From NOT A LOT OF PEOPLE KNOW THAT
By Paul Homewood
https://www.gov.uk/government/publications/electricity-generation-costs-2023
I asked DESNZ to send me their workings for the Levelised Generations Costs published last year. At the time, they put a cost of £114/MWh on CCGT, or £54/MWh excluding the irrelevant Carbon Cost).
I was particularly interested in what the costs would be based on current fuel costs.
The spreadsheet they sent me shows they have assumed operating efficiency of 53%. In other words to produce 1 MWh of electricity, you need to input 1.886 MWh of fuel.
Their original costings assumed a natural gas price of 64p/therm in 2025, falling to 56p in 2026, then rising back to 67p by 2049 (all at 2021 prices). The levelised costs are based on the cost over the 25-year lifetime of the plant.
The most recent DESNZ fossil fuel price assumptions, published in September, list a price next year of 75p, then dropping back to 70p. Prices after 2030 are highly subjective and should not really concern us, though DESNZ think they will drop further, notingthat increasing liquification capacity will put downward pressure on prices:
Remember these are all presented in real terms, at 2023 prices.
https://www.gov.uk/government/publications/fossil-fuel-price-assumptions-2024
If we plug in the 75p price for next year, we get a fuel cost of £48.29/MWh, compared to the figure of £43 in the Levelised Cost report.
Using 70p/therm, which looks to be representative of the next ten years or so, that cost drops to £45.07/MWh. That would indicate a total cost, excl Carbon Cost, of about £56/MWh.
Remember that the operational costs are still costed at 2021 prices, but they are small enough to make little difference.
It is these sort of costs that we need to be comparing with the known CfD prices for offshore wind, currently around £82/MWh.
Although I have dismissed Carbon Costs as not being a cost as such, it is worth noting that the Levelised Cost of £60/MWh for carbon implies a Carbon Price of about £174/tonne CO2. (Curiously the spreadsheet uses £83.03/tonne, giving a cost of £28.66/MWh.) Carbon Prices this year have been around £40/tonne, thus adding about £14/MWh to CCGT generation costs.
Given that gas power tends to set the wholesale market price of electricity, currently around £80/MWh, that £14 makes a big difference. Put another way, if the Carbon Pricing scheme was abolished, wholesale prices could potentially drop to £66/MWh.
I can email the spreadsheet to anybody interested.
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