The announcement this week of far cheaper deals for offshore wind farms than any analysts predicted was well-received inside and outside the energy industry. Newspapers that had historically slated wind and solar power as “subsidy monkeys” joined clean energy supporters in celebrating what are by any standards remarkable cost reductions. A leader in The Times noted: “The cost of building offshore turbines has fallen by nearly two thirds [in five years], and the Government’s targets for expanding wind power output, originally set with a deadline of 2020, have been met four years early.” The Telegraph said: “The auction marks another remarkable leap forward for renewable energy as advances in technology and private sector investment combine to reduce the subsidies that once propped up the industry.” That Telegraph leader poses a question that should now fundamentally reshape debate on energy policy: are subsidies still propping up the industry, or does Monday’s announcement mean those days are over? The two wind farms are due to come online in 2022, and their fixed-price contracts last for 15 years, until 2037. Government forecasts for average annual wholesale electricity prices go out to 2035, covering the first 13 years of the wind farms’ contracts. And the average price it expects for those 13 years is £53.50 per MWh. So, if Government has got its predictions right, the true subsidy will be no more than £4 per MWh – less than 7 per cent of revenue. And if the market price ends up being just a tiny bit higher than the Government expects, power from Hornsea 2 and Moray East will cost no more on average than from any other generating station. Secondly, the Conservative manifesto left the door open to a very limited re-boot for onshore wind farms, initially on Scottish islands. With onshore installations being inherently cheaper than offshore ones, any such projects will almost certainly result in fixed prices being agreed below the expected market rate. The politics of onshore wind farms are always tricky but Monday’s news suggests that one of the main arguments against them – cost – has disappeared.
Capx 15th Sept 2017 read more »
By 2040, wind and solar will contribute the same share as coal to world electricity generation at 31%. In Europe, strong renewable energy expansion will eradicate the growth of gas use in the power sector over the next 10 years, according to the EIA’s just-released International Energy Outlook 2017 (IEO2017). Only after 2030, pipeline gas and LNG is seen regain market share in Europe, displacing nuclear power and lignite coal.
Gas to Power Journal 18th Sept 2017 read more »
