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Beatrice Wind Farm Received £281 Million Subsidy Last Year

April 12, 2021

By Paul Homewood

h/t Joe Public

 

Beatrice windfarm is one of the offshore wind farms which is wholly owned and operated as a stand alone company. We can therefore learn a lot from their Annual Accounts:

 

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https://find-and-update.company-information.service.gov.uk/company/SC350248/filing-history

 

The wind farm has been fully operational since May 2019, so the latest Accounts reflect close to full operation. Revenue for the year was £372 million, of which £281million was government subsidy via Contracts for Difference:

 

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Output was 2382 GWh, meaning the sales price of their power was £38/MWh and a subsidy on top of £118/MWh.

Despite this obscene subsidy, Beatrice only managed to make £83 million profit. Clearly it would not have been viable otherwise:

 

 image

 

Operating and other expenses, excluding depreciation of £89 million, total £62 million or £26/MWh. This factor alone makes a mockery of claims by the wind industry that they are viable at below £50/MWh.

 

The other number to note is the CAPEX of £2.2 billion. Capacity is 588 MW, meaning a capital cost of £3.7 million/MW. Current BEIS estimates of capital costs are £1.6 million/MW. There is very little logic as to why capital costs should have fallen so sharply since work began on Beatrice in 2016.

BEIS are, of course, in a big hole- if they published realistic costings, it would totally destroy the myth of cheap wind power, on which the whole shaky foundation of renewable energy is based.

41 Comments
  1. April 12, 2021 7:18 pm

    Not even as rewarding as money for jam!

  2. April 12, 2021 7:20 pm

    ‘Gross profit’ – indeed.

  3. 2hmp permalink
    April 12, 2021 7:25 pm

    Market prices ?

    What do they care about the true cost of electricity ?
    As a friend of mine who worked on MOD contracts said Cost plus is wonderful !!.

    • Graeme No.3 permalink
      April 12, 2021 11:19 pm

      The old joke? An elephant is a mouse built with Cost plus.

  4. April 12, 2021 7:38 pm

    And this evening, wind is providing only 3.8 percent of Britain’s energy needs . . .

    • Stuart Brown permalink
      April 12, 2021 9:19 pm

      Hah! You spoke too soon, lpf. Wind right now in megawatt territory. All those mighty turbines producing less than the Belgian interconnect. Less than half the French interconnects. Less than a fifth of our ancient nuclear fleet.

      Thank goodness we still have a coal fired station or two left to make up the gap (and a lot of gas that makes all of this look like small change). West Burton A coal and Hinckley point B nuclear close next year…

      • ThinkingScientist permalink
        April 12, 2021 9:29 pm

        Coal currently producing 60% more than wind – its 9.30 pm

        Coal, gas and nuclear combined currently producing nearly 30x total renewables ie wind + solar (the latter being zero, of course!).

      • Ben Vorlich permalink
        April 13, 2021 11:49 am

        It’s worse this morning

        CCGT 19.18GW (50.12%)
        Nuclear 5.41GW (14.14%)
        Solar 6.24GW (16.31%)
        Wind 0.20GW
        OCGT 0.23GW
        French ICTs 1.67GW

        Before the sun rose properly CCGT was well into the mid 60%s

    • Mike Jackson permalink
      April 13, 2021 12:53 pm

      And is I write is producing an embarrassing 1% — 3% less than dear old coal!

  5. mothcatcher permalink
    April 12, 2021 8:22 pm

    Hi, Paul

    Did I hear you are an accountant? If so, it shows.

    I wonder how many people who listen to the ‘news’ each day could read a Balance Sheet, or a P/L account, let alone understand what might be learned from a detailed examination of same? There’s bad stuff, here. Your blog has grown in stature over the years and its content and editing are increasingly to be admired. It has become essential reading for those in the climate debate in UK.

    Please keep up the good work – your country needs you.

    Many thanks from mothcatcher
    (I’m not an accountant, by the way!)

  6. Devoncamel permalink
    April 12, 2021 8:36 pm

    These eye watering subsidies will of course be paid for by the long suffering customers of the energy suppliers. Having paid my taxes I watch in disgust as large chunks of it are sacrificed at the altar of the so called climate crisis. Reassuringly Octopus Energy have sent the following to their customers.

