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Offshore wind power ‘so cheap it could return money to consumers’-Claims Independent

July 28, 2020

By Paul Homewood

 

h/t Robin Guenier

 

A grossly misleading headline from the “Independent”:

 image

Renewable energy is on course to become the cheapest kind of power to produce in the UK, meaning household electricity bills could fall if savings are passed on to consumers.

In the past, government subsidies for energy projects have pushed energy bills up, but as the cost of installing and running wind and solar energy projects has fallen, renewables are set to undercut fossil fuels to the extent they could operate with “negative subsidies” – paying money back to the government.

According to research by a team at Imperial College London, households could benefit when the latest round of offshore wind farms in the UK start producing power in the mid-2020s.

Lead researcher Dr Malte Jansen, from the Centre for Environmental Policy at Imperial, said: “Offshore wind power will soon be so cheap to produce that it will undercut fossil-fuelled power stations and may be the cheapest form of energy for the UK.

“Energy subsidies used to push up energy bills, but within a few years, cheap renewable energy will see them brought down for the first time. This is an astonishing development.”

The research examined wind power for five countries in Europe, including the UK, and focused on a series of government auctions for offshore wind farms between February 2015 and September 2019.

Companies that want to build wind farms bid by stating the price at which they will sell the energy they produce to the government.

If a company’s bid is higher than the wholesale electricity price on the UK market once the wind farm is up and running, then the company will receive a subsidy from the government to top up the price.

However, if the stated price is less than the wholesale price, then the company will pay the government back the difference. This payback is then passed through to consumers’ energy bills, reducing the amount that homes and businesses will pay for electricity.

A UK auction made headlines in September 2019 as winning companies said they could build offshore wind farms for about £40 per megawatt-hour (MWh) of power. This was a record set by these wind farms, with bids 30 per cent lower than just two years earlier.

https://www.independent.co.uk/environment/offshore-wind-power-cheap-subsidies-uk-energy-climate-a9640371.html 

 

It may be true that auction prices for offshore wind have been dropping from the obscene levels seen a few years ago. But that does not mean that households will be better off, as I will explain.

 

Let’s start with the OBR’s forecast of Environmental Levies, that is the cost of green subsidies added to our energy bills:

 

 image

https://obr.uk/efo/economic-and-fiscal-outlook-march-2020/ 

As we can see, subsidy costs will carry on rising at least until 2024-25, from £11.3bn last year, to £12.5bn. This is because there are many offshore wind and other low carbon schemes which have not come on stream yet, all of which have heavily subsidised contracts.

Things will get much worse when Hinkley Point C begins operation in the late 2020s, which will add about £1.8bn to energy bills.

Even the much vaunted CfD auction last year, which the Independent claims brought prices of £40.MWh, won’t save consumers money. That £40/MWh price is actually at 2012 prices, and currently sits at £45.83/MWh, still higher than the market price.

Currently wholesale electricity prices are around £25/MWh, depressed as a result of coronavirus. However, even before the current problems, market prices were hovering around £40/MWh.

chart

https://www.ofgem.gov.uk/data-portal/all-charts/policy-area/electricity-wholesale-markets

 

In the meantime, the subsidies already being paid by consumers will continue well into the 2030s. Renewable Obligation and FIT subsidies are available throughout the life of the asset.

Whilst CfDs only last for 15 years (other than Hinkley Point), the first project only came on stream in 2017. Consequently huge amounts in CfD subsidies will still be generated well into the 2030s.

The claim that offshore wind will return money to consumers is akin to a burglar stealing £1000 from you, and then giving you £10 back!

26 Comments
  1. Philip Mulholland permalink
    July 28, 2020 12:25 pm

    “negative subsidies”
    AKA Tax.
    Welcome to our world.

  2. Jackington permalink
    July 28, 2020 12:25 pm

    Same fake news in D Telegraph paper edition today

  3. John Palmer permalink
    July 28, 2020 12:29 pm

    Same nonsense in today’s Telegraph, I’m afraid. The usual, breathless, unquestioning cut-and-paste job by the very naive Emma Gatten.
    Do these so-called journalists ever try looking critically at the PR puffs they’re sent by the greenies? Sorry, that was a daft question!
    Paul’s burglar analogy is spot-on.

