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Offshore Wind Costs–Facts v Propaganda

February 14, 2019

By Paul Homewood

 screenshot-2017-10-05-16-59-02-768x506

https://notalotofpeopleknowthat.wordpress.com/2017/10/06/gwpf-lodges-asa-complaint-over-false-claims-in-offshore-wind-campaign/

How often do we hear claims that the cost of offshore wind has halved?

I often see it argued in comment threads in the Telegraph and elsewhere, and it is hardly surprising given the barrage of misinformation fed to the public by official sources, the media and the renewable lobby.

The advert above is one of the most obvious examples, paid for by the renewable lobby, Greenpeace etc. It appeared at at Westminster tube station, and was seen by thousands of passengers. But how many of these will have been aware that the claims were withdrawn after the ASA declared them as false.

And it is not just Greenpeace who lie. Take, for instance, this grossly misleading headline from Roger Harrabin: 

 

image

https://www.bbc.co.uk/news/business-41220948

OK, the article then goes on to clarify that it only refers to new offshore projects. But millions will see headlines like this, but never bother to read through the articles.

And then there’s Claire Perry herself making this claim last year in an article written by her for the Telegraph:

Today renewables provide almost one third of our electricity, with wind accounting for half of that and prices falling by more than 50pc in only a few years

https://www.telegraph.co.uk/business/2018/09/05/walney-extension-means-big-business-bigger-opportunity-uk/

Very few people understand the intricacies of renewable subsidies, and will more than likely end up believing that the cost of offshore wind power now being produced costs half as much as it did not long ago. This after all is the deliberate intent of all three examples I have listed.

So what is the truth? How much are we really paying for offshore wind?

Subsidies for offshore wind power are paid via two schemes, ROCs and CfDs:

1) Renewable Obligation Certificates (ROCs)

This scheme is now closed to new projects, but wind farms already qualified under ROCs will continue to receive subsidies for as long as they carry on generating.

In the latest 12-month figures published by BEIS (to Sep 2018), offshore wind farms covered by ROC generated 21.3 Twh, and received 40.2m ROCs.

The current value of an ROC is £47.22, so the value of the ROCs is £1898m. This equates to £89/MWh.

As these wind farms also receive the market value of the electricity produced on top of the ROCs, the value of the ROCs is pure subsidy, and is added to electricity bills.

 

2) Contracts for Difference (CfDs)

In 2014, a new system of subsidy was introduced to gradually take over from ROCs.

CfDs offer a guaranteed strike price to successful applicants, index linked for 15 years, (with the exception of Hinkley C which lasts for 35 years).

Strike prices are agreed via auctions, and have declined over the years, not least because the first tranche were arbitrarily set by Ed Davey, rather than by auction, and were arguably far too high.

Below is t he list of CfDs currently awarded. Some are operational, but others won’t start until as late as 2024:

 

Price MW
Beatrice 155.53 664
Burbo 166.59 258
Dudgeon 166.59 402
EA 133.29 714
Hornsea 155.53 1200
Hornsea Project 63.66 1386
Moray 63.66 949
Neart 127.21 448
Triton 82.75 860
Walney 166.59 660
WEIGHTED AV 116.93 7541

https://www.lowcarboncontracts.uk/

 

CfDs for offshore wind projects are guaranteed and index linked for 15 years, so all of these will still be paid well after 2030.

Based on the average weighting, the average strike price is £116.93. With market prices around £55/MWh at the moment, this equates to a subsidy of about £62/MWh.

 

Summary

  There is about 6200 MW of capacity covered by ROCs. Averaging this together with the 7541 MW of CfD capacity, and we get a weighted average subsidy of £74/MWh, and an actual price of £129/MWh.

This is of course more than double the market price of £55/MWh.

Based on 39% loading, output from these projects, both operational and planned, amounts to 47 TWh, meaning the annual subsidy will total £3478m.

 

Remember that these prices are index linked, so subsidies will rise each year.

Remember also that these subsidies will continue to be paid out well into the 2030s. Whilst new schemes will also be added in future CfD auctions, they will continue to add to these subsidies, even if the overall average price drops.

 

Remember all of this next time Claire Perry, the BBC or renewable lobby try to persuade you that we are getting a good deal from offshore wind.

24 Comments
  1. Joe Public permalink
    February 14, 2019 12:05 pm

    Even Greens & enviros should be able to understand your lucid explanations.

