Costing the Green Grid: Current and Future Technology - Highlighted Paper

From: Net Zero Watch

By: Andrew Montford

Date: January 26, 2024

Costing the Green Grid: Current and Future Technology

Executive summary

A recent Royal Society report claimed the electricity grid could be decarbonised without materially raising the cost per unit of electricity delivered (the ‘system cost’). The annual cost would be of the order of £30 billion. However, this conclusion relied on extraordinary input parameters:

• demand values that are very low, and hardly vary with temperature, apparently through use of an incorrect seasonal demand curve;
• highly optimistic cost and efficiency assumptions.

These assumptions included:

• 60% reduction in offshore wind capital cost
• 70% reduction in offshore wind operating costs
• 50% increase in offshore wind output • 30% reduction in solar capex
• 70% reduction in solar opex
• 90% reduction in electrolyser capex
• 45% increase in electrolyser efficiency
• 60% reduction in reciprocating engine capex
• 55% increase in reciprocating engine efficiency

compared to levels seen today. In order to deliver a decarbonised grid by 2050 at the overall cost stated in the report, these improvements would have to be delivered in the next 2–3 years.

The electricity system model presented in this paper reproduces the Royal Society’s results and then examines the effect of correcting the flaws.

• Using the correct seasonal demand curve increases costs by around  10%, to £33 billion per year. The latter figure represents around £1000 per household.
• Introducing interannual variability – that is, allowing for extra demand in cold years – increases annual spend to over £50 billion, or £1700 per household.
• Using assumptions representing current technology and costs,  but without allowing for interannual variability, increases annual spend to around £160 billion, or £5000 per household.
• If demand is allowed to vary year by year, then 2023 technology would give an annual spend of around £260 billion (perhaps £8000 per household).

This rate of spend would have to be sustained indefinitely.

Obviously, some reductions in costs should be expected by 2050, so the last scenario only determines the envelope of possible outcomes. However, it is clear that the Royal Society contains a significant error, having apparently used incorrect figures for their seasonal demand curve. The sheer scale of the optimism in its assumptions also means that it is misleading for the policy community.

Together, these flaws mean that the report should be withdrawn. (continue reading)

Costing the Green Grid: Current and Future Technology