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Jun
16

Deconstructing SEAI’s Claims That Wind Energy Provides Savings For The Taxpayer

Are Sustainable Energy Authority of Ireland’s figures correct? The numbers just don’t stack up.

By Pat Swords BE CEng FIChemE CEnv MIEMA, Turn 180

The SEAI press release of 27th November 2012 stated[1]:

  • Almost one fifth of Irish electricity usage now comes from renewable sources according to the annual Energy in Ireland (2012) report published by the Sustainable Energy Authority of Ireland (SEAI).  While Ireland’s energy import dependency is still high at 88%, encouragingly renewable energy grew to 6.4%of Ireland’s final energy use, reducing Ireland’s fossil fuel imports by an estimated €300 million last year.

The more detailed SEAI report[2] for the period 1990 to 2011 repeated this claim and documented that renewables accounted in 2011 for 19.6% of our electricity generation, the main contributor being wind energy (15.7%), with smaller contributors from hydro (2.5%) and biomass (1.2%).

  • Simple maths implies that if one fifth of the cost of generation is €300 million then the total cost is circa. €1,500 million or €1.5 billion.

In February 2011 SEAI and Eirgrid produced another report on: “Impact of Wind Generation on Wholesale Electricity Costs in 2011[3]”. It alleged to show the cost differential between the ‘no wind energy’ and the ‘with wind energy’ situation[4]. See overleaf, where the cost of operation without wind is on the left. According to this report, there was a ‘key message’ in that wind generation was expected to reduce Ireland’s wholesale market price of electricity by around €74 million in 2011.

This graph from the 2011 Eirgrid / SEAI report clearly demonstrates that the production cost of electricity in Ireland for 2011 without any wind energy is €1.14 billion. Note: Eirgrid define for thermal generators that the production cost is simply the cost of fuel burned by each generator[5]. The IMR is the Infra-Marginal Rent, which allows generators to recover costs in excess of their production costs, such as capital costs, labour, maintenance, etc.

Conclusion:

SEAI claim for 2011 that 20% renewables reduced fossil fuel usage in electricity generation by €300 million, which implies that circa. €1.5 billion of fossil fuel is required for electricity generation without renewables.

However, in a different report for the same year, they demonstrate that fossil fuel usage for the no wind situation is €1.14 billion per year – a discrepancy of 32%.Eirgrid / SEAI used a computer model which is blatantly false, as it makes zero allowance for the inefficiencies induced on the thermal power stations, which have to burn more fuel balancing the highly variable and intermittent input from wind turbines.When these inefficiencies on the grid due to wind energy are included in the financial assessment, the total cost of fossil fuels for the ‘no wind’ scenario in 2011 was €1.04 billion, which was somewhat elevated due to the non-availability of some cheaper coal and peat generation for part of that year and the corresponding higher use of expensive gas.Furthermore, in 2011 it cost Irish electricity consumers €157 million in additional electricity charges to substitute €130 million of fossil fuel generated electricity with wind energy.

This represents a price increase of 121% for the substituted electricity. However, as the true cost of electricity to the consumer comprises both that of generation and transmission, the above cost analysis reflecting generation only does not include the cost of the significant transmission grid expansions to facilitate those wind turbines. It is therefore an underestimation of the true price increase.

One could alternatively express the above financial analysis in another fashion; instead of where previously fossil fuels would have been used to generate €1 million worth of electricity, we now need to spend €2.21 million to generate the same amount of electricity with wind energy.There is nothing surprising in this. Previously electricity was generated in power plants generating in an optimal manner, like a car running on an open road in a fuel efficient manner. Now we have to pay for a second new grid comprising thousands of wind turbines and new pylons criss-crossing the country; but this new electricity system essentially only works when the wind speed is double the average wind speed, which simple maths demonstrates is not very often. So we still need the existing system, but are now operating the thermal plants in a stop / start inefficient mode, like cars in city driving. In addition, when the wind is strong enough, the electricity produced is more expensive and has to be subsidised above market rates.The bottom line, the price of electricity soars and yet again it comes down to the same simple question – how much does it cost and why are we doing it?

