Tuesday, July 20, 2010

Investment in new energy technologies

The FT has an interesting article on energy technologies. It reports on the Climate Change Committee’s warning that the UK is not on track with investment in this area and is falling behind other countries (read the Committee's full report here)
The Committee on Climate Change, the statutory body that advises ministers on emissions reduction targets, said the UK spent 0.01 per cent of GDP on energy in 2007, the latest year for which comparative figures are available. That compared to 0.03 per cent in the US, 0.05 per cent in France and 0.09 per cent in Japan.

About £550m of public money was spent on low-carbon technologies last year, of which about £260m was on energy.
The committee’s report also quoted estimates by the International Energy Agency that investment must be increased by between two and five times current levels to meet climate targets.
The Committee called on the government to concentrate support on six areas: offshore wind; wave and tidal power; carbon capture and storage; smart grids and meters; electric vehicles; and aviation.
Without government support, it warned, a range of low-carbon technologies were in danger of being stuck in a so-called “valley of death”, whereby private sector investors were unwilling to take a risk on the investment needed.
A “lack of clarity in the institutional landscape” was also inhibiting development, the committee found, as businesses struggled to understand the way public funds were disbursed.

It is somehow surprising that offshore wind has been identified as a cheap option:
The report identified offshore wind as “likely to be the least cost path for decarbonising the power sector”.

Does anyone have evidence on costs?


Peter Heller said...

There are several numbers available on different websites (e.g. wikipedia). All of them show that wind energy (especially offshore) ist one of the most expensive power sources. Due to the low energy density of the wind one has to build large structures and therefore has to invest a lot of money.

Here are numbers for concrete and steel (source ist the book "Power Hungry" from Robert Bryce):


40 Mt (Megatons) steel / MW
190 m^3 concrete / MW

natural gas:

3,3 Mt steel / MW
27 m^3 concrete /MW

wind (onshore):

460 Mt steel /MW
870 m^3 concrete /MW

(note: concrete and steel are about 95% of all construction inputs and their production leads to high co2-emissions)

Therefore, only calculating construction cost, one can easily understand the differences between the first german offshore windpark "Alpha Ventus" and the finnish nuclear power plant Olkiluoto:

Alpha Ventus: ca. 4.000 Euro/kW
Olkiluoto: ca. 3000 Euro/kW

Thats only the investment for construction. Life cycle costs are much higher for wind, because the turbines are designed for a life time of 15 years and will have a capacity factor of about 30%. Olkiluoto is made for 60 years and will have a capacity factor of 90%.

ghost said...


I do not believe your numbers.

Lets take the Enercon E-126 power plant with a power of 7.5 MW:

mass: 3500 t grounding, 2800t the tower, 700t the machine house and rotors (one blade 60t). Pretty impressive, I think. However, how do you get 460,000,000 t (460Mt) of steel for one MW? Hard to believe.

ghost said...


I do not believe your numbers.

Lets take the Enercon E-126 power plant with a power of 7.5 MW:

mass: 3500 t grounding, 2800t the tower, 700t the machine house and rotors (one blade 60t). Pretty impressive, I think. However, how do you get 460,000,000 t (460Mt) of steel for one MW? Hard to believe.

Peter Heller said...

All I can say is: Sorry. It was very, very hot at my office today...

You are absolutely correct, ghost. "Megatons" ;)

I meant "metric tons" (source is american), or for europeans: just "ordinary tons"...

It is an average for onshore wind turbines, it is higher for offshore, as shown by your calculation.

The source of Robert Bryce ist a presentation by Per Peterson:


There are several other calculations around the web, but they all tell the sam story...

@ReinerGrundmann said...

Peter Heller -1

Life cycle costs cannot be limited to the 60 years running of nuclear reactor, this would be like limiting the wind turbines to their first cycle of 15 years. As everyone knows, the social cost of nuclear is much higher if you factor in long term costs. Besides, it is politically highly contentious, as is on shore wind in many places.
So I guess the Climate Change Committee makes a recommendation based on the social cost of renewables.