    • Gerry, England permalink
      July 28, 2020 3:25 pm

      Real journalism is very rare. You either get the cut-and-paste press release or it is all about personalities which explains why the Daily Mail had 12(!!!) pages on the Duke and Duchess of Woke yesterday and that follows on from pages of it in the sunday paper. Our greatest political event in decades – the EU Referendum – was reduced to infantile personality coverage and oh how they loved the blond buffoon fronting up for Leave. Mature coverage of the event would have put us in a much better position than where we are now. Dr North also noticed when looking back at old newspapers how many topics were covered compared to today.

      • Gamecock permalink
        July 28, 2020 8:05 pm

        “Real journalism is very rare.”

        NO, SIR! IT IS VERY COMMON!

        Journalism is NOT a noble and honorable profession. Where on earth did you get the idea that it is? From journalists?

  4. Fintan Ryan permalink
    July 28, 2020 12:30 pm

    Like winning an amount in the lottery less than your outlay

  5. JimW permalink
    July 28, 2020 12:33 pm

    Do the ‘learned’ people at Imperial do nothing but create useless, brainless pieces of work based on GIGO computer models?

    • Ben Vorlich permalink
      July 29, 2020 6:35 pm

      I watched a lecture by Willie Soon on WUWT earlier today he came up with

      Garbage In Gospel Out
      Which I hadn’t heard before and rather liked.

      • It doesn't add up... permalink
        July 30, 2020 7:07 pm

        It’s Greta in…

  6. Peter F Gill permalink
    July 28, 2020 1:12 pm

    I wonder if that research team at Imperial College is the same team that is subsidised by Jeremy Grantham. If so we should note that their mission is for a sustainable, resilient zero carbon future. Also I wonder if in the costings Dr Jansen took into account the cost of all the gas fired back-up necessary let alone all the other costs that are routinely ignored.

    • bobn permalink
      July 28, 2020 5:40 pm

      Yes its the team owned by Grantham’s hedge fund. the one that profits from the carbon credit trading scams. I’m sure an analysis of their report will show it totally faked; leaving out all the inconvenient facts that disprove it. But our media dont check evidence anymore.

  7. Ray Sanders permalink
    July 28, 2020 1:37 pm

    Firstly – Harry Cockburn (no sniggers please) who wrote the article has Batchelors and Masters degrees in journalism and nothing else – he probably thinks VARs are a football issue and has never heard of reactive power as an example.
    Secondly who on earth ever reads the Independent anyway? .

  8. Patsy Lacey permalink
    July 28, 2020 1:48 pm

    In today’s Telegraph Ed Clowes quotes the Mark Herring Head of Strategy of the National Grid System Operator saying Britain’s power network could remove more carbon than emits into the atmosphere by 2033 if it embraces renewable energy and tech that captures and stores greenhouse gases. Apparently this requires an extra 30million electric vehicles and 8 million gas boilers replaced by heat pumps.
    There are an estimated 32 million passenger cars so virtually all of them need to be replaced in just 13 years and what about the other 12 million + gas boilers?

  9. Joe Public permalink
    July 28, 2020 2:20 pm

    “According to research by a team at Imperial College London …”

    Is that the same Imperial College London whose scaremongering warned of 500,000 Corona virus deaths?

  10. Peter F Gill permalink
    July 28, 2020 2:23 pm

    Sounds like a red herring to me Patsy!

  11. Peter F Gill permalink
    July 28, 2020 2:25 pm

    Yes Joe P but that was not in the world, just deaths in the UK.

  12. Curious George permalink
    July 28, 2020 4:19 pm

    I vaguely remember that a free electricity was included in a 16th(?) Soviet Five Year Plan.

