The subsidy bill for new offshore wind farms is likely to be almost 50 per cent higher than the government has forecast because officials have overestimated future wholesale prices, research suggests. Last month ministers awarded subsidy contracts to support three big offshore wind farms by guaranteeing them a price for every megawatt-hour of power they generate for 15 years. The difference between the guaranteed price – £57.50 per MWh for the two cheapest projects, and the wholesale market price for power, which is about £45 per MWh today – will be “topped up” with subsidies, paid for through levies on energy bills. Ministers estimated that the contracts for the three new wind farms, together with a handful of far smaller energy-from-waste projects, together would require top-up subsidy payments of £176 million a year by 2023-24. However, Aurora Energy Research suggests that “the government’s methodology for forecasting future subsidy payments to these projects appears to underestimate the likely cost by almost 50 per cent, or £80 million per annum”. This is because officials use forecasts of the average future wholesale price to estimate the top-up required. A similar subsidy contract is used to support the Hinkley Point C nuclear plant, which has been guaranteed a price of £92.50 per MWh for 35 years. Falling electricity price forecasts have resulted in the estimated lifetime cost of top-up subsidies spiralling from £6 billion in 2013 to £50 billion this year.
Times 23rd Oct 2017 read more »