Brendan said...
This comment has been removed by the author.
Brendan said...

I think the FT quoted the CCC out of context. The line from the report is:

"Our analysis suggests that there is an important role for offshore wind as part of the least cost path for decarbonising the power sector"

They haven't said that it is the least cost technology necessarily.

Peter Heller said...

@ Reiner Grundmann:

"As everyone knows, the social cost of nuclear is much higher if you factor in long term costs."

Everyone but me. I do not know anything about "social costs". Do you have a number (in Euro/kW)?

In my opinion each power source has "social benefits" (because it produces usable power). So we have to compare the social benefits of nuclear, fossile and alternative energy technologies. Which has the largest per Euro?

The answer is obvious and is embedded in the FT-Article:

"Without government support, it warned, a range of low-carbon technologies were in danger of being stuck in a so-called “valley of death”, whereby private sector investors were unwilling to take a risk on the investment needed."

Technologies not backed by private investment are not effective and not efficient (otherwise private money would be concentrated in the development of such technologies). Only concepts the private sector is willing to invest in without public funding should receive public funding...

The government should not decide between technologies. Such a decision should be market driven. Public funding can be used to promote succesful ideas with a high output in economic and social values further.

Does wind energy have a chance without public funding? If not, as the committee suggested, this is a clear indication that it is too expensive. In all manners.

eduardo said...


I think that dogmas are dangerous here, and that one cannot propose sweeping diagnosis and solutions valid to all situations. Whereas private initiatives may be certainly more effective in some fields, public support, at least initially, has been required for others. For instance, would we enjoy now GPS systems, communication satellites or the internet without an initial or total governmental support ?

One problem is that it is not easy to know beforehand not only which technology will be the best, but also which would be the better way to achieve it, public or private.

@ReinerGrundmann said...

If nuclear power was economically viable it would attract private investment. However, "Nowhere in the world have new nuclear stations been financed within a liberlised
electricity market." See here for examples.

Social cost refers to
- long lifetime of nucelar waste and hence potential hazards with unknown costs;
- threat of civil disruption because of massive resistance to nuclear energy

In both cases it is impossible to put an economic cost against the risk.

Eduardo: you say "it is not easy to know beforehand not only which technology will be the best, but also which would be the better way to achieve it, public or private."

Well, we know that private R&D so far has not been sufficient to put us on a low carbon technology revolution. This is why massive public funding is needed, as (I am sure yo know ;-)) The Hartwell Paper argues.

ghost said...


thanks for the clarification... i did not think about "metric" ;)

Peter Heller said...


if you think in terms of "CO2-Emissions", the obvious answer is: nuclear is cheaper than wind.

(Wasn't this your question? You asked for numbers. In my opinion the investments for construction are the only comparable ones, because all other costs are either negligible in comparison (costs for uranium e.g.) or cannot be measured without taking additional and disputable assumptions.)

You write:

"Nowhere in the world have new nuclear stations been financed within a liberlised
electricity market."

and you are correct. Thinking in terms of a free market development coal is the obvious answers (until now) and natural gas will be the answer (in the near future).

Natural gas would be my choice to invest in.

"Well, we know that private R&D so far has not been sufficient to put us on a low carbon technology revolution."

Thats not true in my opinion. In fact our society is based on hydrogen. But so far we have not developed a better hydrogen storage than nature. Nature provides us with carbon as the best hydrogen carrier one can think of. We call it "hydrocarbon" and it is in fact (oil, natural gas, coal) nothing more than long chains of carbon storing and transporting hydrogen.

Our development to a "low carbon" technology lasts since several 100 years. The more hydrogen atoms per carbon atom, the more effective is the ressource. Wood ist exceptional ineffective (much more carbon than hydrogen, around 10:1). Coal has around 2:1, oil around 1:2 and natural gas around 1:4 (methane).

This Transformation has been succesful organized by the private sector.

