The costs of a future energy system are hotly debated, are we looking in the wrong place? Do all future energy system pathways have basically the same cost and in fact are the issues a mismanagement problem with very high administrative overheads? We took a look using our in house tranzparent app.
In the midst of a cost-of-living crisis, it is entirely reasonable to scrutinize the costs of the energy transition. At Tranzparent, we have been analysing a wide range of possible cost outcomes using the in house tranzparent app. We looked at a model of today’s energy system (Today), the Future Energy Scenarios Hydrogen Evolution 2050 pathway (FES HE 2050), and a model in a hypothetical world where global warming had no effect (No GW 2050).
Note: Since global warming is a reality, the No GW 2050 scenario is simply used as a reference point to compare against other potential pathways.
We have Four Golden Rules that should be considered when drawing conclusions for future energy system analysis
Why go through this exercise at all? The tranzparent app provides a powerful way to compare scenarios quickly and accurately, often the real insights come from the differences between models rather than from any single model.
By using an exploratory, scenario-based approach, users can also investigate a wide range of outcomes. The tranzparent app is accurate, easy to use, and low-cost, placing a world of modelling opportunities at your fingertips.
We welcome your feedback on our analysis. We have fully costed models of the other FES pathways and the CCC pathways, and we can model any whole energy system—anywhere, at any scale. Contact us at sales@tranzparent.energy if you’d like to compare the costs of any published future energy system or wish to create your own.
Let’s say UK GDP today in £2,700 bn (see Rule 2).
Here are some typical published ranges of Whole Energy System Costs from the traditional model providers:
|
Pathway |
Assumptions (see Rule 2) |
Whole Energy System Cost (£bn 2024) |
|
Today |
Actual energy system in 2022 (before Ukraine War and COVID) |
£108 bn (4.0 % of GDP)
|
|
FES HE 2050 Future Energy Scenarios Team at NESO Hydrogen Evolution 2050 |
FES workbook 2024 |
£124 bn (4.6 % of GDP) |
|
No GW 2050 No Global Warming 2050 |
Carbon reduction assets removed asset selection on cost alone |
£92 bn (3.4 % of GDP)
|
All figures are 2024 money in this report.
One striking insight is that the total system costs are not dramatically different across scenarios. For context and with reference to the Four Golden Rules: if we add the Ukraine war into the Today model, system costs increase from £92 bn to £180 bn. This closeness in cost levels is surprising given the differences in assets deployed as summarised below;
Today; - mainly a mixture of wind, nuclear and gas generation, no hydrogen production or significant energy storage. Homes heated predominantly with gas and some EV’s etc.
FES HE 2050; - mainly wind and nuclear generation, some Carbon Capture and Storage, large scale hydrogen production, and significant energy storage both gas and power. Homes heated predominantly with Air Source Heat Pumps and Hydrogen Hybrid boilers and large numbers EV’s.
No GW 2050; - like today but with more Wind generation, homes are predominantly heated with Air Source Heat Pumps and Gas boilers with large numbers EV’s.
We have conducted our analysis based on System Availability Cost (SAC). What we mean by SAC is that in effect all assets used in the model are rented, and the rental cost is the payment per annum that enables that asset to exist (to be profitable but not overly so). Despite the Four Golden Rules being heavily involved, we can reproduce many of the published cost figures for any of the assets in the models. Ultimately, we invite you to run models and use whatever costs assumptions you like.
The role of intermittency is often debated; we checked the FES HE 2050 model for a Dunkelflaute where there is no wind for a period of two weeks in January. Due to the large number of gas turbines (hydrogen and natural gas with CCS powered) assumed by the FES team, a Dunkelflaute presented no problem, the lights stayed on and the gas flowed in each of the Half Hour periods modelled by the tranzparent app.
We then looked at the cost of the system in three categories
One significant finding is the heavy burden of administration on consumer bills and the whole system energy cost, nearly equal to the cost of today’s generation assets combined. This is unsustainable and suggests that the retail energy experiment in its current form is no longer viable, not fit for any 2050 pathway.
But what if the cost assumptions are materially wrong? Well that’s a distinct possibility but would they be wrong in one area only, would the cost of Wind error be more expensive that future gas prices assumed? The administrative cost is not wrong sourced from the Ofgem energy price cap.
There are no answers to this but it can be informative to explore the possible ranges of outcomes and how the cost-of-living would be affected.
Below is a graph showing the demand assumptions used in each model.
The FES team assumes significant changes in consumer behaviour—fewer miles driven, more efficient homes, and other demand reductions.
The Four Golden Rules require that models don’t cheat and often models have quite different energy efficiency assumptions and road use assumptions as well as often not being transparent about the significant aviation and shipping demand for energy.
So in that sense, we are not comparing identical energy systems here. It would be interesting to re-run the analysis with demand held constant, a simple task in the tranzparent app.
The Tranzparent model also tracks emissions under each pathway.
Note--The tranzparent model does not deal with land use and so we kept those assumptions constant.
Interesting how the system decarbonises even without the pressure of a carbon budget, reflecting the fact that many ‘green’ technologies are economic and in no need of a subsidy.
It is tempting to introduce a new Rule 5 – Never make a conclusion from future energy system modelling.
This analysis presents no conclusions but two fundamental observations.
The tranzparent app has demonstrated its ability to re produce any published future energy pathway, thereby giving the user the ability to take that model and produce alternative perspectives.
We know from the Four Golden Rules that assumptions shift constantly, which is precisely why the agility and transparency of the tranzparent app make it so valuable. From a standing start, any future energy pathway can be fully costed within three days.
Our goal is to provide this tool to a growing number of clients—especially those not traditionally involved in whole-system energy modelling. In doing so, Tranzparent can contribute to a more informed debate, reducing the noise from ill-informed pundits and oversimplified arguments.
David Casale
david@tranzparent.energy
David is CEO and founder of Tranzparent Limited and was previously at Shell International, National Power, The AES Corporation, Turquoise International and was co-founder of Utilita a retail energy supplier.
Notes