Technology 20 September 2019 By Adam Vaughan Wind power is becoming cheaperHolger Leue/Getty ImagesThe cost of subsidising offshore windfarms has dropped to a record low in the UK. Results of a government auction on Friday show windfarms will be built in 2025 for as little as £39.65 per megawatt hour, a drop of almost a third…
20 September 2019
By Adam Vaughan
The cost of subsidising offshore windfarms has dropped to a record low in the UK. Results of a government auction on Friday show windfarms will be built in 2025 for as little as £39.65 per megawatt hour, a drop of almost a third since the last offshore wind auction in 2017 and two thirds since one held in 2015.
In the auction, companies try to outbid each other to build windfarms. The price starts high, but reduces as each company says they can fulfil the contract for cheaper. The UK government doesn’t actually directly pay for the building or running of the windfarms, but instead guarantees a minimum price it will pay for the energy generated over a 15 year period.
The rapid fall led wind power trade body RenewableUK to claim offshore wind is now the cheapest form of energy in the UK. The cost is less than half the controversial amount promised to EDF Energy to deliver Hinkley Point C, a nuclear power station in Somerset that is also due online in 2025.
Winning projects include Equinor and SSE’s Dogger Bank extension off the Yorkshire coast, SSE’s Seagreen off the coast of Dundee and Innogy’s Sofia project, also in the Dogger Bank area. Onshore windfarms on the Isle of Lewis and Orkey won contracts too, after ministers partially repealed a ban on onshore wind subsidies.
Jonathan Marshall of the Energy and Climate Intelligence Unit and Gareth Miller of Cornwall Insight both say the new low price is “way below” the £45 to £50 that had been expected by analysts.
Windfarms totalling six gigawatts of capacity will be built, enough to power more than seven million homes. However, experts pointed out the figure could have been even higher if the government had not capped the amount of capacity it was willing to back.
In a statement, prime minister Boris Johnson said: “It’s great news that millions more homes will be powered by clean energy at record low prices.”
Hugh McNeal of Renewable called the results: “the biggest single step that the UK has taken towards meeting our net zero emissions target.” Greenpeace said there was now no excuse for the government not to raise its ambition on climate change.
Significantly, the price agreed in the new contracts is so low that householders and businesses – who ultimately pay for the subsidies through energy bills – should pay very little.
The £39.65 per MWh is a guaranteed price for electricity generators, a ‘top up’ if wholesale prices fall below it. However, the market price of electricity is around £50 per MWh, suggesting little or no subsidy will be paid if wholesale prices are the same in 2025. Theoretically, money could even be returned to billpayers.
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