Bridget Woodman: The price of offshore wind continues to fall dramatically. The Government’s latest round of contracts for renewable generation have just been announced, and they show the costs of subsidies have halved in just two years. Cheap wind power is a great source of low-carbon electricity, and it’s good news for politicians who may have been worried about subsidies bumping up household bills. But the scale of investment in offshore wind raises bigger, more systemic questions. The contracts – known as contracts for difference (CFDs) – pay operators of renewable energy installations a fixed price per unit generated for 15 years, regardless of what happens to the actual wholesale price of electricity in that time. For operators, this removes a lot of uncertainty about investing in relatively new and expensive technologies such as offshore wind because the subsidy and a guaranteed market for their power mean they can be confident they will recoup their costs. Contracts are awarded through an auction, where eligible developers bid against each other for projects being constructed in any given year. The projects with the lowest costs are awarded a contract, so ensuring the eventual cost to consumers is kept down. This is the second such auction for CFDs, and was limited to offshore wind, biomass, and energy from waste. More established technologies such as onshore wind and solar were excluded from the auction process. The level of investment needed to build an offshore wind farm is enormous, and therefore only open to a handful of large companies with access to the necessary funds. This reduces the potential for new entrants into the market, and excludes all the new investors who had begun to put their money into smaller scale, onshore projects over the past few years. So, the decline in offshore wind costs is fantastic, and a real endorsement of a rapidly-developing technology. But the bigger picture shouldn’t be neglected here. The UK is putting a lot of eggs into one basket. Centralised generation increasingly excludes new entrants, and literally concentrates power in the hands of a few very large developers. That makes life easier for policymakers who have fewer firms to deal with, but concentration also increases the risk of collusion and, in the lo nger-term, will mean less innovation. While increased generation from renewables is a desirable thing in itself, it is a real pity to be neglecting the increased levels of participation in the system which smaller scale projects offered. If Britain continues along this route, the days of community energy groups and energy co-ops may well be over.
Independent 21st Oct 2017 read more »