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Subsidy cut deals blow to wind farms

November 21, 2018

By Paul Homewood

  

From the The Times:

 

 

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The government has slashed the financial support on offer for new offshore wind farms, forcing developers to find further cost savings if their projects are to proceed.

Claire Perry, the energy minister, said that the government aimed to “secure more energy from renewables for less” after announcing that it would award subsidy contracts worth up to £60 million a year to new projects through an auction in May.

The budget is barely a third of the value of subsidies awarded via the last auction in 2017, when wind farms with a capacity of 3.2 gigawatts got the go-ahead. The government said that it expected the reduced budget to be able to deliver more wind farm capacity than last time, of about four gigawatts.

The maximum price that new offshore wind farms will receive for the electricity they generate will be at least 40 per cent lower than the price for power from the Hinkley Point C nuclear plant.

Writing for The Times website, Ms Perry said the auctions would “make the UK a beacon for inward investment and provide the private sector with the certainty it needs to invest”.

Successive governments have backed the development of wind farms to mitigate climate change. Last year offshore wind turbines generated just over 6 per cent of the UK’s electricity needs.

Britain has almost 2,000 offshore wind turbines, capable of generating almost eight gigawatts of power when generating at full tilt. Projects capable of generating about another six gigawatts are under construction or are contracted to start generating by 2022-23. All have been made commercially viable with subsidy schemes set up by the government and paid for through consumer energy bills.

The government has said that it could support up to another two gigawatts being built each year through the 2020s and yesterday it set out details of how it would award subsidies for the next projects. It said that offshore wind projects starting up in 2023-24 would be entitled to a maximum price of £56 per megawatt-hour, falling to £53 per MWh for projects in 2024-25.

That compares with the guaranteed price of £92.50 per MWh for Hinkley Point C, which is slated to start in 2025, and £57.50 per MWh for the cheapest offshore wind projects awarded contracts last year.

It also underscores the dramatic cost reduction in the offshore wind industry in recent years, since early projects were criticised for high subsidies. The world’s largest offshore wind farm, the 660-megawatt Walney Extension off Cumbria, received a contract in 2014 that guaranteed it a price of £150 per MWh.

All the contract prices cited are expressed in 2012 money and are index-linked to inflation, so the actual price that developers receive will be higher.

https://www.thetimes.co.uk/edition/business/subsidy-cut-deals-blow-to-wind-farms-r7q9f3gzn

 

There was considerable doubt expressed at the last auction round as to whether the price of £57.50/MWh for two projects, Moray and Hornsea 2, was actually sustainable. For instance, Hornsea benefitted from piggy-backing onto the existing infrastructure of the first phase, helping to save on cabling costs.

It will be interesting to see whether the government gets any offers at all at the price they want.

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27 Comments
  1. November 21, 2018 12:38 pm

    The language used maybe answers the question, “slashed” and “blows” sound straight out of the Green Snake Oil marketing handbook, as does the wailing about the bullying Ms Perry in the Guardian.

  2. November 21, 2018 1:37 pm

    This is a step in the right direction and we sceptics must accept that the politics requires a softy softy approach. Nonetheless very expensive politics. ultimately energy bills will shift the scene.

  3. November 21, 2018 1:46 pm

    Ultimately, of course, ALL energy providers should be required to cover the costs of providing back up energy as and when required. Contracts should specify the level of consistent supply with sanctions in place for failure.

    • Jack Broughton permalink
      November 21, 2018 10:25 pm

      In the old CEGB days this was the norm and made new projects very difficult as the developer had to pay for stand by. Now, the unreliable generators get paid if they are curtailed and no costs for failing to supply or variable supply. Green-political madness rules our generating system, but the damage to the UK cost base will be a long term problem for the next generation who do not appreciate the cost penalty of saving the planet at any cost.