    • Gerry, England permalink
      February 14, 2019 1:50 pm

      Assuming they have any interest in so doing – which I doubt. Too much vested financial interest or marxist ideals.

  2. A C Osborn permalink
    February 14, 2019 12:24 pm

    Thanks Paul, reality is shocking.

  3. Harry Passfield permalink
    February 14, 2019 12:37 pm

    Thank you, Paul, for once again giving a clear breakdown on costs. I have one query: when you calculate the price/MWhr does that also include constraint payments which, I understand, can be millions?

    • February 14, 2019 1:39 pm

      No!

    • It doesn't add up... permalink
      February 14, 2019 8:52 pm

      Monthly constraint payments can be seen here:

      https://www.ref.org.uk/constraints/indexbymth.php

      I had been expecting that the new expensive (£1bn just to ship up to 2250MW of wind farm power South) Westernlink HVDC connector that runs from Hunterston (near the nuclear power station on the Clyde) to Deeside in NW England would have allowed Scottish wind farms to produce with few constraint periods. It’s been operating since December 2017 – yet last year, constraint payments to wind farms were a record.

      http://www.westernhvdclink.co.uk/

  4. It doesn't add up... permalink
    February 14, 2019 12:38 pm

    Another hidden part of the subsidy is the costs of connection and grid reinforcement that are simply averaged out across our bills. These are very substantial, and account for the majority of National Grid’s current investment. A large chunk of that is investment in new interconnectors, so that surplus wind can be dumped abroad, and so we can import electricity for top dollar (well, euro) prices when the wind doesn’t blow, and as a substitute for having our own secure capacity: these again are subsidised because they are deemed to be low carbon, even when they connect to a cluster of coal/woodchip fired power stations near Rotterdam, and because the grid consequences are once again charged to consumer bills, rather than being considered as part of the real economics of the projects. Then there is the further cost of additional grid stabilisation projects – the main use for grid batteries. Not to mention the costs imposed on the rest of the grid through accommodating wind production and being ready to ramp up to provide power when the wind dies.

  5. February 14, 2019 12:40 pm

    I hesitate to link to Mark Lynas, but here he was in 2011 writing about Green Blob involvement in the IPCC renewables promotion, spotted by Steve McIntyre:

    http://www.marklynas.org/2011/06/new-ipcc-error-renewables-report-conclusion-was-dictated-by-greenpeace/

  6. A C Osborn permalink
    February 14, 2019 12:42 pm

    Thanks Paul, the reality is painful reading.

  7. FrankSW permalink
    February 14, 2019 12:47 pm

    To simply compare wind/solar costs vs Dispatchable costs in isolation is disingenuous. This is because the existing dispatchable system which must be present to provide 100% life support when the wind don’t blow and the sun don’t shine must also be added to the intermittent’s costs.

    In simplistic formulaic form
    Tradiditional
    Dispatchables Total = Dispatchables Infrastructure + Dispatchables Fuel

    With Wind/Solar
    Wind/Solar Total = WInd/Solar Infrastructure + Dispatchables Infrastructure
    Wind/Solar Real Cost = Wind/Solar Total – Dispatchable Fuel that would have been used

    So if Wind is cheaper than it has to be less than only the fuel component of the dispatchable system not just cheaper than the whole dispatchable system

  8. JimW permalink
    February 14, 2019 1:32 pm

    Good analysis of ‘energy’ costs. To this must be added the cost of back-up from conventional generation when the wind doesn’t blow, plus the costs of transmission networks and VAR etc support. In total its probably double the figure you quoted.

  9. February 14, 2019 1:52 pm

    Off topic but of a similar theme, just seen a Sky News report about hydrogen fuel cell powered cars (specifically Toyota Mirai). Can somebody please confirm that I’m not being totally stupid here, but according to that report, hydrogen is produced by a conversion process that requires a vast amount of energy, the resulting hydrogen gas is then transported around the world and sold via pumps on a forecourt, this is then pumped into a car that then BURNS the fuel to produce electricity to power the cars electric motors. The claim being that this is much cleaner than conventional fuel as it emits zero CO2???!!!*** What am I not understanding? To me it sounds like this is a highly inefficient and energy wasting alternative fuel??

