It’s unusual, but things do occasionally change in the UK! We had been quietly awaiting the governments much delayed Carbon Plan, but then came an unexpected shock, a dramatic fall in offshore wind prices emerging from the new round of the Contract for Difference (CfD) auction process. Hornsea Project 1, now being built, had got a CfD strike price of £140/MWh in the first full CfD round in 2014. But in this second one, Dong’s huge 1.3MW Hornsea Project 2 won a contract at £57.5/MWh for a 2021/22 start up – 60% less. So did another offshore large wind project, in Scotland, for a 2022/23 start up, while a third one got through at £74.5/MWh. That’s still way below the index linked £92.5/MWh allocated to the Hinkley nuclear project- which won’t start up until years after these projects, if it ever does. As variable renewables expand, the cost of balancing them will grow. However, that cost seems likely to be small, maybe 10-15% extra, easily offset by the generation cost reductions, with the dramatic new price falls for offshore wind adding a further imspetus- assuming of course that they can be delivered in practice. But there are default penalty provisions, so that should not be an issue.
Environmental Research Web 3rd Oct 2017 read more »