”.18 Lowering the cost of capital
6 is crucial for a cost-effective low carbon transition –
low carbon has very low operating costs compared
with high-carbon options, but higher capital costs.
As a result financing costs are critical.
As Lord Stern and Dimitri Zenghelis stated in a
presentation to the Treasury earlier this year:
“What is needed to restore confidence is a
clear strategic vision with supporting policies
to guide investors. If [the] rationale for
intervention is credible over [the] medium
term, then clear Government commitment can
leverage investment.” 19
A plan for Clean British Energy Powering the UK with renewables – and without nuclear
Section Two
The path to 2030
1. A renewable solution: decarbonising
without nuclear power
New nuclear is not needed to meet the UK’s climate
goals. DECC Secretary of State Ed Davey20 and
DECC’s Chief Scientific Advisor21 have both said
we can decarbonise without nuclear. Analysis
and modelling by Garrad Hassan22, the Centre
for Alternative Technology23 and the DECC 2050
Pathways project24 all show a variety of different
scenarios exist for decarbonising without new
nuclear. All deploy high levels of renewables. Other
analyses show similarly high levels of renewables
can be deployed – ARUP for DECC showing 305 TWh
by 2030,25 the CCC showing 298 TWh by 2030.26 The
table below summarises these findings.
By 2030, the UK
would rely on a
diverse mix of
nine technologies
– offshore wind,
onshore wind,
gas CCS, gas,
solar, wave, tidal,
geothermal, and
hydro power,
coupled with
greater levels of
interconnection”
2. An illustrative pathway
Friends of the Earth has used the DECC 2050
Pathways model to set out one indicative pathway
which does not involve new nuclear build.
This pathway sets out a transition from the UK’s
electricity being 75% fossil-fuelled in 2010, to
roughly 75% renewable by 2030.
By 2030, the UK would rely on a diverse mix of nine
technologies – offshore wind, onshore wind, gas CCS,
gas, solar, wave, tidal, geothermal, and hydro power,
coupled with greater levels of interconnection,
energy storage and smart demand management
methods to ensure reliability and security of supply.
Study Total demand (TWh) Renewables (TWh) Renewables (%)
in 2030 in 2030 in 2030
425
373
88%
Garrad Hassan, Stretch scenario, ambitious demand 344
295
87%
Arup for DECC 305
CCC 65% renewables scenario 462 300 65%
DECC pathways – CPRE model 420 284 68%
DECC pathways – FOE lower demand 398 292 73%
DECC pathways – FOE higher demand 466 348 75%
Current official DECC projections 409 138 34%
Garrad Hassan Stretch scenario, central demand A plan for Clean British Energy Powering the UK with renewables – and without nuclear
7
This scenario is illustrative, and although it has
clearly far more ambition for renewables than the
Government does, it is cautious in two respects:
UK Electricity mix 2010
370 TWh of demand
• It has less renewables generation than some
other studies, both in percentage and absolute
terms. Higher proportions of renewables are
possible. The technical potential is much
higher, at 850 TWh+ according to the CCC. For
comparison, 2010 UK demand for electricity
was 370 TWh27. Our scenario assumes 350 TWh
of renewables by 2030, whereas one of DECC’s
pathways assumes 500 TWh from wind alone.
Modelling by engineering consultancy Garrad
Hassan for WWF shows that 87-88% renewables
is a strong ‘stretch’ scenario for 2030 for the UK.
• It assumes higher demand than the other
studies. Although we assume major progress
on demand reduction and energy efficiency, we
are assuming this is countered by the need for
very large amounts of electricity to decarbonise
other sectors such as transport and heating. Less
renewables might be needed if more progress
is possible on demand reduction. We assumed
the maximum energy efficiency allowable by the
DECC model. However, recent analysis appears
to show far greater energy efficiency is possible.
A July 2012 draft report for DECC by McKinsey28
argues that an enormous 155 TWh of electricity
demand reduction is possible, and 140 TWh of
that at negative cost.
8 UK Electricity mix 2030
470 TWh of demand
A plan for Clean British Energy Powering the UK with renewables – and without nuclear
3. Trajectory to 2030
The following graphs show FOE’s indicative pathway
for the UK electricity system to 2030.