    • February 14, 2019 2:21 pm

      To clarify, the energy required to produce the hydrogen appears to come from fossil fuel power stations, the energy to transport the gas is from fossil fuels, the car itself burns the gas to produce electricity to drive the motor, itself an inefficient process and produces a lot of waste heat (just the same as petrol and diesel) and in my mind this process generates more CO2 than a pure EV powered by grid electricity (even if from fossil fuel power station) and I can’t see is any cleaner than diesel or petrol anyway. Maybe I have totally misunderstood the situation.

      • jack broughton permalink
        February 14, 2019 3:26 pm

        So far as I am aware the only large scale production processes for hydrogen use natural gas and produce CO2 as a concentrated by-product, (easily stored as a bonus). Electrolysis is not developed at large scale so can be ruled out for a long time to come.

        The capital and running costs of hydrogen synthesis ought to make it a non-starters as an energy source, but the madmen run the asylum now, so …..

      • Graeme No.3 permalink
        February 14, 2019 10:14 pm

        jack broughton:
        Electrolysis as a continuous high pressure system with potassium hydroxide electrolyte has been used for many years. It isn’t that popular as it requires cheap electricity (and some heat input) hence is uneconomic compared with steam reforming of methane to hydrogen and CO2.
        To separate the CO2 it would be necessary to use more electricity, either by refrigeration or zeolite (or other) membrane type.
        Using it in cars is a problem as hydrogen has a Octane rating of 66, meaning inefficient internal combustion. Fuel cells are heavy and both methods give by-products such as nitrogen oxides (as diesels do).

  10. Athelstan. permalink
    February 14, 2019 4:13 pm

    Reading that, is like being kicked painfully in the nether regions and repeatedly, no wonder the green blob constantly go on the attack about the ‘diminishing costs’ because they know full well, if the Brit consumer really knew the true inlay and obsenity of the idea of whirlygigs, installation and inbuilt costs for Booger All juice…………….surely

    But short of reading blogs like this one, how are they ever going to know the truth and therein is the real problem, this blog post needs splattering on billboards across the nation……….something simple like

    “World price £55, you are made to pay £129 per MWh! the true cost of intermittent, very doubtful electricity!”

    “Don’t be daft, the consumer says: bin the green agenda!”

  11. In the Real World permalink
    February 14, 2019 6:44 pm

    I recently read an article which described , [ in a better way than I could explain it ] , how it is just about impossible to run a grid on nonsynchronous generation , [ wind & solar ] . without complete backup from conventional generation because of the instability .
    https://www.kiwithinker.com/2017/04/electric-power-system-stability/

    It now seems to have been made to disappear .
    Is it just me , can anybody else pull up this link , or have the Green Censors been at work trying to stop the truth getting out .

  12. February 14, 2019 11:50 pm

    Reblogged this on ajmarciniak.

  13. February 15, 2019 1:06 am

    Reblogged this on Climate Collections.

  14. Iain Reid permalink
    February 15, 2019 8:47 am

    Other factors in the cost of renewables versus nuclear, for instance, is that the comparison is on nameplate capacity which distorts the actual power generated x time and that the life of wind generators is much shorter than conventional plant?

  15. Thomas Carr permalink
    February 15, 2019 11:49 am

    I hope that you enjoyed the inadvertent use by the BBC of a picture from Getty Images of a glassy sea – never mind the power boat wake – on what can only have been another windless day.

    • It doesn't add up... permalink
      February 15, 2019 12:41 pm

      Windless days are best for maintenance.

  16. February 15, 2019 7:03 pm

    Just put the comment below on a Power Engineering article about the first blades being delivered for East Anglia 1:
    —————————————————–//————————————————–
    714 MW at a cost of £2,500 million can power 630,000 UK homes for 30 years. In 15 years time, a single BWRX-300 SMR, coming off the GE-Hitachi productionn line, will be able to power 625,550 homes [just about the same – give or take] for just £462 million.

    East Anglia 1 will have to be built a 2nd time at a total cost of £5,000 million – nearly 11X more.

    A single BWRX-300, occupying a 0.2 sq km site, could supply all of the 24/7, low-carbon electricity – domestic;commercial; industrial – the populations of Norwich, Ipswich, Great Yarmouth and Lowestoft use.

    And they’ll be able to get the same great deal as ‘Lesta’s Investas’:
    https://bwrx-300-nuclear-uk.blogspot.com/2019/02/lestas-investas-could-fund-lowest-ever.html

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