UK policymakers should update the way they assess the economic benefits of different forms of electricity generation, bringing their methods in line with "modern investment portfolio theory", argues a report by an American economist.
Comparisons based on each type of electricity generation’s levelised cost of energy (LCOE) are "no longer sufficient" and they obscure the net economic benefits of offshore wind, concludes Dr Mark Cooper of the Vermont Law School.
Cooper identifies a series of risks not currently "captured" by LCOE-based assessments. He asserts that an electricity generation mix that includes significant amounts of offshore wind would cut the UK's cost of generation and lower consumer price volatility and energy security risks.
Commissioned by offshore wind developer, Mainstream Renewable Power, Cooper’s report, Capturing the Value of Offshore Wind, argues that offshore wind is "one of the most attractive" forms of electricity generation for delivering the UK's energy policy objectives. Offshore wind’s advantages include:
- insulation against both fuel and carbon price hikes, which ensures that offshore wind is far less price-volatile than fossil fuel generation. This, in turn, can assist energy companies in reducing the frequency and scale of consumer price alterations
- its position as an "indigenous" source of energy with real power to reduce UK reliance on energy imports
- the sector’s plan to achieve "significant" reductions in the cost of energy, offering a "guaranteed downward" trajectory. Such cost reduction is something other types of electricity generation will not be able to deliver.
- the technology’s power to act as a "major" source of national economic growth.
Cooper’s report follows on from earlier research commissioned by Mainstream, which forecast that the offshore wind sector could contribute 0.4% to UK GDP and almost 100,000 full-time jobs by 2020.