Electricity generation to 2030
Renewable electricity generation to 2030
Friends of the Earth’s indicative pathway to 2030
TWh 2010
2015
2020
2025
2030
Unabated thermal generation 290 250 215 165 60
Carbon Capture Storage (CCS) 0
5
10
25
50
Nuclear power
50
45
25
10
10
Onshore wind
10
25
40
55
60
Offshore wind
4
22
60
125
195
Hydro/Tidal/Wave/Geo 5 7 1222 50
Solar PV
0162236
A plan for Clean British Energy Powering the UK with renewables – and without nuclear
9
Friends of the Earth’s illustrative pathway for future
UK electricity generation is very similar to DECC’s
projections up to 2020, with rapid increases in
renewables and falls in coal and nuclear.
Between 2020 and 2030 DECC sees a sudden
levelling off in the 2010-2020 growth in renewables,
and a rapid growth in nuclear. By contrast, FOE sees
a continuing growth in renewables. This seems more
realistic given the likely growth in supply chains,
build-up of deployment, and falls in costs, coupled
with the large available potential. FOE’s pathway
also anticipates faster growth in CCS than DECC
projects, more rapid decline in unabated fossil
fuel generation, and a continuing fall in nuclear
production.
Friends of the Earth’s concern is that if the
uncertainty in the policy environment for renewables
is not cleared up very soon, then its recent growth
will not continue, and it will be replaced by a new
dash for gas. Furthermore, if the Energy Bill focuses
on forcing through Contracts for Difference (CfDs)
primarily to suit new nuclear build in the 2020s,
it is unlikely this mechanism will work well for
renewables, also leading to more gas generation in
the 2010s.
The following graphs illustrate trajectories for each
technology under the pathway put forward by FOE,
compared to DECC’s scenario.
Unabated fossil-fuelled electricity
10 A plan for Clean British Energy Powering the UK with renewables – and without nuclear
Renewables
Nuclear
Carbon Capture and Storage
A plan for Clean British Energy Powering the UK with renewables – and without nuclear
11
4. System balancing and
keeping the lights on
balancing out to 2030:
The UK’s electricity supply and demand both vary,
and have always done. On supply, a nuclear power
plant might suddenly shut down, or a windy or still
day might see increases or decreases in wind power.
For demand, it will be low at 4am, and very high
just after Corrie finishes and the kettles go on. To
deal with this, the National Grid balance supply and
demand. As they say: “this is something we do many
times every day, and have done for years. It is a
normal part of our day job, and we have a number of
well-proven tools to help us do it”.29
• Greater use of interconnectors – the UK is
relatively unconnected with other electricity
grids. Greater interconnection would allow
import and export of electricity with other
countries, a cost-effective way of balancing
countries’ systems. We use 4 GW of
interconnection now; we assume an increase
to 30 GW by 2030, with extra links to Norway,
Ireland, and Northern Europe. Wind power is a
particularly good fit with hydro power – which
would be helped by interconnection with Norway
and its vast hydro resources.
This is a difficult and technical job, but one that
works and will continue to work with increased
renewables. The Government report that
• Pumped storage and stand-by plant – hydro and
gas plants to cope with shocks and long winter
windless spells.
“Our view that the current framework is
capable of addressing these challenges [of
‘greater intermittency’] is supported by National
Grid, which has stated that it considers that
balancing electricity supply and demand
would be manageable at 2020 with around
30GW of wind”.30
IPPR have looked at the case studies of Ireland,
Spain and Portugal. These are countries, like the UK,
with little current interconnection; who all have wind
levels now at similar levels to the UK’s predicted level
in 2020; and who have all coped fine in recent years
with the critical issue of a long, cold, calm spell.31
• Diverse mix of technologies – use of a wide
range of seven different types of renewables,
plus gas CCS and some unabated gas. Greater
offshore wind would see total wind output
more balanced due to the diverse area wind
generation would cover including many different
areas – the Irish Sea, the English Channel, Moray
Firth, Dogger, Hornsea, etc.
• Storage and demand-side responses – 15%
of demand could be flexible, there are many
different complementary approaches, including
smart meters, electricity stored and fed back into
the grid from electric vehicles and smart grids.
As the Energy and Climate Change Committee
reports32 there is no immediate threat to supply
from a rising proportion of electricity coming from
renewable sources and as conventional power plant
close, and it is only in a ‘worst case scenario’ that a
risk arises before 2020.
Analysis of our scenario using DECC’s pathway
model against a five day winter period (with very
little wind or sun, and high demand) shows our
renewables mix has sufficient back-ups to cope with
this – both peak power and energy supplied over the
whole period.