Calculations

Fossil Fuel Cost of Irish Generation in 2011

So how much fossil fuel did Irish thermal plants actually burn in 2011? The energy flow for electricity production in 2011 is shown below from the detailed SEAI report for the period 1990 to 2011:

On Figure 12 of the same report, the same energy flow is presented in kilotonnes of oil equivalent (ktoe).

If we consider the 2011 SEAI / Eirgrid report on wholesale prices the following costs were supplied, which were then related to the fuel usage for electricity generation:

Gas (£p/therm): Average 56.25p per therm with an average of €1.15 to £1 for 2011[6] è €0.65 per therm. There are 396.8 therms (Eur) in 1 tonne of oil equivalent (toe)[7]. Natural gas used in electricity in 2011 was 2,500 ktoe:

Fuel cost of gas generation for 2011: 2,500 x 1,000 x 396.8 x 0.65 = €644,800,000 (€0.644 billion)

Coal ($/tonne): Average $121 per tonne with an average of €0.72 to $1 for 2011 è €87.4 per tonne. The detailed report for 1990 to 2011 gives on page 87 for coal 0.6650 toe/t. Coal used for generation in 2011 was 913 ktoe:

Fuel cost of coal generation in 2011: (913 x 1,000 x 87.4) / 0.665 = €119,994,286 (€0.12 billion)

Peat: Cost of peat is assumed to be 1.55 times that of coal[8]. Peat used for electricity generation in 2011 was 480 ktoe:

Fuel cost of peat generation in 2011: (480 x 1,000 x 87.4 x 1.55) / 0.655 = €99,275,725 (€0.1billion)

Heavy Fuel Oil (HFO) ($/tonne): Average $603 per tonne with €0.72 to $1 è €434 per tonne. From page 87 for HFO 0.9849 toe/t. HFO used for generation in 2011 was 40 ktoe:

Fuel cost of HFO generation in 2011: (40 x 1,000 x 434) / 0.9849 = €17,625,342 (€0.018 billion)

Gasoil ($/tonne): Average $797 per tonne with €0.72 to $1 è €574 per tonne. From page 87 for Gasoil 1.0344 toe/t. Gasoil used for generation in 2011 was 14 ktoe:

Fuel cost of gasoil generation in 2011: (14 x 1,000 x 574) / 1.0344 = €7,766,589 (€0.008 billion)

Total cost for fossil fuel in 2011: 0.644 + 0.12 + 0.1 + 0.018 + 0.008 = €0.89 billion

Gas, oil and peat amounted to 78.8% of our electricity generation in 2011; in addition there was 2.5% hydroelectricity, 1.2% biomass (landfill gas, etc) and 1.8% electricity imports. The fuel cost of the landfill gas is zero, as it is for the hydroelectricity and indeed for wind. If we assume that the 1.8%, which was imports, had the same cost basis as the domestic fossil fuel based generation, which is a reasonable assumption, then the production cost for 2011 is:

Total production cost in 2011: 0.89 x (78.8 + 1.8) / 78.8 = €0.91 billion.

From the Eirgrid / SEAI graph in their report on the costs of wholesale electricity, the figure for the expected production cost for the ‘with wind’ scenario in 2011 is €0.92 billion.

Conclusion: The fuel cost calculated from first principles of €0.91 billion is in good agreement with the expected production cost of the ‘with wind’ scenario in the Eirgrid / SEAI report of €0.92 billion.

The Failure to Assess the Inefficiencies on the Grid from Wind Energy

However, if we did not have the renewable investment promoted by EU policies over the last decade, which led to 15.7% of Ireland’s electricity being generated by wind in 2011, how much would it have cost us to generate with fossil fuels?