I understood the Hartwell-Paper as promoting small steps while benefitting from each step and not promoting a huge revolution, where success only stands at the end of a long and expensive way. And the transformation to natural gas in cars as well as for electricity generation is such a small step, providing us with more and cheaper power, lower CO2 emissions, and backed by huge private investments.

The question is not: Will there be a "carbon-free" economy? The carbon-free economy will arise because of the energetic levels of atoms in CO2 and H2O. (Maybe we will see a future where nuclear energy is used as thermal energy source to create hydrogen in a direct and effective way...maybe even in small batteries...i don't know.)

The question is: How long could we wait?

My opinion: I am willing to take the risks of a potential destuctive climate change. As long as we follow the path to more wealth.

Public funding of ineffective energy sources destroys wealth.

Peter Heller said...
This comment has been removed by a blog administrator.
eduardo said...

I deleted comment #13, since it was a repetition of #12

eduardo said...

@ 12
yes, I am familiar with the Hartwell paper, a sort of an Apollo program for new energy source :-). I must confess that I am now more favorable to its solutions than at first - I was a bit skeptical.

But even within that framework, there are a few questions to sort out: who pays for the service (research), and who provides the service. I can imagine a solution in which a tax is raised by the state but this tax is used to buy R&D from the private sector, under competitive conditions. Other possibility is that the state conducts research itself. Since what we need are mostly technological solutions, perhaps a sort of mixed public-private set-up could work better.

@ReinerGrundmann said...

you are right, there are several possible constellations for conducting RDD&D. But above all, the two important principles are

1 the carbon tax is small and not designed to change behaviour and

2 it will be used to set up a fund for such research into new technologies. So it is a hypothecated(dedicated) tax.

isaacschumann said...

The U.S., in my opinion, has a good mixed public and private system for r&d. We have an excellent system of publicly funded universities and nrel laboratories (national renewable energy labs) that put out alot of good work. we in the private sector 'piggy back' off of these publicly funded studies often. An influx of funds from a carbon tax would be great, build more laboratories dedicated to energy research, more grants, and some for me:)

On the other hand, the U.S. subsidies regime is a total mess, we will be stuck with corn ethanol for some time... subsidies, imo, don't promote innovation, they promote lobbying of politicians.

Peter Heller said...

Isaac has made a valid point. We have to differentiate between subsidies for systems already at the market (as for wind energy in germany) and public financial support for research and development.

Seen from a technical perspective wind energy is fully developed. It could not be made more effective and more efficient in its output in principle. All other alternatives (bio, solar, geothermic, and also nuclear) are compared to wind energy at the beginning of a promising development process.

Therefore public funding of R&D in the field of windpower does not make sense anymore. Better use this money for other technologies.

And when it comes to the market, wind energy is more expensive than (e.g.) nuclear because of the low energy density of the wind - which is again a fundamental border. Therefore it can only survive with large subsidies, which in Germany are not paid by the government, but by the consumers.

And this is the destroying of wealth. As soon as the subsidies are reduced (eventually to zero) nobody will invest in wind turbines anymore. And the money invested so far is gone. Without any effect. One could burn it, it will be the same.

Therefore the above mentioned committee is not well-advised.

Unknown said...

Dear Peter (#18),

the starting point of the discussion was how Great Britain could increase its carbon-free share of electricity production. Along GB's Atlantic coast, wind is actually a ubiquitous resource, other than in Germany. It is an onshore wind park that I would love to finance there, and the reason is, that onshore wind is economical without subsidies there.

Onshore wind costs about 1.5 - 1.7M€/MW to install, including project costs, no matter where. It depends heavily on the wind profile and the local wholesale electricity price whether a wind investment is profitable or not. Along the Atlantic coast in Northern England, Scotland and Ireland, a wind turbine produces approximately 4,000 MWh/MW per year (in Germany closer to 1,500 - 2,500 MWh/MW). If operating and capital costs are 17% of investment including amortisation within 20 years, the investment is profitable at an electricity price of 64 - 71 €/MWh, quite close to current electricity price levels of around 60 €/MWh.