However beyond 2020, as the quantity of
renewables increase further, changes do need
to be made to accommodate the high levels of
renewable power we believe are essential. There
are many deployable approaches which can be
used to manage this, and at reasonable cost –
increased electricity storage,33 interconnectors, and
increasing the ability of electricity demand to reduce
temporarily (known as ‘demand side response’).
European Climate Foundation modelling of a
Europe-wide switch to 40%, 60%, 80% and 100%
renewables by 2050, found that “all scenarios
maintained or improved electricity supply reliability
and energy security”34 – with key factors being
greater interconnection, additional flexibility in
demand and increased back-up capacity.
This is how FOE’s pathway approaches system
12 The CCC report that “even for renewables shares up
to 65% in 2030 and 80% in 2050, Pöyry’s analysis
suggests that the cost associated with intermittency
A plan for Clean British Energy Powering the UK with renewables – and without nuclear
is only up to around 1p/kWh of additional
intermittent renewable generation”(p60)35.
We have also looked at a lower demand scenario of
400 TWh;36 the main differences are shown in the
table below. With lower demand, there would be
lower system balancing requirements.
Higher demand Lower demand
Total demand (TWh) 466 398
Offshore wind 196 140
Gas 61 55
Illustrative system 20 GW storage
20 GW storage
30 GW interconnection
30 GW interconnection
14 GW stand-by
0 GW stand-by
OR OR
balancing However beyond 2020, as the quantity of
renewables increase further, changes do need
to be made to accommodate the high levels
of renewable power we believe are essential.
7 GW storage 7 GW storage 15 GW interconnection
15 GW interconnection
23 GW stand-by
9 GW stand-by
The other issue with security of supply is ensuring
that new capacity will come on-stream in time
to replace power stations which are closing. This
is in people’s minds, as a large amount of coal
capacity is set to close this decade, and many of
the UK’s nuclear reactors are nearing the end of
their lives. However, there is a very large amount
of new gas-fired capacity which has been given
planning consent in the last three years, and there
is no “supply gap”. DECC’s official projections have
capacity increasing from 99 GW in 2012 to 107 GW
in 2020 and 111 GW in 2030. They assume 5 GW of
new gas between 2011 and 2020 – however, there
is 16 GW of new gas with planning consent37. New
nuclear is irrelevant to the issue of security of supply
in the 2010s, as any new stations built would not be
generating power until the 2020s.
A plan for Clean British Energy Powering the UK with renewables – and without nuclear
13
Section Three
How this is a cost-effective route to take,
and a benefit to the UK economy
1. Overview
We have argued that the UK must have a 2030
decarbonisation target: to ensure we are on track
to meet our climate targets, and to give clarity and
certainty to investors in low-carbon infrastructure.
We have also argued that we can meet such a
target while ensuring system reliability and security
of supply, without nuclear, and that this would
be sensible, given nuclear’s other environmental
downsides and risks. A balanced mix of a wide
variety of renewable technologies, CCS and extra
measures such as interconnection to balance the
system can do the job.
The critical remaining question is whether we can do
this at reasonable cost. This section argues that the
answer to this is an overwhelming yes.
This section looks at the varying costs of different
low-carbon technologies. But it is worth saying first
that although decarbonising the economy has costs,
staying hooked on fossil fuels would be much more
costly – as we pay the price for inaction on climate
change and remain reliant on increasingly expensive
imported fossil fuels. Even a shale gas boom is very
unlikely to have a major impact on EU gas prices as
it has in the States.
So what is the most cost-effective way to
decarbonise our electricity sector by 2030? There
are 4 essential points here:
• Energy efficiency and demand reduction is by
far the cheapest policy to pursue; it reduces the
overall cost of any investment programme, highor low-carbon.
• Onshore wind and hydro are already costeffective renewable options. Solar has fallen
dramatically in recent years, and is predicted
to keep falling. With strong policy support from
Government, major cost reductions by 2020 are
likely for offshore wind.
• Rising gas prices are the overwhelming cause
of electricity price rises in recent years;38 fossil
fuel prices are likely to continue to rise,39 and will
do so despite the overblown claims some are
making for the shale gas industry.
• Nuclear costs have spiralled. There is no
guarantee of future cost reductions. In addition,
many of nuclear’s costs are hidden from
conventional cost calculations; the reality is that
nuclear costs far more than is usually asserted.