The issue is that intermittent wind energy induces instability on the grid, such that the fuel cost to generate the 78.8% of electricity from gas, coal, peat and oil in 2011 was higher than it would otherwise have been if there was no wind energy on the grid. SEAI deliberately deceive on this matter as they refuse to assess the inefficiencies on the grid and include them in their emission calculations for carbon savings. This is despite the fact that under the REFIT scheme for funding wind generators, the wind energy company gets a tariff of €69 per MWh, while the electricity company taking the wind power receives a further €10.40 per MWh for balancing costs[9]. As the Eirgrid and SEAI report of 2011 clarifies: “to cover the cost of managing the short term variable production of wind energy”.

In other words, these inefficiencies are acknowledged in the financial structure to incentivise wind, but denied when it comes to assessing its impacts. In particular, in each SEAI annual report for renewables in Ireland these inefficiencies are ignored, although when one does go to the Appendix where they document how they came up with their claimed fuel and emission savings, it is stated:

  • “There are clear limitations in this analysis but it does provide useful indicative results”.

Indeed, back in 2004 when Eirgrid produced an engineering report[10] on the impact of wind energy and its intermittency on the economics of operation of conventional plant. This concluded that:

  • “The adverse effect of wind on thermal plant increases as the wind energy penetration rises. Plant operates less efficiently and with increasing volatility”.

The 2004 report highlighted not only the practical limitations with increasing amounts of wind energy on the grid, but also the very high cost associated with wind energy given other far more cost effective alternatives available for carbon abatement. It was ignored.

When SEAI / Eirgrid were requested to provide under the Access to Information on the Environment process the basis for calculating the ‘with wind’ versus ‘no wind’ scenarios, they refused (see footnote 4). The graphs were based on a computer model by the company Redpoint and SEAI / Eirgrid refused to provide any further details, such as the assumptions used in programming it.

If we consider that their model came up with a cost of €0.92 billion for the ‘with wind’ scenario in 2011 and this related to production costs of 78.8% domestic fossil fuel and 1.8% imports, i.e. 80.6%. If instead of 15.7% of electricity being generated in 2011 by wind energy and assuming those inherent inefficiencies on the grid in the cost of €0.92 billion are carried over; then the ‘no wind’ production cost becomes:

(0.92 / 80.6) x (80.6 + 15.7) = €1.1 billion.

From the Eirgrid report €1.145 billion was instead assigned to production costs with ‘no wind’. What this demonstrates is that whatever inefficiencies were inherent in the financial calculation associated with the ‘with wind’ scenario were also imbedded in their calculation of the ‘no wind’ scenario.

In reality this is ridiculous. One can for instance refer to the Energy and Climate Change Committee of the UK Parliament, which took evidence on The Economics of Wind Power in July 2012. In the submission from Sir Donald Miller F.R Eng, FRSE, who was Chairman of the SSEB, later Scottish Power from1982 to 92 (Wind 13)[11].

  • The assumption that each MWh of electricity generated from wind saves the equivalent in CO2 emissions from fossil fuel power stations would not be supported by any engineer with experience of operating power plant. The considerably lower efficiency of the back up thermal plant running at part loads together with the additional losses from frequent deloading and reloading as the wind strength varies, all consume additional fuel. The jury is still out on the exact implications of this but there is accumulating evidence from analysis of actual system operations both in the USA and more recently for the Irish Grid that high wind penetrations save little or negligible emissions of CO2 and can in some circumstances actually lead to increases”.

Note: His critical submission of the UK’s renewable energy strategy was shared by many others from a technical background, who contributed to this public consultation.

So clearly this Redpoint model used by SEAI / Eirgird is false, as it makes no allowances for these inefficiencies and while SEAI / Eirgrid refused to respond to requests for information in relation to it, the same Redpoint models are used by the Department of Energy and Climate Change (DECC) in the UK. If one considers Redpoint’s report for the UK Authorities on “Implementation of the EU’s 2020 Renewable Target in the UK Electricity Sector: Renewable Support Scheme[12]”, this has a lengthy section on increased balancing costs due to power station inefficiencies, but the truth comes on page 85:

  • It should be noted that determining exactly which [power] plant will provide these extra services was outside of the scope of this study; the balancing costs reported should be seen as approximate only.

