A trick of the tale

  • Date: 17/08/20
  • Andrew Montford, GWPF

With the data now showing unequivocally that the cost of offshore wind is not in precipitous decline, I found myself wondering about all those (ahem) colourful characters who have spent the last ten years trying to persuade everyone that it is. And I thought about the Committee on Climate Change, who pushed the technology hard when they reported to government on the feasibility of completely decarbonising the economy. The cost, they claimed, was now 40% below what was expected just a few years ago:

The most recent auctions for ‘established’ technologies procured contracts for offshore wind at around £69/MWh for delivery in the early 2020s – 40% below where we had expected the cost of the technology would be by 2030.

In support of this position they included the following graph:

This gave me pause for thought. I couldn’t remember costs of over £200/MWh being suggested. Checking the literature, I discovered that there is only only one windfarm with levelised costs over £200/MWh, namely Teeside, which was operational in 2013.

So I then took a look at the source cited, DECC’s 2012 report on levelised costs of generation technologies. The data appears to come from Table 12, which lists levelised costs for different mature technologies, in each case considering three different “hurdle” rates. These are explained elsewhere as being equivalent to the internal rate of return required by investors.

Which brings us to a problem with the CCC’s graph: of the three scenarios, the CCC has chosen to show the high hurdle rate one. This is an inexplicable choice, when interest rates have been at historically low levels throughout the period.

I thought it might be interesting to replot the graph with the low hurdle rate numbers from the DECC report. Here are the results.

It tells a rather different story, doesn’t it? DECC’s forecasts look rather better, and the 2025 figure looks very odd indeed. In fact, it might well have led to awkward questions being asked about exactly what was going to change between 2020 and 2025. And that might have led people to discover what we know now, namely that costs of offshore windfarms remain eye-wateringly high.

The graph is, in other words, a work of propaganda, aiming to deceive and persuade rather than to inform. Your taxes at work.

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