31 January 2013 11:34 GMT
24 June 2011 04:20 GMT
10 April 2013 01:04 GMT
By Henrik Stiesdal
Friday, November 01 2013
Updated: Wednesday, November 20 2013
There is a risk that some countries might say: we like the concept, we want clean, stable energy, but we cannot afford offshore wind.
From society’s perspective, the selection of electricity sources should be based on their true costs. Unfortunately, the standard measures of electricity costs reveal only part of the picture.
Today, we use the levelised cost of energy (LCOE) as our yardstick. It is calculated as the ratio of the lifetime sum of discounted capital and operating costs, including fuel, divided by the lifetime sum of discounted energy output.
However, to arrive at a better estimate, more factors need to be considered. The total direct cost of electricity is the sum of the LCOE, plus:
These direct costs of electricity are still not a complete measure of the cost to society. To arrive at what might be called Society’s Cost of Energy, or SCOE, additional aspects have to be considered, such as:
If, however, we consider the SCOE, it becomes a completely different matter. We have done the calculations at Siemens, and we were surprised by the results. Taking into account the above factors, offshore wind will come very close to onshore wind in Europe in 2025, beating nuclear, coal and solar hands down, and only marginally beaten by gas.
The big differentiator is that offshore wind creates higher social benefits and lower social costs than other power sectors. It has more potential to create local employment and positive GDP impacts than almost any other energy source — and in structurally weak areas where jobs and investments are urgently needed. External costs for offshore, such as pollution or falling property values, are negligible. If such calculations can be substantiated, the result is a paradigm shift.
So, what now? Well, we could ask external institutes to verify our calculations and publish reports detailing the methodology and results. However, experience shows that this will typically lead to the publishing of counter-reports from parties with opposing interests, then a period of debate... and then the issue is forgotten. Meanwhile, the myth of cheap conventional electricity and expensive renewable energy will prevail in the public domain.
The problem is that the argument for an SCOE view is quite complex. At the same time, increases in household electricity prices send a clear signal to consumers and are mainly blamed on the growth of renewables and their direct and visible subsidies.
But we have good arguments that the SCOE is the best estimate of the true costs of electricity. We need to convey this simple message to decision makers and the public: societies should make their choices of electricity sources based on the true social costs. Perhaps this could be a question to all Recharge readers: how do we get the message across?
Henrik Stiesdal is chief technology officer of Siemens Wind Power
This piece was published as part of the Thought Leaders series. Recharge’s Thought Leaders’ Club brings together leading thinkers and participants from the renewable-energy sector to examine the key challenges facing our industry
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