    ‘Most energy companies are quick to raise prices, and slow to cut them. We’re proudly the opposite. Here’s what you need to know:
    Wholesale energy prices have risen 33% since October.
    The other big suppliers announced April price rises of 9.2%
    Ofgem’s price cap also went up 9.2% from April 1st to reflect increased wholesale costs.
    Our rise is smaller: 7.1% for dual fuel and we’re holding off until mid-May.
    A typical home will save £106 annually compared to price cap prices.
    If you only have time for a quick rundown, head to our frequently asked questions now.’

    To add insult to injury my part of Devon doesn’t enjoy the luxury of dual fuel. Next time I pass the bird slicing carbuncles on the A361 I shall ‘proudly’ count my blessings.

    • Gerry, England permalink
      April 12, 2021 9:20 pm

      If the subsidies come from government then it is taxpayers who pay it not their customers. But do not despair, customers pick up the bill for the green taxes and increased grid management costs.

      Given the smug TV adverts for Octopus Energy I bet they are nowhere near the cheapest supplier. I find it strange that if they offer dual fuel tariffs that it is not available everywhere. On the flip side, when Economy Energy went bust we were transferred to Ovo Energy who at that point did not offer gas only accounts which made it difficult to work out how much more expensive it would be.

    • It doesn't add up... permalink
      April 13, 2021 11:46 am

      Note the use of highly selective statistics. Reduced demand in lockdown led to the lowest prices we have seen in wholesale markets for years, allowing margins for retailers, who were also spared from having to recover the sharply rising balancing costs in part because some consumers were finding it difficult to pay bills..

      https://www.nordpoolgroup.com/Market-data1/GB/Auction-prices/UK/monthly/?dd=GB&view=chart

      Complacency by the Grid and BEIS on capacity has left us dangerously short, with the loss of the BritNed and Western Link subsea connectors leading to frequent electricity margin notices and soaring balancing prices, amplified by Dunkelflaute or just no wind. It’s only going to get worse as we lose coal and nuclear capacity.

  7. theolderguvnor permalink
    April 12, 2021 9:29 pm

    On the basis it seems the germans are always ahead of us maybe his will change soon?
    https://wattsupwiththat.com/2021/04/08/germanys-windexitold-wind-turbines-dismantled-without-replacementlooming-massive-power-outage/

    • MrGrimNasty permalink
      April 13, 2021 12:17 pm

      That story is not a true reflection sadly. I checked that one before.

      Re-powering capacity is still exceeding decommissioned, and then you have new projects still going up/coming on line too.

      The best you can say is that new projects have declined considerably in the last couple of years. Capacity is still going up year on year overall.

      I expect there will be a crunch at some point in the future when the peak of building windfarms comes of age – but by then who knows what the energy situation will be like.

      Either windmills will have been rendered redundant by a political or technological breakthrough, or more likely the government and consumers will be over a barrel with no alternative to pay whatever is demanded for re-powering.

  8. April 12, 2021 9:36 pm

    I download the constraints payments from the REF website more or less every quarter and in March I saw something never seen before, Beatrice was being paid less than before. Normally the payments increase all the time. I was given a complicated explanation by REF which I’m afraid I didn’t understand but it involved CfDs and what it boiled down to was that they had had to pay back a large amount and their average price had reduced. The average price for offshore is normally considerably more than onshore, often double.

    Beatrice is divided into four so whereas the prices in December were £174, £167, £174 and £176, in March they were £64, £66, £128 and £145. It’s a bit like an auction and they get paid more or less what they ask for to switch off (crazy system set up by Westminster).
    On the day I looked in December Beatrice had been paid £935,265 to date, in March it had gone down to £711,740. Be interesting to see what happens in June. Don’t ask me to explain. See http://www.caithnesswindfarms.co.uk/#Constraints

    One of the stupider aspects of all this is that two more much larger windfarms are being constructed next to Beatrice. Heaven knows what they will be paid to switch off. All windfarms up here are paid to switch off because they’re too far from where their electricity is needed. Every time I see a developer boast of the tens of thousands of homes they will be powering I wonder – where are all these homes? Certainly not in the far north which is rapidly depopulating. The total constraints for Scotland on 11 March was £892,937,810 . All coming from UK bill payers of course.

