Is wind power cheaper than natural gas? – Watt?

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Paul Homewood

Offshore wind power V gas power generation?

Which is cheaper, offshore wind power or natural gas power?

When we discuss this issue, we always seem to go in circles! Politicians and the wind energy lobby always refer to the official levelized costs last released by BEIS in 2023, often dishonestly incorporating carbon pricing into the cost of natural gas generation, even though it is a tax, not a cost.

Others point out that levelized costs cannot be compared simply because they do not include the indirect costs associated with intermittent renewables, in particular paying for spare capacity.

In fact, the only valid comparison is between the total cost of wind power and the fuel costs of a combined cycle gas turbine power plant. Of course, the latter still need to be fully staffed and maintained while on call, so these costs are essentially fixed. The only additional cost they incur in actually generating electricity is the fuel itself.

The following analysis is based solely on the assumptions used in the above BEIS generation cost report and other official data.

In 2023, natural gas power generation will reach 101 terawatt hours, accounting for one-third of the UK's total power generation.

The government's latest medium-term forecast for gas prices is around 70p/ther, or £24/MWh. Fuel efficiency is 53% and electricity generation costs £45 per megawatt hour, totaling £4.5 billion per year.

https://www.gov.uk/government/publications/fossil-fuel-price-asminations-2024

Now let’s talk about offshore wind.

BEIS costings assume a capital cost of £2,200/kW – the upper end of its range and a more realistic figure given the significant rise in strike prices offered at last summer's CFD auction. To generate 101 terawatt hours, we would need 26 gigawatts of new offshore wind capacity, more than we currently have. The total capital cost is £57 billion.

To this can be added the operating costs of offshore wind, which BEIS estimates at £19/MWh.

Thus, over a 15-year life, operating costs plus capital amount to £86 billion. The cost of natural gas to produce the same amount of electricity over the same period would be £67 billion.

Even so, the cost of wind power is still underestimated, as we should add the cost of grid upgrades, which are expected to exceed £100 billion, or at least a fair share of the additional 26 GW.

We know that the cost of wind power already in the system is much higher than BEIS's optimistic calculations. But even if these are used for new wind farms, CCGT is clearly much cheaper.

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