This graph updates estimates from 2011 and
previously, to account for new analysis in 2012:
• It takes the August 2012 Imperial College figures
for nuclear power, updating the Government’s
figures to account for revised capital costs.
Future nuclear costs are extremely uncertain,
so estimates have not been included post 2020.
These figures do not include the major additional
Levelised cost projections for different technologies
“Rising gas
prices are the
overwhelming cause
of electricity price
rises in recent years;
fossil fuel prices are
likely to continue
to rise, and will
do so despite the
overblown claims
some are making
for the shale gas
industry”
(Source: Arup, Parsons Brinckerhoff et al40)
14 A plan for Clean British Energy Powering the UK with renewables – and without nuclear
subsidies nuclear receives, which are set out in
more detail below. So, real figures for nuclear
would be higher than shown here.
• It takes the January 2012 figures on solar capital
cost reductions from Parsons Brinckerhoff for
DECC, and applies them to update Arup’s 2011
estimates.
• It uses averages of Mott McDonald 2010 and
2011 and Arup 2011 projections for on-shore
wind (these appear not to have changed in
2012).
• It does not include 2012 projections for offshore
wind that its costs could fall to £100/MWh by
2020. These projections are conditional on a
strong, supportive policy environment which is
currently in the balance.
• It uses Parsons Brinckerhoff 2011 data for gas.
However, this uses DECC’s old gas and carbon
price projections, which DECC has subsequently
increased – consequently the figures for gas will
be higher than shown here.
• Gas CCS is not included as there is no
commercial scale plant in operation; Mott
McDonald indicate that cost might start at
£105/MWh.41
A further point about this graph is that it is
comparing costs at the same project start date.
But the same start data means very different dates
for electricity generation: a solar plant might start
in 2012, and be generating by 2013, whereas an
offshore wind plant might generate by 2020 and
nuclear might have a project start of 2012, start
building in 2018 and start generating by 2025.
Faced with this, the Government might want to
consider comparing the cost of this nuclear plant
against a solar plant starting in 2024, not one
starting in 2012. Such a comparison would make the
economic case for nuclear even worse against quickto-deploy and cost-falling technologies like solar. In
addition nuclear costs are unlikely to fall much in
the next ten years as so few units are being planned
and nothing will have been finished. This is in stark
contrast to solar, which has extremely rapid learning
curves and deployment cycles.
gas, coupled with falls and predicted further falls
for renewables, mean that renewables will be the
most cost-effective technology for electricity system
decarbonisation, coupled with demand reduction
and energy efficiency measures.
The rest of this section looks at nuclear, wind, solar
and gas costs in more detail.
2. Nuclear
Nuclear costs keep on going up. Construction costs
have spiralled at the reactors currently being built
at Flamanville in France and Olkiluoto in Finland,
and both projects are years late. Post-Fukushima the
need for more stringent standards is likely to push
costs up, not down. Meanwhile, investor confidence
in nuclear is collapsing, with nearly all the major
utility companies scrapping their plans to build
plants in the UK.
“...investor
confidence
in nuclear is
collapsing, with
nearly all the major
utility companies
scrapping their
plans to build plants
in the UK”
Despite this, the Government still claims nuclear is
cheaper than gas or wind at around £74/MWh.42
But August 2012 analysis in a working paper by
Imperial College’s Centre for Energy Policy and
Technology (ICEPT)43 argues that the Government’s
figures don’t reflect the realities of nuclear
construction, with Government under-estimating
construction times, cost escalation and financing
costs, and over-estimating plant life and load
factors.
Imperial argue that levelised costs may be over
£160/MWh unless cost escalations can be all but
eliminated. Their central figure of £164/MWh
assumes only 5.4% annual cost escalation, whereas
the two most recent EPR nuclear reactors being
built, at Flamanville and Olkiluoto, have had annual
cost escalations of over 16%.
Other analysts such as Dr David Toke44 of
Birmingham University and Peter Atherton from
Citigroup45 have also argued that new nuclear plants
are likely to need price guarantees from Government
at over £160/MWh. EDF themselves have suggested
they could need a ‘strike price’ as high as £140/MWh
under the Energy Bill.46 Such price guarantees would
contravene the Coalition Agreement by providing a
public subsidy to nuclear.