    • It doesn't add up... permalink
      April 13, 2021 1:57 am

      Usually it does not make sense for an offshore wind farm with a lavish CFD to apply for constraint payments, as there are other wind farms onshore that get a much lower subsidy that are cheaper to curtail. Beatrice was getting £162.33/MWh as a guaranteed CFD price last year, which has risen to £164.73/MWh at the beginning of April with indexation. Presumably in the year to March 2020 for the accounts it will have been around £160/MWh, though I’m not sure of the precise number.

      The only circumstances in which the CFD price does not apply are when prices turn negative overall. Then there is a cap of the CFD payment at zero, so if the market price is minus £60/MWh, the payment is limited to the CFD price, meaning the actual effective price drops to £104.73/MWh currently. There is a further cap of no payment at all if there is a continuous period of six hours or more with negative prices, as happens sometimes when there is a large surplus of wind. In those circumstances, rather than being paid a negative amount for producing it makes sense to get paid not to produce. These negative prices are part of why the wind farm appears to have been paid less on average than its CFD. Other reasons could include a mismatch between its sales contract terms and the market price used for CFD calculations.

      For older wind farms subsidised by ROCs once market prices go negative it may make more sense to get paid to curtail. An ROC is worth just over £50/MWh, so if the market price is minus £60/MWh, revenue from producing is negative, and it is better to forego the ROC and get paid to curtail if you only get 1 ROC per MWh and can get paid more than £10/MWh.

      In practice, transmission constraints mean that Scottish windfarms have to be curtailed at whatever price it takes – and that having been curtailed there is no market for English and Welsh wind farms to offer to curtail (indeed, there can be a need for extra generation south of Scotland to make up for curtailed power). So the price gets set by those with a higher level of ROC subsidy.

    • It doesn't add up... permalink
      April 13, 2021 11:54 am

      Still not sure exactly how the cumulative payments could have been adjusted downwards. But they are worth less than a day’s average output. So far not a major contribution to revenues.

  9. Don B permalink
    April 12, 2021 10:11 pm

    In the USA, Warren Buffett of Berkshire Hathaway was honest; he publicly said:

     “For example, on wind energy, we get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.”

  10. ecobunk permalink
    April 12, 2021 10:21 pm

    The system price was virtually £2 per unit for about 3 hours, so struggling to keep the lights on.

  11. Nicholas Lewis permalink
    April 12, 2021 10:27 pm

    I could stomach this if i knew people weren’t making money out of this for themselves. This one will be a cash cow threw off £150m in these accounts Ive got reminder on companies house for an update in 12mths.

    All these renewable power companies are financially engineered to maximise income for owners and minimising any tax they pay. What winds me up even more is govt telling us that unless they incentivise private sector to take risks it won’t get built which is just nonsense with the subsidies being handed out.

  12. Dan permalink
    April 12, 2021 11:26 pm

    Could they do an even better trick by upping the depreciation in order to “write off” more?

    These numbers are unsurprisingly bad. And that’s before integration. Has anyone ever done a cost of an offshore farm assuming it were dispatchable (high capacity factor) just to eyeball the not real, but best it could be scenario?

    • Phoenix44 permalink
      April 13, 2021 6:13 pm

      No depreciation rates for tax are set by HMRC.

  13. Thomas Carr permalink
    April 12, 2021 11:39 pm

    All that but no employees — see page 30. Massive churn of directors in the meantime.

  14. April 13, 2021 1:10 am

    Allow £35m for an 8% return on 20% equity, and their LCOE is about £125/MWh?

    • It doesn't add up... permalink
      April 13, 2021 3:03 am

      They’re more highly geared than that. Original shareholder contributions appear to have been about £261m, or about 10% of the total cost including the link to shore (which has to be sold off by this June, and carries a book value of £438.5m at cost). They’ve subsequently reduced the formal share capital and started taking out dividends, £200m of which were financed by the capital reduction! I suspect selling the OFTO will produce another dividend bonanza.