  13. jack broughton permalink
    July 28, 2020 4:48 pm

    As the green-scam schemes get wilder and wilder the claimed benefits become bigger every time, like more employment on schemes where the equipment is mostly imported! There is a need to show these idiots that the costs are massive and the great environmental benefits claimed amount to shaving a gnats-cock off the world’s CO2. “Saving the earth”, which they all claim to be their noble goal, would need a lot more than cutting all of the UK’s emissions can do.

    Given the true cost of environmental “savings” (totally unproven) against NHS, jobs and cars, it doe not need a genius to know where people would vote! Only our politicians seem to think that people are interested in the junk science of climate change.

  14. Gamecock permalink
    July 28, 2020 8:08 pm

    “Offshore wind power will soon be so cheap to produce that it will undercut fossil-fuelled power stations and may be the cheapest form of energy for the UK.”

    The message is that Greenie power is viable. It’s not.

  15. Teddy T permalink
    July 29, 2020 10:02 am

    “The claim that offshore wind will return money to consumers is akin to a burglar stealing £1000 from you, and then giving you £10 back!”

    I was disappointed with your final comment. It sounds like sour grapes having lost the argument. The earlier energy policy mistakes are a disaster but we have to live with them.
    I thought there were still huge problems with the cost of new offshore wind; connection costs, back up cost for when the wind is not blowing and payments when the grid can’t take the energy produced. Perhaps the price guarantees are also index linked which if true posses longer term issues when inflation returns. Also, you have stated previously that turbine owners can drop out of the agreement for a nominal charge if energy price stay higher.

    If all this is still true there is an argument against more offshore wind. If not I’ll take £10 and please can I have more of it.

  16. July 29, 2020 12:54 pm

    At the ultra-warmist ‘The Conversation’ we find this article:

    JULY 20, 2020
    Floating wind farms: How to make them the future of green electricity
    by Susan Gourvenec, The Conversation

    Unfortunately, while floating wind farms are technically feasible, they’re not economically viable. Doing anything offshore is expensive.
    https://techxplore.com/news/2020-07-farms-future-green-electricity.html
    – – –
    Offshore = expensive. Who knew?

    Whoever thinks it isn’t expensive needs to tell the wind industry where it’s going wrong.

    • Duker permalink
      July 30, 2020 1:45 am

      Notice the ‘journalism style’ they use. Make some ridiculous claim in the headline and the introduction goes further promising even more wondrous things.
      The debunking of the whole lot only happens well into the story which most readers never get that far. Mission accomplished as they become associated with the ‘future’.
      We seen it all with the battery powered airliners ‘future’, all the whole any concerns are brushed off with ‘in theory these things work’…somewhere

    • Gamecock permalink
      July 30, 2020 1:59 am

      Can they get the shore cables to float?

  17. July 30, 2020 6:16 pm

    I suggest this recent analysis of the actual cost of offshore wind farms according to the key parameters involved, for potential investors, is a better was to check on real costs. Nobody will supply at a long term loss. Best cost about £110/MWh. OPEX 1/3 of that from memory. Not £40/MWh. JUst the facts. CEng, CPhys.

    Parametric CAPEX, OPEX, and LCOE expressions for offshore wind farms based on global deployment parameters
    Anastasia Ioannou, Andrew Angus & Feargal Brennan
    To cite this article: Anastasia Ioannou, Andrew Angus & Feargal Brennan (2018) Parametric CAPEX, OPEX, and LCOE expressions for offshore wind farms based on global deployment parameters, Energy Sources, Part B: Economics, Planning, and Policy, 13:5, 281-290, DOI: 10.1080/15567249.2018.1461150

    To link to this article: https://doi.org/10.1080/15567249.2018.1461150

  18. It doesn't add up... permalink
    July 30, 2020 8:41 pm

    If it returns money to consumers, they will be the ones in Europe benefiting from ultra cheap exports. Consumers in the UK will be subsidising them. In fact, they already are. In April, the French were paid £6.88/MWh on average to take some 55GWh off us, valued at system sell price. We pay the full subsidy to the wind farms.

  19. July 30, 2020 9:17 pm

    Only “nothing” is free, …until they figure out how to get you to pay for it.

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