      • Derek Buxton permalink
        November 22, 2018 11:54 am

        The only problem is now, the poor and vulnerable are punished for all this green cr*p. As the words imply, we have not got the many pounds needed to support this fantasy land that Berry loves so much. When are they going to get real in this, the worst Paliament I can remember in all my 85 years. Climate change will happen over time as always so stop punishing those who cannot afford it, it is known that it is fraud on a global scale!

  4. Gerry, England permalink
    November 21, 2018 1:46 pm

    ‘All have been made commercially viable with subsidy schemes set up by the government and paid for through consumer energy bills.’

    Says it all really and so much for it being the cheapest form of energy as the warmists claim.

  5. HotScot permalink
    November 21, 2018 1:48 pm

    Britain has almost 2,000 offshore wind turbines, capable of generating almost eight gigawatts of power when generating at full tilt.

    And what percentage of their operating time are they at ‘full tilt’?

    • November 21, 2018 2:45 pm

      The last time I looked it was in the low single figures.

      The big problem would be if they all simultaneously generated at full power. Grid overload and blackouts anyone?

    • It doesn't add up... permalink
      November 21, 2018 5:56 pm

      On the data I have the offshore segment is averaging over 80% of capacity just 7.5% of the time in the long term. Perhaps more worrying is that is averaging less than 10% of capacity for 10.4% of the time. National Grid essentially assume that all wind can guarantee 15% of capacity to cover cold winter days and nights. Of course, onshore wind performs rather less well, being at under 10% of capacity about a sixth of the time.

      • Harry Passfield permalink
        November 21, 2018 7:05 pm

        What’s more annoying is that they do not have to factor in the cost of back-up in their pricing. The very definition of a scam. Perry needs to get on the transgender bandwagon and grow some b……. (But she won’t, as long as her Green assistants do her job for her)

  6. November 21, 2018 2:20 pm

    Data points: 8 gigs capacity, 6% UK electricity needs. True?

    If actual use is 22% capacity, existing windpower has about 28% total UK electricity “needs” capacity …..?

    • Harry Passfield permalink
      November 21, 2018 6:56 pm

      Think you missed this . from your comment.

  7. It doesn't add up... permalink
    November 21, 2018 4:26 pm

    As I previously mentioned here, the Moray project (950MW) will depend on getting connections to Norway and reinforced links to England for free: without these, it would face high levels of curtailment due to inadequate links to transport its power to markets. These are expensive projects, probably at least £3bn in total.

    I noted somewhere else that Scotland plans to have a total of 22.5GW of wind. Peak Scottish demand is no more than 6GW, and their total currently planned export capacity is similar (in reality, it allows Scotland to borrow power to keep the lights on when the wind doesn’t blow). Plainly, they expect that the pylons will march over Northern England, and the fund for subsea cables is unlimited: moreover, they appear not to have noticed that the UK tends to share its weather systems with most of the Continent, meaning that surplus wind is unlikely to be wanted, while interconnectors will try to bleed reliable power out of wherever it is generated. It will be the grid bills as much as the CFD payments that will jack up prices for consumers.

  8. Bitter@twisted permalink
    November 21, 2018 4:32 pm

    So if these monstrosities generate power as cheaply as we are told, why bother with a subsidy at all?

    • Ben Vorlich permalink
      November 21, 2018 4:37 pm

      +10

  9. MrGrimNasty permalink
    November 21, 2018 5:39 pm

    If only there were some way to get Perry and the entire CCC to attend :-

    http://joannenova.com.au/2018/11/jo-nova-explaining-how-to-destroy-electricity-grids-in-munich-oslo-london/

  10. markl permalink
    November 21, 2018 5:53 pm

    I can hear the screaming already about how it’s not fair someone else will not pay for their vision of renewable energy. Forbid the energy providers will have to pay for it themselves!

  11. MrGrimNasty permalink
    November 21, 2018 6:08 pm

    The oldest big windfarms are, what, 20-30 years old? If the technology hasn’t reached the point where it has matured and no longer needs a massive bail, it never will.