This is a clear admission of a paucity or absence of the data needed to assess the situation reliably. In the paper by Henney & Udo on “Wind – Whitehall’s pointless profligacy” published in New Power, Issue 45, October 2012, 6-11[13] it is stated:

  • In response to various queries to DECC asking about CO2 emissions savings from wind, DECC has directed various people to “The Carbon Footprint of Generation” by the Parliamentary Office of Science and Technology. Checking with the author revealed that the figures cited for emissions/kWh of thermal plants were based on steady output of the various units. A letter from Mr. Jonathan Brearley, Director of Energy Strategy and Futures, was vague on the methodology adopted. A subsequent email from an official explained that the basis of DECC’s claims was unpublished modeling in 2009 by Redpoint. When contacted, Redpoint first pointed out that their study was not aimed at looking at CO2 savings; and second their modeling assumed a simple displacement of 1kWh of thermal output by 1kWh of wind. Eventually an e-mail fated 01/08/12 from Mr. Benjamin Marriott, Acting Senior Economist, revealed that “The direct answer is that the efficiencies of thermal plant were held constant in the modeling.”

This confirms that the Redpoint model used by SEAI / Eirgrid is hopeless inaccurate, as it makes zero allowance for the inefficiencies on the grid, which can easily be confirmed by doing the simple mathematics at the start of this section.

What are the Financial Costs when Grid Inefficiencies are included?

Dr Joe Wheatley, Biospherica Risk Ltd, completed an analysis of the CO2 performance of the Irish grid based on the modelled emissions of power station performances assessed ever 30 minute interval, available from Eirgrd, in order to better analyse the inefficiencies on the grid with increasing amounts of wind input. This peer reviewed paper was presented in March 2013 at a Seminar organised by the Economic and Social Research Institute (ESRI)[14]. It concluded:

  • “It is estimated that wind power saved 0.28 tCO2/MWh on average, relative to an implied average carbon intensity in the absence of wind of 0.52 tCO2/MWh. These low savings are explained in terms of the response of individual thermal generators to intermittent wind generation”

It other words for each kWh of wind generated, the emissions and fossil fuel savings were:

0.28 / 0.52 = 0.54 kWh

This contrasts with what SEAI state in the Appendix of their annual renewable energy reports on how they calculate:

  • “Based on a theoretical displacement by each kWh from renewable energy of a kWh generated from the entire fossil fuel plant mix”.

If we consider in 2011 that 15.7% of Irish Electricity was generated by wind, then from the above, the amount of potential fossil fuel generation associated with that was equivalent to:

(1 – 0.54) x 15.7 = 7.2%

In other words, if that wind hadn’t been there an extra 7.2% of electricity could have been generated by the combustion of that amount of fossil fuels.

So the €0.91 billion of non-wind generation for 2011 was really related to natural gas (53.9%), coal (16.3%), Peat (7.8%), oil (0.8%), imports (1.8%) and inefficiencies on wind (7.2%); in other words 87.8% of electricity production.

So the total cost to generate electricity in Ireland with ‘no wind’ is:

(0.91 / 87.8) x 100 = €1.04 billion

Note: 2011 was associated with a higher cost for the production of electricity as the large Moneypoint 900 MWe coal fired plant was undergoing an environmental upgrade and one of its three boiler units was out of service for an extended period over the summer months. In addition one of the three peat fired plants was out of service for an upgrade. It has been clear that prior to and post this Moneypoint upgrade and those upgrades of the peat plants, that the percentage of coal and peat in the Irish generation mix is higher, in turn displacing more expensive natural gas use for generation[15].

From the SEAI / Eirgid report on wholesale costs for 2011 and the graph on the left, it is possible to discern that €1.145 billion was instead assigned to production costs with no wind, which was an overestimation by €141 million, as the inefficiencies on the grid were not properly assessed.

