Civitas study 2012
Britain’s energy policies are heavily influenced by the Climate Change Act (2008) and the EU’s Renewables Directive (2009). Under the Climate Change Act Greenhouse Gas (GHG) emissions are to be cut by 34% by 2018-22 and by 80% by 2050 compared with the 1990 level. These are draconian cuts. Under the Renewables Directive Britain is committed to sourcing 15% of final energy consumption from renewables by 2020. These commitments add to energy costs and undermine business competitiveness.
Britain’s zeal in cutting carbon emissions should be seen in a global context. Britain’s CO2 emissions are about 1.5% of the world total and even the EU27’s share is only 12% of the world total. No other major emitters have binding policies to cut back their emissions. China’s emissions are, for example, rising quickly.
Using estimates on the costs of electricity generation compiled by engineering consultants Mott MacDonald (MM):
- Excluding carbon costs, coal-fired power stations are the least expensive technology for generating electricity for both near-term and medium-term projects.
- Including carbon costs, gas-fired power stations are the cheapest option for near-term projects, but nuclear power is the least expensive in the medium-term. Other things being equal this would suggest that investment should be concentrated in gas and nuclear technologies. A mix of technologies is preferable for operational reasons. Coal-fired power stations become relatively uneconomic, reflecting the heavy carbon costs, especially in the medium-term.
- Onshore wind looks relatively competitive on the MM data. But MM exclude the additional costs associated with wind-power. When allowance is made for these additional costs, the technology ceases to be competitive for both near-term and medium-term projects.
- Offshore wind (even before allowing for additional costs) and Carbon Capture and Storage (CCS) technologies are inordinately expensive.