Govt Cave In To Wind Lobby, And The Public Will Pay The Cost
By Paul Homewood
h/t nickrl
As expected the government has caved in to the wind lobby:
The UK government has increased the strike price caps for the upcoming Contracts for Different round and committed to an offshore wind-only pot.
The Administrative Strike Price for fixed-foundation bidders in Allocation Round 6 will be £73 per megawatt-hour, up 66% on the £44/MWh in AR5 that failed to attract any entries.
Floating wind’s price ceiling will be set at £176/MWh, up 52% on the £116/MWh in this year’s tender that also did not result in any bids from eligible developers.
The measures, which are being promised following an “extensive review” of the auction regime, will ensure projects can be “sustainably priced and economically viable to compete”, the government said.
London has also committed to establishing a separate pot for offshore wind “in recognition of the high number of projects ready to participate”.
Offshore wind fought it out with onshore wind and solar in this year’s failed auction.
https://renews.biz/89521/uk-hikes-offshore-wind-cfd-price-cap-by-66/
The prices, needless to say, are at 2012 levels. At today’s levels they work out at about £100/MWh.
By the time any new projects are commissioned, indexation will probably have pushed the figure up to £130/MWh.
Floating wind projects are even more horrendously prices at around £250/MWh at today’s prices.
This decision will add about £8 billion a year to energy bills, compared to the previous auction prices. (Based on increasing offshore capacity from 15 to 50 GW, the target for the mid 2030s).
The myth of cheap offshore wind power has now been conclusively blown out of the water. Far from it being nine times cheaper than gas, as was misleadingly claimed a year ago, it is now actually dearer than gas power, even before you add in the wider system costs of intermittency.
The latest BEIS levelised costs for new CCGT at £54/MWh, excluding the “carbon costs”, which are not a cost at all:
https://www.gov.uk/government/publications/electricity-generation-costs-2023
These costs are based on a gas price of 64p/therm, reflecting the long term pricing assumed by the BEIS. Even at current prices of around 100p, the CCGT cost would only rise to around £80/MWh.
Although the power market price tends to be set by the cost of CCGT generation, this is inflated by the carbon cost and the inefficiencies caused by intermittent operation.
This decision by the government will inevitably lead to permanently high electricity prices for the public.
UPDATE
I now have the official indexation data from the LCCC.
£73/MWh at 2012 prices inflates to £100.45 at 2023 levels. I have updated accordingly
Comments are closed.
NOT A LOT OF PEOPLE KNOW THAT 
Definitely no surprise from our ignorant and useless politicians. See also Matt Oliver at: https://www.telegraph.co.uk/business/2023/11/16/coutinho-boost-subsidies-wind-farm-projects-auction-flop/
Judging by the comments at the Telegraph, the informed public knows more about the subject than the politicians and civil servants. But that comes as no surprise.
Totally agree. The civil service advisors generally know sweet FA about the real world. For example, I recently came across this “Green” article written by an advisor (Peter Mayer) to the government/civil service via umpteen committees and quangos.
https://www.greenspec.co.uk/building-design/chp-costs/
Straight off the bat he lies
“Locally supplied electricity incurs lower transmission losses than the national grid, which runs at losses of 40%.”
In reality National Grid has “transmission losses” of less than 2%, the District Networks have “distribution losses” of less than 8%.
He gets away with such bollox virtue of the fact that the his audience probably couldn’t even wire up a three pin plug and have no idea what he is talking (lying) about.
I despair at times.
Sounds like a Mafia racket “Gimme da money or I blow your lights out”.
One of the funniest I have red for a long while. All too true.
Well they caved in pretty quick, trying to save face.
“This is a vital part of our plan to have enough homegrown clean energy, bringing bills down for families and strengthening our energy independence.”
said Claire Coutinho,
How does a 66% increase bring down prices, the woman reminds of another Claire, Perry what happened to her?
Lions led by Donkeys
She only got her job because she is Sushi’s bimbo lackey, not for any talent.
Ben Pile on it too.