Overall, high costs for nuclear and rising costs for
A plan for Clean British Energy Powering the UK with renewables – and without nuclear
15
Levelised cost of nuclear energy (£/MWh) in 2013
Source: ICEPT, 2012 - Cost estimates for nuclear power, page 2
What’s more, the big energy utilities themselves
increasingly seem to agree that nuclear is simply
unaffordable. In the past year, SSE, RWE and E.On
have all pulled out of bidding to install new nuclear
in the UK. Of the Big Six, only EDF and Centrica
remain players in the market.
down in the past. Mott McDonald, who provided the
Government’s 2010 cost estimates, say that nuclear
has a “historically poor rate of cost reduction”47 and
that of all technologies, learning rates for nuclear are
“the lowest, in some studies even showing negative
learning”.48
Future nuclear costs are extremely uncertain. The
nuclear industry has not managed to bring costs
Cost estimates for EPR and AP 1000 nuclear reactors
Source: ICEPT 2012, page 14.
16 A plan for Clean British Energy Powering the UK with renewables – and without nuclear
These figures also do not include three major
additional subsidies nuclear receives:
• Nuclear operators benefit from a huge
additional public subsidy by having very
limited liability in the case of accidents – 1.2
billion Euros maximum, compared with the costs
of the Fukushima catastrophe of $100-250
billion. By not having to insure itself properly, it is
getting a huge public subsidy, and the taxpayer
will pick up the overwhelming cost of any nuclear
disaster.
• Operators also only pay a tiny amount for
future decommissioning costs and waste
disposal costs. Although nuclear waste remain
toxic for many thousands of years, the use
of discount rates in cost calculations mean
any costs more than 50 years into the future
have next-to-no value. Decommissioning costs
swallow a huge percentage of DECC’s current
budgets, for nuclear decisions taken many
decades ago.
• Operators cannot guarantee they will pay
costs in future, nor are they required to do so.
The industry has a very bad record of requiring
extensive Government bail-out. This will continue
– the industry’s by-products are too toxic for it to
fail. The Government will always have to bail it
out if it gets into difficulties – so these risks and
their costs are borne by the taxpayer.
3. Solar
Solar costs are plummeting. In the last year alone,
2012 analysis49 for the Government reports 50%
falls in capital costs for larger solar systems. Capital
costs are the main factor in solar’s overall levelised
costs – applying the recent capital cost reductions
to the Government’s previous solar cost projections
shows major falls in 2012 levelised costs, and
continuing falls in years to come:
Comparison of 2011 & 2012 median
projections, 250-5000 kW solar
A plan for Clean British Energy Powering the UK with renewables – and without nuclear
17
Updated 2012 levelised cost
projections for 250-5000 kW solar
Source: based on Parsons Brinckerhoff and Arup. 50
Other analysts project further falls in solar – Ernst
and Young have previously said that solar projects
on grid sites can reach parity with retail power by
2017.51
As David Cameron stated at the Clean Energy
Ministerial held in April 2012: “Government and
industry are together proving that we can get costs
down quickly. Already, solar costs have halved in two
years.”52
4. Wind – onshore and offshore
Onshore wind is one of the cheapest low-carbon
technologies. In Mott McDonald’s 2011 report to
the CCC it came out at £83-£90/MWh, lower than
nuclear (£89/MWh in the same report)53. Its costs
are falling, reflected in the recent Government cuts
to its subsidy levels.
Bloomberg New Energy Finance analysts report that
the best wind farms in the world already produce
power as economically as coal, gas and nuclear
generators; the average wind farm will be fully
competitive by 2016.54 They say that from 19842011 “the levelised cost of energy from onshore
wind has fallen in 2011 real terms from EUR 200/
MWh to EUR 52/MWh. This is only EUR 6/MWh more
expensive than the average cost of a combinedcycle gas turbine plant in 2011.”
Offshore wind is more expensive, but the Crown
Estate’s May 2012 Offshore Wind Cost Reduction
Pathways Study shows several pathways that could
bring offshore wind costs down to £100/MWh or
less by 2020, with further cost reductions possible
18 in the 2020s.55 Their report makes clear that longterm predictability in terms of minimum volumes
of deployment and financial support are major
requirements to deliver these cost reductions. The
Government’s Offshore Wind Cost Reduction Task
Force June 2012 report also concluded that:
“Offshore wind levelised cost of energy can be
reduced to £100/MWh by 2020… with the continued
determination of all parties the UK offshore-wind
sector should be able to deliver the vast quantities
of low-carbon electricity the country needs in an
affordable manner, while providing thousands of
jobs and being an engine of growth for decades to
come”.56
The Offshore Valuation Report,57 commissioned by
a consortium of industry and governmental bodies,
similarly argued that the costs of fixed offshore wind
could go down by 50% by 2030 (to a levelised cost
of £70-£80/MWh, compared to around £150/MWh
today).
