Climate change: Welcome to the affordable energy transition
The “code red for humanity” that was articulated in the latest report by the UN’s Intergovernmental Panel on Climate Change has made it clear that we can no longer afford to carry on as before.
The cost of extreme heatwaves and extreme weather resulting in both droughts and floods is simply too large, whether it is measured in human, environmental or economic terms.
But can we afford to fix it?
I’m happy to say that, yes, we can.
Solar and wind is affordable
Dramatic reductions in greenhouse gas emissions will be required if we are to prevent the world from overheating.
This will require an energy transition that is as enormous as it is ambitious.
We must ditch energy produced from fossil fuels, such as coal, oil and natural gas, and replace it with renewable energy generated predominantly from solar and wind.
And we must do so immediately.
The challenge might appear unsurmountable.
To phase out fossil fuels, we must at least triple production of carbon-free electricity if we are to meet future energy needs.
But we can do this.
In fact, we can do this in a number of ways.
The best solution, both in practical and ethical terms as well as in terms of costs and benefits, will rely on solar and wind power generation.
Unlike alternatives, such as nuclear power or natural gas combined with carbon capture and storage, solar and wind power will not leave behind dangerous waste.
And unlike hydro, tidal and geothermal energy solutions, which will also make up parts of the energy mix, it is possible to scale solar and wind power quickly at affordable costs everywhere.
Carbon free energy systems can be as cheap as natural gas
Solar and wind power cannot be generated at night when the weather is calm, however. Therefore, we will also need to store electricity that is generated when the sun is shining or when it is windy, to be used whenever and wherever it is needed to provide light, heat and power for machines and vehicles.
The cost of carbon free electricity is therefore the sum of solar and wind power generation costs and the price of electricity storage solutions.
Different storage facilities will be appropriate for different situations, but in every case the challenge will be to deliver solutions at prices that can compete with fossil fuels.
Or put simply, we must come up with a renewable generation and storage solution that delivers electricity at prices that can compete with natural gas fired power plants.
Again, I’m happy to say that, yes, we can do that.
Nuclear and carbon capture and storage cannot compete
Baseload electricity currently costs €60/MWh. For a natural gas fired power plant this is split in €30/MWh fuel cost, €10/MWh CO2 tax and €20/MWh for everything else.
We expect the CO2 tax to triple before 2030. This means baseload electricity price will increase to €80/MWh if natural gas fired power plants remain the price-setting benchmark (1).
This immediately rules out nuclear power, where the levelised cost of energy (LCOE) is in well in excess of €100/MWh and where there is much uncertainty about final costs (2).
Natural gas with carbon capture and storage is also too expensive, coming in at be €90/MWh. Besides, such solutions can merely delay, rather than prevent, catastrophic climate change anyway (3).
Let’s not go there.
Wind-Solar-Storage energy systems can be competitive
Wind-Solar-Storage energy systems must meet three requirements in order to push the cost of carbon free electricity below €80/MWh.
- The optimal ratio of solar to wind power.
- The optimal combination of generation overbuild and storage duration.
- The optimal type of storage.
The right ratio of wind and solar power plants is the one that minimises monthly or seasonal variations in the energy output, because this removes the need for complex and expensive seasonal storage of electricity.
Such a best-case solution will require some capacity overbuild, probably about 50%, which will ensure enough electricity is generated during every month of the year.
Combining this with 100 hours of electricity storage using the optimal battery technology for such a duration will deliver the wind-solar-storage energy system with the lowest capital expenditure.
Different batteries do different things
We all know that batteries are getting better. Car batteries, for instance, are getting safer, more reliable, more durable and more efficient. Electric vehicle drivers no longer suffer range anxiety the way they used to.
But the kind of batteries we use for vehicles are not the ones we need for long duration electricity storage systems.
“At a time when a green recovery from the global pandemic is desperately needed, I cannot think of a better time to tell you that, yes, not only can we fix it; we are doing it already.”
For static installations, the power and energy to weight ratios are irrelevant, and there is no need to continuously charge or discharge the batteries at full power. In our wind-solar-storage system analysis we found that 30–35% utilisation is a realistic requirement in most cases.
In such cases, it can be up to 50% cheaper to store electricity in flow batteries than to use lithium batteries. In other words, we will need to produce a lot of different batteries to do very different jobs for us. Put simply, we will need lithium batteries for cars and flow batteries for large-scale long duration electricity storage.
This means that we must develop both a complex energy generation mix that will include solar, wind, hydro and other sources of power, as well as an energy storage system that combines different battery solutions, each of which will be fit for a specific purpose.
An affordable energy transition is underway
The general public does not know much about flow batteries, and perhaps they do not need to. These batteries are unlikely to be installed in people’s homes and are too big and bulky to be used in cars.
But in industry, they are set to become a big deal.
Our calculations show that Wind-Solar-Storage energy systems that include flow batteries can deliver electricity at the desired €80/MWh baseload.
In other words, the energy transition is affordable.
The implications of this are enormous. It basically means that we can afford to create better lives for everyone.
According to the most optimistic estimate, the global market for flow batteries is set to more than quadruple to $1bn by 2026. The global markets for solar power installations is set to reach $233.3bn during the same period. The onshore wind market is set to be worth $1,926.6bn by 2026, while the offshore wind market is set to be worth $56.8bn.
What we are observing here is an energy transition that has already begun, a transition that will create new green jobs and green economies where cities will have clean air and where countries and continents will avoid ever-worsening man made climate disasters.
At a time when a green recovery from the global pandemic is desperately needed, I cannot think of a better time to tell you that, yes, not only can we fix it; we are doing it already.
The affordable energy transition is already well underway. I am delighted to welcome you to take part.
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- Natural gas prices vary, assumed is $6/MMBtu or €5.1/MMBtu, 1 MMBtu =293 kWh, assumed plant efficiency 60%, 5.1/(0.6*293)= €0.03/kWh = €30/MWh. A 60% efficient NG plant emits 0.34 tonne CO2/MWh. The EU Allowance (EUA) CO2 price is volatile, €30/tonne was assumed in the calculation. This was the price in January, in August it was already €58/tonne. This shows that the assumed €90/tonne before 2030 is likely.
- Hinkley Point C, the UK’s first new nuclear power plant for more than 20 years, could only be built with a guaranteed and inflation corrected electricity price of €108/MWh for the next 35 years.
- CO2 capture processes are about 85% efficient. The power output of a NG plant should be increased by about 13% to power its own CO2 capture process. So a NG plant with CO2 capture still emits 17% of the CO2 of a power plant without storage. If electricity production is tripled, the total CO2 emission from NG power plants is only halved.
