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Worry List

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Showing just the changes made in the edit by Tom Counsell at 2011-04-27 17:25:00 UTC

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2011-04-27


Title: 2050 Pathway Costing Worry List

Content: A list of 'big picture' things that the team are worrying about in producing the 2050 pathway costing work (see also 2050 Costs methodology)

h1 How do we make the project principles very clear to Calculator users?

Tom Counsell: This is my biggest worry.

h1 How wide should the ranges be?

Tom Counsell: My line has been that we should have ranges that are as wide as the actual uncertainty in the costs. Several people (mainly economists) have responded that this would mean that the cost ranges are too wide to usefully inform a decision. I think that this means DECC is trying to create the wrong sort of policy, if the policy depends on a bet that we have the costs of particular things correct. However, I may have missed something, so I'd like to keep listening to views on this.

h1 How are we treating capital costs?

Andrew Greenway: I think we should avoiding including existing stock costs in all cases where practical as it is liable to confuse. Would have thought an all level 1 pathway will still capture the cost of buying the same technologies as now anyway, provided we include some lifetime assumptions on the current stock. There must be data for this somewhere, though sensible guesswork would work for now too (this is what I have attempted for non-dom heating)

h1 Are smart meters part of grid costs? Balancing costs? Temperature costs?

Andrew Greenway: To me, grid costs sounds most sensible as it fits in with the whole smart grid narrative more neatly than the temperature one (where David M would clearly prefer jumpers). Given this is a technology with good public awareness already, I think hiding it amongst the balancing options is not optimal. 

h1 How do we go about getting support of OGDs?

Andrew Greenway: The evidence panel’s suggestion of Working Groups for sectors is reasonable, and I think we should set some up to discuss Phase 1 soon after completion (with DECC colleagues invited as well). Defra are keen and have proactively got in touch with us. Tying in with the Heavy Emitters Strategy may help with BIS. DFT is the great imponderable – a meeting between KR, TC and Jennie Rayson top priority! Other things that may help: get Ravi involved early if necessary. Work the SpAds / political networks (and by extension, get SoS buy-in to the presentation early). Involve OGDs with presentation styles early. Emphasise our focus on MARKAL / already available data. 

h1 How rigid do we want to be on behavioural change = zero cost?

Andrew Greenway: For example, ‘industry output growth’ seems a classic zero-cost lever, but it could be driven by switching to alternative methods in production, decommissioning plants, etc, etc – things with cost implications, even for a ‘low’ scenario. I guess the rule is to say zero in the absence of data, but it is something we should be alive to. 

h1 fuel prices – how to deal with volatility? What choices to offer users?Do we have one lever or one per fuel?

Tom Counsell: The excel should allow people to choose whatever they want. On the web tool: I'm currently biased to thinking we don't have any extra user choices, because we already have too many. Therefore, we just include the volatility in the cost range of fuel costs.

h1 Do we want to show the relative costs by broad sector (transport, heat, etc) in the graphs?

Tom Counsell: Yes. But the question is relative to what? Different people will want to compare costs to different alternative futures. 

h1 Are we presenting relative or total costs?

Neil Fleming: I think the first point is absolutely fundamental.  The more I think of this the more I think that we might want to leave total costs in all trajectories (I believe I am correct that total emissions are in all trajectories so this would be consistent - which is vital) but that we show in our graphs and per person costing the change from the reference case. The analogy would be today’s Budget – the public are interested in the changes from what would have happened anyway – from the do-minimum or in our case the closest to this is the reference Trajectory 1.   Discuss more tomorrow?

h1 Are we going to try and answer the big questions?

* What is the cheapest pathway?
* Is it cheaper / how much more expensive is it to tackle climate change than to not?
* What are the biggest costs in tackling climate change?
* What are the biggest sources of uncertainty in tackling climate change?
* Is it cheaper to be more energy efficient or to build more capacity?
* Is nuclear cheaper than wind or CCS?

h1 How do we deal with costs and benefits that accrue after 2050?

Michael Clark: This can distort the picture either way on costs. If we do not include costs beyond 2050 of energy decisions across that period this could lead to a far greater real cost of the energy system generated during 2010-2050 but paid for beyond 2050. Examples include: storing carbon and nuclear waste. Conversley, the benefits of capital investment in energy stock to 2050 could accrue over a far greater lifetime beyond 2050. This could include wave kit that lasts 100 years or more compared to a short term decision to create a gas CCS plant that only lasts 20 years. This will also be pertinent if we add the ability to ammortise costs through financing assumptions.

Tom Counsell: I think that we need to treat this on a case by case basis. The aims should be to:

# Ensure that we aren't misleading people to the extent that if they understood the full detail, they would choose a different pathway.
# Ensure that we aren't adding complexity, where the complexity doesn't materially affect the result.

To that extent, I'd propose some rules of thumb:

# If it is a cost (e.g., storage of nuclear waste), and is <10% of the opex, just NPV it and apply it as a surcharge to the opex. The detail of the timing of that cost is unlikely to affect people's decision about whether to use the technology or not.
# If it is a benefit (e.g., nuclear power station built in 2049) then ask: Has the rate of investment reached a steady state? 
## Yes? Let the cost be. This is the case with offshore wind, where by 2050 we are aren't growing the GW, but just replacing those that fall down.
## No? The simplest thing may be to pro-rata the capital cost to reflect the proportion of the things life that occurs by 2050.

h1 Is the UK really a price taker for all energy technologies? and if so why are we investing at all in early stage LC technologies?

Tom Counsell: This is a true uncertainty. Our ranges should reflect both: that the UK may or may not be a price taker; the rest of the world may or may not invest in the technology. 

If we wanted to model the UK as having an influence on the cost of energy technologies through its deployment, then we should introduce an equation that means the 'low' end of the cost range is only reached gradually, as UK deployment increases.

h1 Does a 'stress test' really capture the system cost of balancing?

Tom Counsell: Not at the moment. The stress test probably underestimates the fuel that would be used by the backup generators - they would probably operate for more than 5 days a year. Worse: does the balancing calculation actually trigger any fuel cost at all? Must check.

h1 Should we monetise service demands? And will the range be so great it is pointless?

Michael Clark: I would argue we shouldn't but the difficulty is deciding which service demands are largely technology driven (lighting) or largely behavioural (household temperature). I would argue lighting & appliances, temperature of homes and commercial heating demand will all be influenced by technology but this technology could be anything from a relatively inexpensive smart meter or energy efficient lighbulb right through to expensive building re-design to create efficient heating for commercial businesses. Therefore, I think the realistic range would be too great and we should not include a range but explain the drivers in the analytical report, including estimates of welfare losses.

Category: 2050 pathway costs



User: Tom Counsell

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