Previous estimates of costs assumed that Round
3 offshore wind sites would be more expensive
(as they are in deeper, further-out water), but the
Offshore Valuation report suggests this would
be countered by faster wind speeds and more
consistent output, and that costs may be similar.
There is potential too for floating offshore wind to
cut costs – both allowing penetration of deeper
waters and cutting foundation costs.
Even before these reports, offshore wind was
predicted in various studies to fall to below gas
generation prices between 2020 and 2025.58
A plan for Clean British Energy Powering the UK with renewables – and without nuclear
5. Gas
a. Unabated gas
Continuing to use large quantities of unabated
gas is incompatible with the UK’s climate targets.
It would also come with a high economic cost, for
two reasons. First, the UK is increasingly reliant on
imports of gas as North Sea Gas runs out. Second,
the price of gas has increased rapidly in recent years,
and is predicted to keep on rising.
Projections of gas prices, pence per therm
Source: Ofgem, WEO, IEA, DECC et al. 59
A plan for Clean British Energy Powering the UK with renewables – and without nuclear
19
b. Shale gas
International Energy Agency Chief Economist Fatih
Birol has stated:
Growing UK reliance on gas imports...
...even with a shale gas boom
“An increase in unconventional gas
production is definitely not the optimum path.
The optimum path would be to see more
renewables, more efficiency and more low
carbon technologies”.60
Shale gas has recently been cited as a possible
‘game-changer’, based on the major effect it has
had in the USA. However, even a shale gas boom in
Europe and the UK will not have more than a minor
effect on either price61 or on the UK’s increasing
reliance on imports – as the graph below shows.
Pöyry reports that even under a boom scenario for
shale gas, additional shale gas production even
by 2030 would only make a small dent in our net
imports.62 The European Commission report that for
Europe as a whole, “Shale gas production will not
make Europe self-sufficient in natural gas. The best
case scenario for shale gas development in Europe is
one in which declining conventional production can
be replaced and import dependence maintained at
a level around 60%.”63
As Secretary of State Ed Davey has stated: 64
“Analysts think shale gas extraction in Europe
will be more expensive than in the US, and
probably won’t happen at scale until the end
of this decade. And we’re competing with fastgrowing economies which are hungry for gas.
Demand in the Middle East is rising steeply; the
IEA think it will rise 20% in the next five years,
outstripping supply. China alone is expected
to double its demand by 2017. No wonder the
consensus is that gas prices will either remain
high, or go higher.”
Source: graph based on DECC65 and Pöyry.66
c. Gas with CCS
Gas with CCS would be compatible with carbon
budgets, and assist with system reliability. CCS is
likely to be a technology that is necessary worldwide
to tackle climate change, and developing it in
the UK may help in its application to industrial
processes. So, although the economics and
technical difficulties of CCS are not resolved, we
include gas CCS in our illustrative pathway for how
the UK could decarbonise.
Gas CCS costs are uncertain. Mott McDonald for
the CCC see it as a “medium price option, at around
£105/MWh”, not falling much because “carbon
price increases offset capex and performance
improvements”.67 Also, these estimates were based
on DECC’s 2010 projections for gas and carbon
price, which have since been updated and have
increased.
Dependency on gas imports is already high, and
growing – and even boom scenarios for shale gas do
not alter this.
20 A plan for Clean British Energy Powering the UK with renewables – and without nuclear
6. Macro-economic benefits
Investment in the green economy can be a major
element in the UK’s economic recovery. A wealth of
recent research attests to this, and only a little of it
is summarised here.
Opportunities
There is a rapidly growing £3.3 trillion global market
in low carbon goods and services.68 The UK has a
strategic advantage in renewable power: we are
already a world leader in offshore wind power, and
emerging wave and tidal technologies, with huge
potential for export growth. The UN calculates that
a green global economy would deliver higher growth
in GDP and GDP per capita than business as usual
but countries such as Brazil, China and India are
mobilising investment to tackle emissions far faster
than many developed economies.69 The UK risks
losing its strategic advantage if it doesn’t shape
policies to grasp the opportunity.