Why the Britains do not build more onshore wind power plants? I'm not sure, but maybe they don't like their shape and maybe they don't have the electricity grid capacity to transport power from the coasts to the industrial centers. Going offshore in GB is in my opinion not necessary for reasons of exploiting better wind profiles.

As for wind power reaching its technological limits, I don't know. Hydropower has already reached its limit, with 85 - 90% of efficiency, bit wind is still quite far from this. Further, alternative designs such as the Darrieux rotor (with only one vertical axis) is still in its infancy due to over-subsidising traditional wind power, creating a shortage on wind engineers. We should expect much more progress to materialize in wind than in hydro, at least.

@ReinerGrundmann said...


"Why the Britains do not build more onshore wind power plants?"

The answer is that there is resistance from the countryside, partly motivated by aesthecis (as you suspect), but mainly by politics (too much perceived interfernce of government with the countryside (the handling of the BSE crisis, foot and mouth crisis, fox hunting ban, right to ramble, etc.)

isaacschumann said...

I live in the midst of a large wind park in central Indiana(a very flat and windy state). there are real drawbacks to windmills; noise (though it is really not that bad) and they disturb ones view of the sunset and night sky, it looks like a massive alien spaceship on the horizon, hundreds of red blinking lights.

However, I am generally unsympathetic to peoples complaints about them, especially when compared to the byproducts of other power generation. the noise is a soft 'whooshing' sound and some light pollution is definitely preferable to what one would encounter living next to a coal or nuclear plant. I would say that most people I encounter really like them, (though some of course do not) even though indiana is very conservative and most people could care less about climate change.

As far as the economics of windmills, I have heard conflicting claims and am no expert myself; but it sure is windy here. all the time.

Peter Heller said...

Thanks for the explanation, Björn. Yes, I do not know anything about the geographical circumstances in Britain. I am able to provide only the german perspective.

"As for wind power reaching its technological limits, I don't know."

There are several public funded R&D projects dealing with wind energy in Germany at this time. And nearly all of them are about the construction, targeted to reduce the construction costs, because this is the main problem of wind power. The current design is not in question. There maybe designs with a higher energy conversion efficiency - but the current design provides about 50%, which is near the theoretical maximum of 60%. And it is the most cost effective design for big-sized rotors. All other designs are limited to smaller sizes because of the mechanical stresses they suffer.

In my opinion the starting question was "What is the most cost effective way to generate electricity carbon-free?"

At the moment the answer is definitely the nuclear option. But biomass is on its way. Wind energy will never be the most cost effective way.

(Maybe there are some options in developing countries for small villages without an electric power trsnmission grid.)

wflamme said...


after looking at this Indiana wind map and looking up some station data Burlington, IN, North Colfax I'd be surprised if the power output time series would look very different from ours in Germany.

It's hard to make use of a power source as unreliable and fluctuating as this ... especially when your neighbours tend to share the same situation at the same time.

In Germany, on top of our subsidies we pay around 2 ctEUR/kWh for wind power related 'grid services' (backup power) and need to invest some billion EUR over the next few years for grid enforcements.

Unknown said...

The Council for Science and Technology Policy of Japan approved the action plans of "green innovation" in the following six areas.

(The web site is http://www8.cao.go.jp/cstp/budget/action.html , but in Japanese only.)

- photovoltaic technology (better and cheaper);
- utilization of biomass resources, in particular alcohol from cellulose of waste wood;
- batteries and fuel cells (better and cheaper) mainly for vehicles;
- information technology with less power consumption;
- integration of earth observation data as social infrastructure (applied to food production adapted to climate change, mitigation of flood disasters, conservation of ecosystems, etc.)

Compared with the case of UK, the area of electric vehicles is overlapping, but division of labour seems to be achieved in other areas of priority.

Unknown said...

Excuse me. Correction to my comment (#24). The number of Japanese action plans of the "green innovation" is five, not six. (I imitated the original posting about UK too much.)