Demands for more subsidy expose the illusion of falling wind power costs

By Paul Homewood

 

 

 

PRESS RELEASE

 

“The belief in falling wind power costs is the central foundation of the government’s Net Zero enterprise, and it is demonstrably false. The absurdity of current Net Zero plans is now exposed for all to see.”
London, 1 March – Net Zero Watch is highlighting the fact that claims of falling wind power costs are contradicted by demands from wind power operators for additional subsidies on top of existing support.
This debate has been in progress since 2017, when research published by the Global Warming Policy Foundation indicated that the wind industry’s bids for Contracts for Difference subsidies (CfDs) were absurdly low and did not reflect underlying capital and operating costs.
These observations were confirmed by alternative methodologies and by other authors (details are given below), and critics repeatedly predicted that the industry would eventually beg for more subsidy.
Confirmation that we were correct can be found in the fact that the Financial Times is now reporting that wind farm developers, including the industry giants Vattenfall and Ørsted, are asking for tax breaks in the forthcoming budget, offering the spurious justification that inflation has made uneconomic their low Contracts for Difference contracts awarded for delivery in 2024 (FT: "Wind Farm Developers demand UK tax Breaks to offset Rising Costs”).

 

 

 

Net Zero Watch notes that since the CfD strike prices are inflation-indexed the industry’s excuse does not hold water. On the contrary, the demand for tax breaks confirms that the low bids in the CfD auctions were never accurate reflections of underlying windpower costs.
Net Zero Watch says that the Chancellor should refuse to be blackmailed by the wind industry and must reject demands for further financial support.
Professor Gordon Hughes, author of several of the studies cited below, said:
“The offshore wind developers seeking additional subsidies are treating taxpayers as fools. CfD contracts are inflation-indexed, so electricity customers will be paying higher prices for their electricity until 2040 and beyond as a consequence of recent inflation. The notion that there has been an unexpected increase in capital costs since bids were submitted last summer is ridiculous, as suppliers have been warning of severe cost pressures for at least 18 months.
The reality is that offshore operators have been submitting unsustainable CfD bids ever since 2017, hoping that something would turn up. Even a period of very high market prices is not enough, so now they want to be bailed out by tax breaks. The Chancellor should just say No.”
Dr John Constable, NZW’s director of energy, said:
“The belief in falling wind power costs is the central foundation of the government’s Net Zero enterprise, and it is demonstrably false. The absurdity of current Net Zero plans is now exposed for all to see.”

Notes for Editors: Articles and studies on unrealistic offshore wind bids for Contracts for Difference
1. Gordon Hughes, Capell Aris, John Constable, Offshore Wind Strike Prices: Behind the Headlines (GWPF: London, 2017)
2. Gordon Hughes, Who’s the Patsy? Offshore wind’s high-stakes poker game (GWPF: London, 2019)
3. John Aldersey-Williams, Ian D. Broadbent, Peter A. Strachan, “Better estimates of LCOE from audited accounts– A new methodology with examples from United Kingdom offshore wind and CCGT”, Energy Policy, 128 (2019), pp 25-35.
4. Gordon Hughes, Wind Power Economics: Rhetoric and Reality: Volume I: Wind Power Costs in the United Kingdom (Renewable Energy Foundation: 2020).
5. Gordon Hughes, Wind Power Economics: Rhetoric and Reality: Volume II: Wind Power in Denmark (Renewable Energy Foundation: 2020).
6. Andrew Montford, Offshore wind: Cost predictions and cost outcomes (GWPF: London, 2021)
7. Kathryn Porter: Addressing the high real cost of renewable generation (Watt Logic 2022)