    • David Ashton permalink
      November 21, 2018 9:48 pm

      In addition, I have read that some German windmills are reaching an age where subsidies will expire. The owners are threatening to close them down if subsidies are not continued beyond the contract date. This means the sale of their output at wholesale prices doesn’t even cover their running costs.

  12. theguvnor permalink
    November 21, 2018 6:53 pm

    Did I just hear correctly on RT that UK is proposing to leave ETS to start its own?

  13. tom0mason permalink
    November 22, 2018 12:20 am

    Paul,
    As your site links pictures and comments from outside of the EU, this site will fall under Article 13 of the Directive on Copyright in the Digital Single Market would effectively require Internet platforms – of all sizes – to proactively filter any content posted by their users, with the goal of stamping out materials that allegedly infringe on copyrights…before they are even posted.

    Soon European readers of your site will not be seeing so much of this site as you post pictures and videos that the EU elites don’t want to be seen. WordPress is against this action — see https://transparency.automattic.com/2018/06/12/were-against-bots-filtering-and-the-eus-new-copyright-directive/
    More information is available at https://www.saveyourinternet.eu/

  14. John F. Hultquist permalink
    November 22, 2018 2:44 am

    Hope we get to hear what the locals think of Jo Nova.

  15. November 22, 2018 5:08 am

    ‘All have been made commercially viable with subsidy schemes set up by the government and paid for through consumer energy bills.’ says the reporter, Emily Gosden.

    Good grief, Ms Gosden, the need for subsidies (ie paid for by forcible extraction from the long-suffering customer/taxpayer) is proof positive that the whirlygig parks are NOT commercially viable!

  16. richard permalink
    November 22, 2018 5:21 am

    Hi Paul I get a lot off emails from solar citizens there latest gave me a link https://reneweconomy.com.au/unsubsidised-wind-and-solar-now-cheapest-form-of-bulk-energy-96453/ I would like to know what you think Regards Richard Merchant Perth Australia

  17. Mike H permalink
    November 22, 2018 9:50 am

    This may just be hope triumphing over experience but this article seems to me to have a slightly more balanced tone. It does qualify a comment about capacity with “when running at full tilt”. As noted above, it does state that this will all hit consumers’ bills. The costs of the Walney scheme are spelt out, including the index-linking.
    One swallow, etc….but it will be interesting to see if this slightly more balanced – or less unbalanced – tone continues.

  18. Ben Vorlich permalink
    November 22, 2018 10:08 am

    An interesting situation this morning, dull fairly windless day in France. Demand is 75GW. Wind and solar combined is barely at 3.5GW, but gas and biomass are in the red zone and all the interconnectors apart from Germany are importing into France.

    Looks like Macron’s onto a winner with his carbon taxes subsidising renewables.

  19. dennisambler permalink
    November 22, 2018 11:14 am

    CC committee member and chair of the mitigation sub-committee, Baroness Brown, (Julia King), is also a non-exec director at Offshore Renewable Energy Catapult,

    https://ore.catapult.org.uk/about-us/

    “By the end of 2018, installed offshore wind power capacity will reach a total of 30.2GW, with 22.9GW of generation in Europe and 7.3GW across the rest of the world.

    The UK remains the global leader in offshore wind, with a total capacity of 6,385MW and an additional capacity of 3.2GW entering operation by 2020.”

    Elsewhere on their site they say:

    The UK’s operational offshore wind farms are using 62 export cables totalling a length of 1,499km and over 1,806km of inter-array cables to transport the 6,385MW of electrical generation.

    Subsea power cable failure is frequently reported as an issue for offshore wind farm operators. Such failures are reported to account for 75-80% of the total cost of offshore wind insurance claims – in comparison, cabling makes up only around 9% of the overall cost of an offshore wind farm.

    A total of 43 array and export cable failures have been reported since 2007. Issues associated with manufacturing and/or installation are reported to be the most common cause of cable failure.

    From 2014 to the end of 2017, recorded cable failures at UK offshore wind projects have led to a cumulative loss of power generation of approximately 1.97 TWh.”

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