not many people know
Paul Homewood
https://www.gov.uk/government/publications/electricity- Generation-costs-2023
I asked DESNZ to send me the results of their work on the levelized cost of generation published last year. At that time, their cost for CCGT was £114/MWh, or £54/MWh (excluding irrelevant carbon costs).
I'm particularly interested in what the cost is based on current fuel costs.
The spreadsheet they sent me shows that they assume an operating efficiency of 53%. In other words, to generate 1 MWh of electricity, 1.886 MWh of fuel needs to be input.
Their original costings assumed gas prices of 64p/them in 2025, falling to 56p/therm in 2026 before rising back to 67p/therm in 2049 (all at 2021 prices). Levelized costs are based on the plant's 25-year life cycle.
The latest DESNZ fossil fuel price assumptions, released in September, put prices at 75p next year before falling back to 70p. Prices after 2030 are very subjective and we shouldn't really worry, although DESNZ believes prices will fall further, noting that increased liquefaction capacity will put downward pressure on prices:
Keep in mind, these are in actual 2023 prices.
https://www.gov.uk/government/publications/fossil-fuel-price-asminations-2024
If we enter next year's price of 75p, we get a fuel cost of £48.29/MWh, compared to the figure in the levelized cost report of £43.
Using 70p/therm (which seems to represent the next decade or so), the cost drops to £45.07/MWh. This represents a total cost (excluding carbon costs) of approximately £56/MWh.
Keep in mind that operating costs are still in 2021 prices, but the costs are small enough that there's almost no difference.
We need to compare these costs with the known CFD price for offshore wind (currently around £82/MWh).
While I don't think the cost of carbon is a cost in itself, it's worth noting that the levelized cost of carbon is £60/MWh, which means a carbon price of around £174/tonne of CO2. (Oddly, the spreadsheet uses £83.03/tonne, giving a cost of £28.66/MWh.) This year's carbon price is around £40/tonne, so CCGT generation costs have increased by around £14/MWh.
Given that gas generation tends to determine the wholesale market price of electricity (currently around £80/MWh), £14 would make a big difference. In other words, if the carbon pricing scheme is scrapped, wholesale prices could fall to £66/MWh.
I can email the spreadsheet to anyone interested.
Relevant