Many years ago I, as a not very good Engineer turned enviro type, coined the term ‘enviROI’. It was because even 25 years ago I noticed that whilst green was getting political and business interest, all the serious money was being directed to ‘funding’, less the vig, big ticket items that were essentially green holes. Funders, assessors, departments were all juggling eyewatering amounts at target-based areas that either interested the public not one jot, or only worked if very creative criteria were applied to the actual planet saving results achieved. Hence a good enviROI was invariably starved of initial support into early sustainability to shovel gobbets of wedge at anything that numbercrunchers could show numbercrunchers it gobbled the right kind of terminology fare that ticked boxes, met targets, was never going to be assessed sensibly if at all and paved the way for more meetings of expensive folk who don’t care about the planet or anything else bar money, on a guaranteed basis.
And it has never changed. Sat in a meeting not long ago set up by our council locally. In the room were more bankers, funders, NGO types, etc all on salaries, from the cars jockeying for the eV chargers outside all in excess of £150k, who actually create nothing, pitching ‘green’ support to hairdressers and wellness counsellors. And maybe an ‘eco-entrepreneur’ with an idea to turn wood chips from shredded Ukrainian forests into a subsidy mine.
All based on creaming off their cuts for doling out wasted money from EU money from years ago, still sloshing about. There may even have been a BBC local democracy ‘reporter’ aged 12 there, to make sure JSO was represented, to hold it all to account.
Ben Pile has summed that up excellently. Upthread I have commented about ridiculous technical “advice” given to the Civil Service by “independent advisors” in this case Peter Mayer. Transpires the “technical advisor” is a financial and insurance consultant who clearly either knows sweet FA about engineering and/or presents bullshit very eloquently. Net Zero has precisely Net Zero to do with environmentalism.
Millibot will still claim it is 9X cheaper than fossil fuel electricity generation
” Millibot will still claim it is 9X cheaper than fossil fuel electricity generation ”
This needs to be publically undermined, but there is no publically available accurate, formal cost comparison between wind and thermal.
Accuracy requires a level playing field based on facts, which is not LCOE.
Accuracy requires that the cost of electricity generated by wind includes all the elements required to support the unreliable operation of wind turbines, these elements could include back-up for when wind is (potentially) low and could include grid stabilisation for when wind is (potentially) erratic.
It is not a proven fact that humans are responsible for dangerous climate change, therefore carbon tax should be excluded from the calculation for cost of electricity generated by coal / gas / oil.
My view is that an element should be included within the calculations that represents the stockpile of a fuel in the UK, not certain how that would be calculated though!
Good timing, there is no wind for the next 2 days and today there is very little solar, so tonight the DFS system is on, paying people to turn down electricity consumption. When will the PTB reveal the real reason for smart meters is to charge more in times of high demand to limit consumption. At 6pm tonight I will be grilling a steak, roasting some vegetables, making toast and a cup of tea, should get up to 6kW, pity I do not have an electric shower.
“pity I do not have an electric shower.” I’ll turn mine on for you okay!
Net Zero Watch rips into Claire Coutinho:
https://www.telegraph.co.uk/business/2023/11/16/coutinho-boost-subsidies-wind-farm-projects-auction-flop/
As I wrote yesterday :
The Government will have to give in the offshore wind industry’s demands for price increases and/or bailouts. This is because Net Zero by 2050 is written into law and the Government is therefore forced to follow the carbon (dioxide) budgets set by the CCC and will be taken to court by ClientEarth (an organisation in part funded by the UK taxpayer) if they fall behind, as has already happened, resulting in further new Net Zero burdens for the UK. Such as the £20bn for CCUS which arose from the last time the Government were taken to court.
The cost to the consumer will be more than £8bn/yrear as the Government will need to increase the “carbon cost” on gas or otherwise the DESNZ “Electricity Generation Costs Report 2023 table is going to look a little silly.
I think they are already assuming a big increase. £60/MWh corresponds to a UKA price of at least £150/tCO2e which would be for inefficient generation at 400g/kWh. The market price is under £45/tCO2e.
I read an article – possibly The Daily Sceptic – that suggested that the Climate Change Act was not as solid as we are led to believe. The language may be not be so much ‘shall’ or ‘should’, which translates into must, as opposed to ‘may’ or ‘might’ which is not instructive. A lot of legislation is written in these terms.
What we must remember is the civil service, led by Whitehall officials, is firmly in the climate crisis camp. With all mainstream political parties nodding along there will be no deviation from policy.