  15. patrick healy permalink
    April 13, 2021 8:12 am

    And here I sit looking out over a brilliant sunshiney St Andrew Bay, glisting in all its splendour.
    What do I see in the distance? A giant crane constructing yet more obscene subsidy sucking windmills.

    • April 13, 2021 8:24 am

      Why not submit a photo to the more critical (if any newspapers) to hi

  16. April 13, 2021 8:50 am

    Wind is producing 0.8% of UK electricity at the moment, coal 4%, gas 55%. Wind is the future they say 🙄

    • April 13, 2021 9:21 am

      Wind is now at 0.69%. That is a pathetic 260MW.

      • April 13, 2021 10:46 am

        I really fail to understand how otherwise intelligent politicians (and there are some) are completely brainwashed over renewables and especially wind energy. Even if they can’t be bothered to check the output, surely they must see that sometimes the wind blows and sometimes it doesn’t?

        I have given up on this with local election candidates as I know it’s a waste of time. We have an excellent regional MSP who campaigns for all the right causes, but when I wrote to her about our shockingly corrupt planning system which consents nearly all windfarm applications no matter the size of the opposition, she replied “We are of course supportive of renewable energy and the need to cut emissions.” That’s typical. So now I’m concentrating on planning with politicians.

      • April 13, 2021 11:34 am

        It is now 0.49%, 190MW. I wonder when Harrabin will be producing an article telling us how well wind power performs and how cheap it now is.

  17. John Cullen permalink
    April 13, 2021 1:00 pm

    MAJOR ECONOMIC HAZARD FOR THE WEST !!!

    Professor Gordon Hughes of Edinburgh University has undertaken a forensic accountancy investigation of some 350 windfarms and come to some damning conclusions; I will give you a flavour:-

    Start of quote.
    The findings are complex but sobering:
    (1) The actual costs of onshore and offshore wind generation have not fallen significantly over the last two decades and there is little prospect that they will fall significantly in the next five or even ten years …

    There is an important corollary to these findings. The current set of offshore projects being constructed and planned in North Western Europe are closely akin to speculative property development. They are high risk projects that will only be able to repay lenders and offer a return to equity investors if the average wholesale market prices of power rise to at least 3 to 4 times their current level throughout NW Europe …

    This has consequences for financial regulation. To discharge their responsibilities, financial regulators ought to impose a heavy risk weighting on loans to offshore wind farm operators, while also advising that green equity investments are too risky for pension funds and small investors. Instead, the chiefs of the European Central Bank (ECB), the Bank of England and other regulators have urged more investment in green assets.

    This leads to the prospect of what is not so much a car crash as a motorway pile up in the fog of ignorance. The looming crisis will require that those who finance wind power and its related ecosystem of companies are bailed out by either taxpayers or electricity consumers. The scale of the bailout would be large: about £30 billion is at risk in the UK wind sector alone, with significantly more in Germany, the Netherlands and Denmark.

    There was widespread public anger over banking bailouts after the 2008 crisis, but this is likely to be exceeded in intensity by criticism of bailouts for wind farms, not least because the public has been told repeatedly that wind power is now the cheapest form of electricity generation. Some companies and institutions may lose their shirts. Rather than wait passively for the resulting collapse it is time to think urgently about how to limit the scale of the eventual problem and how to clear up that part of the mess that cannot now be prevented.

    End of quote which comes from https://www.ref.org.uk/Files/performance-wind-power-uk.pdf

    In a companion report (https://www.ref.org.uk/Files/performance-wind-power-uk.pdf) Hughes writes at page 32:-

    Start of quote.
    The issue for wind power is clear. Offshore wind, in particular, is highly capital-intensive, has a short economic life due to its high operating costs, and does not operate in load-following mode. To play a large role in any electricity system it must either be very cheap – with a cost per unit of energy that is significantly below that of alternative, more flexible, sources of generation – or it must be heavily subsidised. To date, wind generation has relied on the second option. There is no real evidence that the first condition can be met.
    End of quote.

