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Is Wind Power Really Cheaper?

October 9, 2015

By Paul Homewood




According to the Independent:


Onshore wind energy has become cheaper than electricity from any other source in the UK for the first time, in what could be a landmark moment for renewable energy in Britain.

Yet the Government has been accused of scuppering Britain’s best chance of meeting the country’s ambitious environmental targets through its continued resistance to onshore turbines, despite growing evidence that they are the most affordable option.

However, new figures show they not only produce cheaper energy than coal, oil or gas power stations, but also remain far cheaper than offshore turbines, which the Government is championing.



Onshore wind farms currently produce about 60 per cent of the UK’s wind power output. Although they are set to remain the predominant form of renewable energy in the next few years despite opposition in Westminster – which has stopped subsidies and given the final say on whether a project should go ahead to local residents – supporters of green energy say the country is missing a chance to maximise their potential.

The cost of onshore wind power has fallen from $108 (£70.20) per megawatt hour (mWh) a year ago to $85 today, as they become more efficient and cheaper to build.

Over the same period, coal-fired power stations have seen their costs rocket from nearly $98 mWh to $115 and gas from $100 to $114, after the EU agreed new rules that will greatly increase the amount they must pay for their carbon emissions. Offshore wind costs $175 mWh, according to the research, by Bloomberg New Energy Finance.

A steep decline in borrowing costs, with bank lending rates hovering around all-time lows, is also much more beneficial for wind farms than for fossil-fuel plants. This is because far more of the cost of renewable energy projects relate to their construction, which is funded by loans.

“There’s still a tendency for the general public to believe that renewables are really expensive, while coal and gas are really cheap,” said Seb Henbest, of Bloomberg, which conducted the research. “This is how it used to be not so long ago, but over the past five years technology costs have come down significantly, along with financing costs.”

The Independent, being the Independent, apparently don’t realise the irony, when they continue:


But campaigners say the Conservative Government has made it considerably more difficult for new onshore wind farms to be built since it took office. They argue that, while onshore wind may now be the cheapest energy source, it could still benefit from subsidies and point out that nuclear power and fossil-fuel power plants also receive government support.

“There is no technology in the UK system at the moment that doesn’t receive subsidies,” said Jimmy Aldridge, a research fellow for energy and climate change at the IPPR think-tank. “There are new subsidies at the moment to pay for coal, gas and nuclear to compensate for the fact that the business case for those technologies has changed in response to new cheaper renewable technologies.”


First of all, let’s get rid of the commonly made but fallacious claim made in the last paragraph.

The payments he refers to are Capacity Market ones. In return for these payments, agreed via auction, power providers commit to providing standby capacity for when demand is high and renewables are not producing. This is a payment for a service rendered, and in no way is as subsidy.


Let’s also examine some of the Bloomberg claims in more detail. The actual report is here.


One of the key paragraphs is this:


Among the country-level findings of the BNEF study are that onshore wind is now fully cost-competitive with both gas-fired and coal-fired generation, once carbon costs are taken into account, in the UK and Germany.


In other words, onshore wind is not cheaper than coal or gas per se, only after the latter have been taxed. The effect of this is seen when the EU cost of coal power, $105/MWh, is compared with the US, which is $75/MWh.

Another significant factor, which is only briefly mentioned, is that the report is basing the costs of fossil fuel power on the assumption that they were built from scratch now. The reality, of course, is that we have a host of coal and gas power stations already in existence and with enough capacity to make renewables irrelevant. Because they do not need to be built from scratch now, their costs are much lower. This is why they can they afford to sell for less than £50/MWh, which is where market prices have been for the last year or more. (Latest wholesale prices stand at £42.20/MWh)  



However, the Bloomberg study fails to mention the crucial point, which totally undermines their claims, at least as far as the UK is concerned. Because of the way the Strike Price works, wind power is effectively in a position to sell all of the power it produces.

Let me explain. Whatever price a wind farm operator gets for the power it sells on any particular day, the govt tops it up to the agreed Strike Price, index linked and guaranteed for 15 years. This process is known as Contracts for Difference (CfD). So, in effect, the wind farm can give away its electricity for nothing, safe in the knowledge it will still get its guaranteed price from the govt.

As a result, other suppliers will be crowded out, leaving wind and other renewables to dominate supply.