My hope is that the dent in household budgets will turn people against this charade. Who will represent them?
” What we must remember is the civil service, led by Whitehall officials, is firmly in the climate crisis camp. ”
Endemic “group-think”
They have sold out to every leftie idea going and basically need to be removed en masse. Which is actually quite easy since they are all at home anyway. Just bring in a new team in the office and slowly disconnect the Snivelling servants.
At present, even though offshore wind is unreliable, and difficult to deal with, it makes a modest, albeit intermittent, contribution to electricity generation. But the nine fold increase in offshore wind envisaged by the National Grid FES 2023 is simply not going to happen. Each new site will be harder to do than the previous one, the grid will be less able to cope, and we still have a storage capacity of only 0.15% of what we are likely to need, with no known way of achieving it.
It’s still doubtful whether this will really prove to be a big enough increase. There is of course the background of the proposals for additional money for “non profit factors”. Also, the AR4 wind farms are obviously in trouble and need a bailout. This won’t be over until projects are being built.
CfD for Dummies:
Anyone point me in the right direction for a brief paper/article which explains to the householder what is the actual impact in cash terms on consumer prices of the operation of this market and what the strike prices mean and the effect of their changes?
It would also be nice to know how these market ‘management’ regimes do to add to the price of getting the fuel out of the ground.
I recall more than a decade ago the wind developers always talked about “certainty” when it came to rules for wind development and pricing. You would think that might mean access to markets and priority for purchasing the energy generated. However, I always felt it was a euphemism guaranteed profitability and as the industry has evolved, nothing has changed with respect to the actual meaning of “certainty” as it applies to wind energy in particular and renewable power in general.
None of this makes any financial sense whatsoever. It simply means that all of UK based industry and domestic consumers will be paying three times the price for their energy produced from wind farms.
That policy simply makes the whole of UK industry uncompetitive and more jobs will go to the far east.
Our politicians are complete nincompoops when it comes to the science or the maths. None of this will alter global climate systems and the majority of climate scientists do not sign up to their so called ‘climate emergency’. There isn’t one and none of this will change anything other than impoverishing our country.
So what’s the real game here? Anyone have any ideas?
Thanks DW. The Greens in particular seem to be oblivious to the export of jobs on the back of cheap power. The Chinese know that they are on to a good thing. In the U.S. they cannot understand why Europe is pricing itself out of the market for finished goods. If the UK still has 70% of its gas requirements from domestic wells why are we paying world prices except to make good the 30% supply shortfall. The U.S. is not especially if the gas is from fracked wells. They get enough from fracking to be able to freeze the surplus and send it at world prices to Europe.
Thomas: “why are we paying world prices”?
Any market or trading exchange (worthy of the name) will strive to identify the opportunity cost of the traded product. A well functioning and liquid market gives buyers and sellers a sense of the cost and benefit of the next unit traded.
If an exchange or market doesn’t do this effectively, there will be too much production (waste) or too little production (rationing), resulting in misallocation of resources.
Whether it is 30% or 1% of total traded volume, if the global market is the marginal producer or consumer of a product, the global market sets the price.
Producers and consumers have no reason to trade at above or below the market price (sometimes referred to as “sweetheart deals”) as these kinds of “out of market trades” misallocate resources. In the corporate world, there are Corporate Governance rules and quite often government regulations to prevent (and punish) sweetheart deals.
If the UK still has 70% of its gas requirements from domestic wells we paying world prices because marginal consumption and production is not from domestic wells.
I can’t wait to see the back of the self serving LibLabCon merchants, who are engineeringly incompetent and just blindly accept the advice of their leftist activist SPADs – voting for Reform UK to end this nut zero rubbish, is our only hope
” voting for Reform UK to end this nut zero rubbish, is our only hope ”
There will be different views on this board. I would prefer a single-issue party that has no “baggage” , the single issue being energy that is low cost, reliable and relatively safe.
Well at least the Graun (Silly Jilly) can blame high energy costs on…….GAS
https://www.theguardian.com/money/2023/nov/16/energy-bills-great-britain-rise-january-cap-gas-prices
Shameful and deceitful, thank god they’re gone next year