The new UK Labour Party government has promised that bills will be £300 cheaper because of renewables.
The advantage of solar and wind is that once the assets are built the running costs are very low, mostly the finance costs from the original investment, whereas a gas fired power station has both the investment costs and operational costs from having to buy gas.
The investment firm Lazard created a measure for this disparity called the Levelized Cost of Energy (LCOE). In their latest report the cheapest costs for onshore wind are $27 MWh and for solar at $29 MWh, whereas gas generation is $45 MWh. Renewables are 60% cheaper.
For the UK average £780 electricity bill this would mean £312 savings. Bingo - the argument is settled.
But energy costs aren’t all the costs on the bill, they’re more like two thirds, and we already have a system that’s 40% renewables. Halving the cost of energy in the remaining 60% takes only one third off the bill, more like £150.
And what about that cold still dark night in February when our wind turbines are still? We have a few green domestic choices of how to cover this gap – nuclear and batteries, but today these are often more expensive than gas.
Building interconnectors and changing consumer behaviour would help, but neither are easy.
When the stakes of inaction are so high, it’s time to be honest about the real costs. The system we need might cost more than the system being replaced.