But first, let’s backtrack. Most electricity is sold by forward contract, whether day ahead, month, or year ahead. OFCOM show this well:






Well over 80% of total power is traded as baseload, and most of this is sold on 2 month contracts or longer.

Wind power cannot be sold in this way, because delivery cannot be guaranteed. Without the preferential access to the market given by CfD’s, as well as other mechanisms, wind farm operators would have no guarantee that they could sell anything like their full output, and certainly not at an economically viable price. For much of the year, of course, demand for spot power is low, and competition high.

This guaranteed access to the market is simply another subsidy in disguise. The Bloomberg analysis is essentially based around the assumption that most, if not all, wind power output can be sold. If, say, only half is, this would make their cost per MWh much higher, given that most of the costs are fixed.



Of course, I might be wrong about all of this!! But if I am, these super efficient wind farms would have no need of any subsidy or preferential treatment at all. In the last CfD auction round, earlier this year, the average Strike Price for onshore wind came out at as much as £82.50/MWh for 2018/19.




If their cost really is $85/MWh, we are being taken for an extremely expensive ride!

  1. October 9, 2015 12:18 pm

    In West Virginia, one of the most beautiful ridges, Backbone Mountain, in Tucker County has been skinned of native vegetation which required acid soils and covered with wind turbines on huge cement pads which likely leach basic materials. As a further bonus, they kill a lot of bats as the changes in air pressure bursts their little lungs…nice. This state is home to many fairly rare and thus threatened bat species and sub-species which are also being devastated by the white nose fungus. The silence from the environmental community is deafening. Whatever power is generated by these monstrosities is not even benefitting West Virginia and many are not turning at any given time, but a native habitat has been obliterated. Crickets chirping.

  2. Keitho permalink
    October 9, 2015 12:47 pm

    Wind is producing 1.7% of demand right now, 0.56Gw. If we had 60X as many turbines we would meet demand on this basis. Thankfully we have fossil backup.

    • A C Osborn permalink
      October 9, 2015 1:17 pm

      And that is a cost that the Bloomberg report does not include BACKUP.

      • Keitho permalink
        October 9, 2015 1:52 pm


        These wind boys are hilarious.

      • cheshirered permalink
        October 10, 2015 8:55 am

        Precisely. How can the overall price of wind not include all the costs of components that are essential to ensuring wind energy is deliverable?

        Coal, nuclear and gas don’t need back-up from wind or anything else and therefore their costs are as they fall.

        Wind NEEDS back-up, so surely those additional costs have to be included in the overall cost of wind.

        STOR costs must also be included in the total cost of wind because the ONLY reason it’s there at all is – yes you’ve guessed – to…..back-up wind when there’s no bloody wind!

        Wind + back-up + STOR = true cost of wind. Therefore wind is more expensive than ALL other systems.

        What a racket ‘renewable’ energy is.

  3. MikeW permalink
    October 9, 2015 1:08 pm

    The wind energy industry will continue to be an economic and energy parasite unless it achieves an order of magnitude increase in efficiency and reliability. A simple metric on when (if ever) wind energy reaches break-even is when they actually make money in a free market without government mandates or subsidies.

  4. manicbeancounter permalink
    October 9, 2015 1:14 pm

    So onshore wind is becoming cheaper than coal as a result of two separate sets of initiatives. First is to make the coal more expensive, through costs of investment; reduced operating capacity; and discriminatory taxation.
    Second is to make onshore wind more economic through discriminatory market access.

    As an aside, I did not realize the level of carbon tax on coal.
    Per per gigajoule on gross calorific value, it is £0.82, rising to £1.57 on 1st April 2016.
    In megawatt hours, that is about £2.95 rising to £5.65 on 1st April 2016.
    If there is coal plant is only 50% efficient the impact on electricity costs is double this.
    A gigajoule is about 0.277778 MWh

  5. A C Osborn permalink
    October 9, 2015 1:20 pm

    As the EU via our Government continues to make Coal to expensive the Suppliers should stop producing NOW.

    Then the Government would see how useful Wind & Solar really are.

  6. A C Osborn permalink
    October 9, 2015 1:22 pm

    At the same time as this report we also have this from Bloomberg.

  7. October 9, 2015 1:45 pm

    The question is: cheaper for who? Not for the electricity consumers.