Growth
The CBI recently calculated that already the green
economy contributed £122 billion or 8 per cent to
GDP and may have accounted for over a third of all
UK growth in 2011/12. The CBI argue that “moving
to a low-carbon economy can drive significant
business investment and create many new jobs
across the country. This is happening now, in every
sector, in every region, and if we can build on these
foundations, it can be a catalyst to transform our
export figures and rebalance our economy over the
long-term”.
the fossil fuel-based sector.72 CBI analysis suggests
that green business activity now employs around
940,000 people in the UK, with two thirds of these
jobs located outside London and the South East.73
According to the Renewable Energy Association,
their industry already supports 110,000 jobs across
the supply chain, nearly 21,000 new jobs were
announced in 2011 alone and the industry could
support 400,000 by 2020.74
Decarbonising the electricity system is a core part of
this green economic success story. It:
• Is a central element of the least-cost path to
decarbonise the economy overall.
• Already employs 110,000 people, with
potential to create and maintain tens of
thousands of jobs more. Germany’s renewables
sector employs 370,000 people thanks to 10
years of strong renewables policies.75
• Will greatly improve the UK’s balance of
payments, by reducing the UK’s multi-billionpound annual net imports of fossil fuels.
• Will help regional economies grow right across
the UK – renewables has a diverse range of jobs,
all over the nation, not concentrated in one or
two regions.
• Will help the UK capture a growing share of
the multi-trillion pound green technology
market.
With the right policies in place, green business can
be a major pillar of our future growth and could add
£20 billion extra in annual GDP by 2015 and knock
£0.8bn off the trade gap, within the lifetime of this
Parliament.70
In 2011 alone, £6.9 billion worth of new investment
was announced in the UK’s renewables industry.71
Driving investment in home grown clean energy
and energy saving will help keep consumer money
circulating in the UK economy contributing to
economic recovery rather than sending it to Qatar
and Norway to import gas.
Jobs
The renewable energy and low carbon sectors
generate more jobs per unit of energy delivered than
A plan for Clean British Energy Powering the UK with renewables – and without nuclear
21
Conclusion
In order to deliver clean British energy, three things are
needed from the forthcoming Energy Bill:
•A clear target for the electricity system to be decarbonised to 50g/kWh by
2030, on the face of the Energy Bill. This will give long-term policy certainty
and clarity, bringing down the costs of investment.
•Demand reduction, response and energy efficiency need to be enshrined at
the heart of the Energy Bill. The planned Capacity Market will not ensure that
the vital electricity storage, demand response and interconnectors needed to
facilitate high levels of renewable electricity after 2020, are delivered.
•Support renewable technologies through a Fixed feed-in tariff, rather than
the current complex Contracts for Difference mechanism, which is designed to
subsidise nuclear and keep out smaller market entrants. Exclude nuclear from
the feed-in-tariff.
22 A plan for Clean British Energy Powering the UK with renewables – and without nuclear
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24 A plan for Clean British Energy Powering the UK with renewables – and without nuclear
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A plan for Clean British Energy Powering the UK with renewables – and without nuclear
25
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pdf. May, for the CCC.6.4.1 and 7.3
68. http://www.bis.gov.uk/assets/biscore/business-sectors/docs/l/12-p143-low-carbon-environmental-goods-and-services-2010-11
69. http://www.unep.org/greeneconomy/Portals/88/documents/ger/GER_synthesis_en.pdf
70. http://www.cbi.org.uk/media-centre/press-releases/2012/07/green-or-growth-is-a-false-choice-%E2%80%93-cbi-chief/
71. DECC, 2012. Renewables Investment and Jobs. http://www.decc.gov.uk/assets/decc/11/meeting-energy-demand/renewable-energy/3994-renewables-investment-and-jobs-announced-1-april-t.pdf
72. http://rael.berkeley.edu/sites/default/files/WeiPatadiaKammen_CleanEnergyJobs_EPolicy2010.pdf
73. http://www.cbi.org.uk/media-centre/press-releases/2012/07/green-or-growth-is-a-false-choice-%E2%80%93-cbi-chief/
74. REA, 2012. Renewable Energy Made in Britain www.r-e-a.net/resources/rea-publication.
75. REA, 2012, ibid.
26 A plan for Clean British Energy Powering the UK with renewables – and without nuclear
A plan for Clean British Energy Powering the UK with renewables – and without nuclear
27
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