    Hughes calls it, “a motorway pile up in the fog of ignorance”. I call it a train wreck. Either way the damage is and will be huge – but the sooner we start to act sensibly, the less the damage will be!

    Regards,
    John.

  18. igsy permalink
    April 13, 2021 3:49 pm

    Who are the shareholders?

  19. Stuart Brown permalink
    April 13, 2021 4:25 pm

    Sort of related I just read this:

    https://theenergyst.com/uk-needs-over-49-gw-of-flexibility-to-reach-100-renewables-at-lowest-cost/

    “Pekka Tolonen, energy business director, Wärtsilä Energy, said, “Last month’s UN climate report gives a clear message for the UK: to decarbonise at the lowest cost, high levels of renewable energy must be scaled up by 2030. What we have learned from modelling over 145 countries and regions in our Atlas of 100% Renewable Energy is that power systems with high levels of renewables need a significant amount of flexibility, through energy storage and gas balancing technology, to achieve the transition to 100% renewable energy future.”

    Wärtsilä make ruddy great big engines, so it’s no great surprise that their ‘gas balancing’ solution to intermittent wind and solar is…. ruddy great big engines. But the bit that made me laugh, especially today, is the idea that we need 49GW of them. And the maximum demand in the depth of this winter was? 45.3GW on the 7th Jan. So we can count on wind for…?

  20. It doesn't add up... permalink
    April 13, 2021 5:00 pm

    I see that according to REMIT the IFA2 interconnector (NGIFA2) is out of action until 12th May for converter station works. Hence the added market tightness.

    • Nicholas Lewis permalink
      April 13, 2021 7:01 pm

      Well that hasn’t stayed online for very long just as well its not middle of winter with a dominant high over Northern Europe

  21. Thomas Carr permalink
    April 13, 2021 6:29 pm

    Back we go again. As I type this UK wind is generating 0.727 GW to meet a demand in the UK of 38.313 GW according to Gridwatch. This is 2% of what is being used.
    Yet the Beatrice home site, overcome by hubris, considers it OK to claim to be powering 450,000 ‘homes’ . Who would ever buy a thermal power station whose output was so far from the truth? A fraud by any other name. It’s all there . I have flown over it on the way to Wick.

  22. MikeHig permalink
    April 14, 2021 10:02 pm

    That output figure of 2382 GWh….how is that measured? Is it the true, net contribution to the grid, as it should be? Or does it, perhaps, “overlook” conversion and transmission losses, for example? We all know that turbines draw power from the grid during calm spells – is that accounted for?
    Excuse my apparent suspicion but this industry has a way with figures, shall we say.

    OTOH, it’s only fair to point out that the game has moved on since this project kicked off. It uses 7 MW turbines whereas the state-of-the-art is now 13 MW. I don’t know how the costs of these things scale relative to output. I have a dim memory of a “6/10s” rule for estimating the cost of upscaled process plant but that wouldn’t come anywhere near the apparent reduction in capital costs used by BEIS, as Paul notes.

    • It doesn't add up... permalink
      April 14, 2021 11:05 pm

      Metering will be at the wind farm. Remember that the high voltage transmission grid has relatively little loss compared with local distribution grids at lower voltages. Also, losses vary greatly according to how the grid is being used. When there’s lots of Scottish wind losses will be high as the power has to be shifted over long distances to demand in the South. There are complicated models that look at these factors to estimate transmission network charges and how to share them out. There is usually a local factor that applies to dedicated transmission lines but it’s very small. OFGEM are now minded to lump almost all network charges including losses, balancing costs and use of the transmission network onto consumers. That is of course a back door subsidy to remote wind farms.

      • MikeHig permalink
        April 17, 2021 9:29 am

        Idau: I should have been a bit more specific with my comment. I was wondering whether the metering takes place where the farm connects to the grid or at the offshore “hub” where, aiui, the turbines’ output is collected and transformed for transmission to shore.
        I have read that, on the new Dogger Bank project, the transmission will use HVDC so it struck me that there could be some noticeable losses in the hub-to-shore linkage which would not be accounted for if metering is at the hub.
        Then there is the question of whether the quoted production is net of any “imports”: I have no idea how to clarify that.

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