  8. Knute permalink
    October 10, 2015 4:31 am

    “Over the same period, coal-fired power stations have seen their costs rocket from nearly $98 mWh to $115 and gas from $100 to $114, after the EU agreed new rules that will greatly increase the amount they must pay for their carbon emissions.”

    Doris and Frank


    I can’t believe your going to vote for that cockeyed supporter of limits on fossil fuels.


    Doris, our son now works teaching software that’s used to track carbon dioxide output. He’s even got a chance to propose programming drones that do local area searches.


    Yes, Frank I’m proud of our son. That Geospatial Analysis profession is going to explode but I just feel so conflicted. It makes me feel dirty enough to want to run thru the rain naked.


    Well, Doris do it before they get the drones up.
    Don’t want to embarrass our son now do we.

  9. Paul2 permalink
    October 10, 2015 8:35 am

    O/T but this makes my blood boil. Everyone’s so worried about supposed sea level rise. Look at how corrupt and incompetent the Bangladesh government really are:

  10. October 11, 2015 5:40 am

    Some information on Renewable capacity factors from EurObservER which actively supports the Renewable Energy industry.


    Cost comparisons are have been clearly made by the US EIA
    US EIA electricity_generation.pdf 2015 Table 1

    For fuller illustrations from European experience see:

    Accounting for the capacity factors, (the actual electrical output as compared to the Nameplate capacity of the Renewable installation) that are reported by the Renewable industry, the overall capital cost of all European Renewable Energy installations averages out at about €29billion / Gigawatt, whereas the cost of a conventional gas-fired generation is about €1billion / Gigawatt.

    This comparison of course strips out all the positive profitability effects of government regulation and subsidies that are being applied to Renewable Energy: that regulatory support is the only means that make Renewables a viable business proposition.

    That overall value for Renewables at €29billion / Gigawatt is derived from the combination of
    Onshore Windpower €14.2 billion/GW
    Offshore Windpower €41.4 billion/GW
    On Grid Solar Power €48.5 billion/GW

    The burden of these additional Renewable costs is imposed on consumers via the increase in their utility bills.

    According to these Renewable Energy supporting sources by 2014 European Union countries had invested approximately €1 trillion in large scale Renewable Energy installations. This may well be an underestimate.

    This has provided a nameplate electrical generating capacity of about 216 Gigawatts, nominally about ~22% of the total European generation needs of some 1000 Gigawatts.

    The actual measured output by 2014 from Renewable Industry sources has been 38 Gigawatts or 3.8% of Europe’s electricity requirement, at a capacity factor of ~18% overall.

    The whole 1000 Gigawatt fleet of European electricity generation installations could have been replaced with reliable, dispatchable, lower capital cost Gas-fired installations for the €1trillion of capital costs already expended on Renewable Energy in Europe.

    However Renewable Energy production is dependent on the seasons, local weather conditions and the rotation of the earth, day and night.

    So the Renewable Energy contribution to the electricity supply grid is inevitably erratic, intermittent and non-dispatchable. It is therefore much less useful than dispatchable sources of electricity, which can be engaged whenever necessary to match demand and maintain grid stability.

    That 3.8% Renewable Energy contribution to the grid is often not available when needed and obversely its mandatory use and feed-in obligations can cause major grid disruption if the Renewable Energy contribution is suddenly over abundant.

    The Renewable Energy industry could not exist without the Government mandated subsidies and preferential tariffs on which it depends. It is not a truly viable business proposition

    Viewed from the point of view of the engineering viability of a nation’s electrical grid, Renewable Energy would never be part of the generating mix without its Government mandate and Government market interference.

    So the Greens in their enthusiasm to save the world from an undefinable but probably minimal threat, will destroy civilisation long before the world fails from excessive overheating from CO2 emissions.

    • Knute permalink
      October 12, 2015 2:43 am

      Priceless information.

      Really good stuff. Now if you took that info and packaged in short themes, published on popular webpages, during predictable patterns (every Sunday for instance) you climb both google search engines and end up on top ten lists for media content researchers.

  11. October 29, 2015 6:58 am

    Wind energy accounts for nearly 70% (21.1 GW) of installed capacity, thereby making India the world’s fifth largest wind energy producer.


  1. Is Wind Power Really Cheaper? | Jaffer's blog

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