Data
License: All rights reserved. Credit: Greenpeace

Infographic: The economics of gas & wind

Damian Kahya
Damian Kahya is the Energydesk editor and former foreign, business and energy reporter for the BBC. You can following him on Twitter @damiankahya
License: All rights reserved. Credit: Greenpeace

As a new report by Cambridge Econometrics claiming that a dash for wind would be better than a dash for gas for the economy, we run you through some of the key facts and figures comparing a dash for gas, with sourcing the energy from a clean alternative, in this case, wind:

Currently, as the graphic shows, it's gas that makes up most of the household bill with renewables making up a small fraction.

That could all change if we go for renewable energy, but, economically speaking, is that a good idea or will it just drive up bills and drive jobs (and emissions) overseas?

Gas prices

Nobody knows what they wil do but the Department of Energy and Climate change have more reasons to find out then most, so they've plotted this handy graph comparing all the projections they could find.

The government is also committed to putting up the cost of carbon dioxide emitted from gas power which will more than double to over £74 by 2030, but we'll have more on this later.

Cost of wind

Right now offshore wind, the most expensive form of renewable energy but also the most abundant in the UK, costs about 3 times what gas costs.

But that may change (or it may not), if investors get more confident and can borrow money for less.

A recent analysis by the Crown Estate found that the cost could fall by a third by 2020, coming far closer to the rising cost of gas. Our own analysis, of all the available published projections, found much the same

Risks

Wind, specially offshore, requires high up front investment and the government has estimated that between now and 2020 we need to spend £110bn on clean energy.

A big bet on an emerging technology.

But gas has risks too, as UK gas production falls, more and more of that is imported.


(Image: WWF, Source: DECC)

Data from HMRC suggests that in 2011 alone we spent over £9bn on gas imports, with UK gas production falling the UK could end up sending more and more money to gas exporting nations like Qatar.

Each household currently spends about £89 on Qatari gas and supplies are vulnerable to economic or political shocks. Last year gas prices for consumers rose by £100 between March 2011 and 2012.

Shale 

So far as we know the extractable resource is around 20-40 trn which works out at 2-4 years of UK consumption at full pelt - and that's without a dash for gas.

Of course, it may be larger - that's why the government is licensing some parts of the country which may have shale for exploratory drilling. 

Below is a Google Fusion map of the areas awarded in previous rounds (yellow) and the latest one (green) the red dots are unconventional gas wells. The next round is bigger - and can be seen here - but is still under consolation.

The UK's population density, and resistance to rural development, is one factor likely to limit both shale - and onshore wind - development (and much else besides).

 

More importantly the UK, unlike the US, is part of a regional and global gas market

That means that shale gas in the UK is no more likely to bring down the cost to consumers than North Sea oil reduced the cost of petrol.

And like oil, the more of it we use at home the less we can export.

What matters to economists is global shale.

Some, like Professor Dieter Helm, argue it will push down the price of gas making gas power economic everywhere. 

Others like the International Energy Agency (IEA) in it's Golden Rules for a Golden Age of gas scenario see gas prices in Europe merely rising by less than they otherwise would have done.

Jobs and growth?

A report by Cambridge Econometrics, paid for by WWF and Greenpeace (who obviously have a position on these things) took most of the above into account and found a dash for wind creates 70,000 net extra jobs and boosts the economy by about £20bn by 2030.

How much depends on how much of the supply chain politicians can convince investors to locate in the UK.

(Image: WWF, Source: Cambridge Econometrics)

The report was tested against a variety of contingencies - including the impact of lower gas prices from shale, and found that, passed 2020, a dash for wind was still better for the economy than a dash for gas power.

But that doesn't make it the 'right' answer. Some will argue gas will get so cheap as to render the report meaningless. Others that wind will never fall in price.

And the climate?


Gas emits about 50% less carbon dioxide than coal when burnt.

Most accept gas from shale, or gas imported via LNG has higher emissions - but how much is disputed. It is very likely most gas used in the UK will be significantly cleaner than coal.

Some argue that because renewables are so costly to build the UK and other developed countries should turn first to gas - rather than risk simply exporting their industries (and carbon emissions) overseas. It is also suggested that gas power stations could be fitted with Carbon Capture and Storage

But if put head to head, a dash for unabated new gas compares very unfavourably with a dash for wind so far as the climate is concerned.

New plants 

There is also an argument that we need lots of gas anyway - just as backup. The National Grid has said we need 3-4 new gas plants by 2020. 

But beyond then it's unclear. Work by Poyry for the Committee on Climate Change found no more than an additional 5-10 new plants would be needed if we manage demand and build interconnectors to other countries.

A lot depends though on how long (and how much) one uses our existing gas infrastructure and critics of renewables may argue these problems don't arise with Nuclear. But that is a whole new area.

 


Comments Add new comment

A lot depends though on how
long (and how much) one uses our existing gas infrastructure and critics
of renewables may argue these problems don't arise with Nuclear. But
that is a whole new area.

 

A lot depends though on how
long (and how much) one uses our existing gas infrastructure and critics
of renewables may argue these problems don't arise with Nuclear. But
that is a whole new area.

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