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Political News A STUDY INTO THE ECONOMICS OF GAS AND OFFSHORE WIND
Posted by on 2013-03-05 11:58:32
contributed by gfoat

The report finds that, compared to a future power system more heavily dependent on gas, large-scale investment in offshore wind would impact positively on the UKs GDP and employment. In the longer term, offshore wind would prevent locking the UK into natural gas usage and imports. UK power sector CO2 emissions in the WIND scenario would be around one-third of those in the GAS scenario in 2030, even though some gas-fired power is needed to provide backup when there is insufficient wind to meet power demand.

In the WIND scenario the UK pays slightly more for electricity, but more of the value added of the supply chain is located in the UK. Despite a small increase in electricity prices, GDP is around 0.8% higher in the WIND scenario by 2030 because the domestic content (construction and manufacturing of offshore wind capacity) of electricity is higher than in the GAS scenario. By 2030, electricity prices in the high wind scenario are projected to be only 1% higher than those in the gas reliant scenario, which challenges the prevailing view that electricity produced by gas-fired plants will be much cheaper indefinitely.

The GAS scenario relies heavily on imports of natural gas but could capture revenues for the Government through the carbon price floor. Total UK imports of natural gas are 45% lower in the WIND scenario by 2030, a reduction of almost 8bn annually.

There is considerable scope for offshore wind costs, both capital and operating, to fall over time, as economies of scale and learning effects drive costs down. The report draws on projections of reductions in the cost of offshore wind from a comprehensive study commissioned by the government and produced by the Crown Estate following extensive stakeholder consultation. In addition, as offshore wind projects become established, the risk premium associated with the borrowing cost for offshore wind will be reduced; this is currently a major cost of offshore wind relative to new gas projects.

The development of offshore wind capacity envisaged in the WIND scenario, coupled with other low carbon sources and measures to deal with the intermittency, meets the Committee on Climate Change's recommended target for the carbon intensity of the UK's power generation target of 50gCO2/kWh by 2030 and would reduce total annual emissions in the UK by 50 million tonnes CO2 by 2030. In the longer term it would support decarbonisation consistent with the UK's legally binding emissions target for 2050 and encourage the development of the UK as an offshore wind technology leader.

At the sectoral level, the differences between the two scenarios are modest. Large-scale development of offshore wind is likely to benefit engineering, manufacturing and construction firms, and also possibly insurance and project financing companies. In contrast, utilities, including gas distribution, would benefit from increases in gas-fired generation.


By Cambridge Econometrics for Greenpeace and WWF-UK


 
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