Conclusion: The total cost of fossil fuels for the ‘no wind’ scenario in 2011 was €1.04 billion, which was somewhat elevated due to the non-availability of some cheaper coal and peat generation for part of that year and the corresponding higher use of expensive gas. This was €141 million less that assigned by SEAI / Eirgird, who do not account for the inefficiencies on the grid.

So how much was the IMR, which is the non-production costs related to the wholesale price of wind?

The non-wind IMR for the ‘with wind’ scenario (graph on the right) assessed by SEAI was €0.6 billion. This was associated with €0.92 billion in non-wind production costs and the small import of electricity.

The non-wind IMR is therefore 0.6 / 0.92 = 0.66 of the non-wind production cost.

The wholesale cost of electricity if there is no wind becomes (1 + 0.66) x 1.04 = €1.73 billion.

However, if one reads the graph on the left in the SEAI / Eirgrid report it has a value of €1.865 Billion, an overestimation by €135 million. From the same graph there was also €42 million in constraint cost for the ‘no wind’ scenario. As the report explains the overall cost of electricity is the “production costs due to the generators, the revenue received by generators in excess of their production costs, the constraint payments from the market to allow for the stable operation of the system and the PSO costs arising from the policy support mechanisms”.

For the ‘no wind’ scenario this becomes 1,730 + 42 = €1,772 million

If we go back to the right hand column on the same report, the wholesale cost of electricity in 2011 ‘with wind’ was €1.8 billion for which there was an additional PSO levy of €60 million and constraint costs of €69 million. So the additional cost to the consumer was:

1,800 +60 + 69 – 1,772 = €157 million

Yet in figure 1 of the same report Eirgrid / SEAI claim a saving in wholesale electricity prices of €74 million, i.e. a difference of €231 million.

Conclusion: The Eirgrid / SEAI report of 2011 on the wholesale cost of electricity predicted that wind energy produced a saving in wholesale electricity process of around €74 million. In fact when the inefficiencies induced on the grid are accounted for, the ‘with wind’ scenario actually cost €157 million more than the ‘no wind’ scenario, a discrepancy in their report of €231 million.

To put this is a different way; the fossil fuel use for the ‘no wind’ case when the absence of inefficiencies on the grid is factored in to the calculation was €1.04 billion. For the ‘with wind’ case in 2011, the cost of fossil fuels was €0.91 billion, therefore a reduction of €130 million in fossil fuels which were substituted by wind energy. Note: Not is as claimed for in the Press Release that €300 million of fossil fuels were saved. But to achieve that saving one had to pay the same electricity charges plus €157 million more.

So to summarise, to substitute €130 million of fossil fuel generated electricity with wind energy in 2011 cost Irish consumers an additional €157 million in electricity charges. On a unit and percentage term, it costs Irish consumers an additional €1.21 million to substitute a million Euros worth of fossil generated electricity with the equivalent amount of wind energy, i.e. it is 121% more expensive. However, this only includes generation costs, the grid has to be expanded to facilitate the introduction of increasing amounts of wind energy, such as the recent €600 million interconnector to from Ireland to Wales, for which the only justification was wind energy[16]. Note: In relation to their 2011 report on wholesale prices, Eirgird stated that they had no documentation on how additional grid costs were assessed.

Conclusion: Eirgrid / SEAI used a computer model which is blatantly false, as it ignores the inefficiencies induced on the thermal power stations, which have to burn more fuel balancing the highly variable and intermittent input from wind turbines. When these inefficiencies are allowed for, it is clear that in 2011 it cost Irish electricity consumers an additional €157 million in electricity charges to substitute €130 million of fossil fuel generated electricity with wind energy. This represents a price increase of 121% for the substituted electricity and is actually an underestimation of the true cost, as it does not include the cost of grid expansions to facilitate those wind turbines.

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[5] See Eirgrid: Effect of Tie-break Options on DBC and Curtailment. 28th Sept 2012

[11]http://www.publications.parliament.uk/pa/cm201213/cmselect/cmenergy/writev/517/m13.htm

(The South of Scotland Electricity Board became Scottish Power in 1992.)