UK grants offshore wind triple market electricity price

• 11 years ago (2013-06-29)
• David Flin

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The UK will pay offshore wind developers triple the market price for electricity they generate under a subsidy programme to boost renewable energy. By 2020, this subsidy will be valued at £7.6 per year. The Department of Energy has also detailed rates paid for solar, hydropower, biomass conversion, and onshore wind farms, as well as boosting the capitalisation of its Green Investment Bank to £3.8 billion. The Treasury will guarantee debts for building a new nuclear power station.

The measures are part of an effort to attract £110 billion for new power plants by the end of the decade. Offshore wind and nuclear are at the heart of the plan to replace aging power plants and reduce the use of fossil fuels. The UK’s biggest utilities have yet to commit enough funding to reduce the risk of blackouts.

Paul Massara, CEO of Npower, said: “This is another clearing of the fog, but there is still a huge amount to be resolved. I don’t believe we are at that stage where there is enough detail to make investment decisions.”

The UK energy regulator Ofgem said that the statistical probability of major power shortages in the UK will increase to about once in 12 years in 2015 from once in 47 years currently. This is because about 20 per cent of Britain’s power generation capacity is scheduled to close in the next decade.

The strike price earned by offshore wind power plants will be £155/MWh generated, starting next year, declining to £135/MWh by 2018. The government estimates that funding will spur construction of 8-16GW of offshore wind power capacity. The Department of Energy said that onshore wind farms will receive £100/MWh, declining to £95/MWh from 2017. Biomass operators will receive $105/MWh, large solar £125/MWh, and hydropower dams £95/MWh. Other strike prices include: £305/MWh for tidal and wave projects; £65/MWh for projects that use gas from landfill; £90/MWh for energy from burning waste; £125/MWh for geothermal power; £120/MWh for dedicate biomass plants; and £145/MWh for anaerobic digesters. By contrast, the front-month electricity price in the UK has averaged £47.80/MWh over the last year.

Most of the contracts will last 15 years, while those for plants converted to biomass will get 20-year deals, according to the proposals. Drax Group, the UK’s biggest coal plants, is spending $1 billion to convert three of its six units to burn wood pellets.

RenewableUK, the main industry lobby group, said that while the proposals are a step forward, the 15-year contract length makes industry development “challenging”. Maria McCaffery, CEO of RenewableUK, said: “The levels of the strike prices are challenging but possible considering the reduced time periods that renewables will be supported for under contract for difference system compared to the Renewable Obligation. More details need to be sent out. The most important ingredient remains investor confidence, and that will take time to land.”