An independent new report – commissioned by the company that owns Britain’s biggest power station – has revealed consumers could save more than £2 billion if the Government’s planned renewable energy auctions were opened up to include a wider mix of energy technologies.
Drax Power commissioned NERA Economic Consulting and Imperial College to look at hidden costs that are not reflected in the contracts Government awards for renewable generation.
These hidden costs, or whole system costs are increasing as intermittent renewables – those reliant on the sun and wind – increase. These intermittent renewables mean other forms of power generation need to kick in, and flex up and down to meet electricity demand. These costs are passed on to consumers via their energy bills.
Currently the Government is planning three auctions for new renewable energy contracts – Contracts for Difference (CfDs) – over the next four years, and all are focused on offshore wind.
The new research shows significant differences in the true costs of renewables once these additional costs are recognised. Offshore wind could require a CfD of £127 per MWh, onshore wind £92-97 per MWh, solar £96 per MWh, and biomass £84 per MWh.
Once these new support levels are modelled over the planned energy auctions, the new energy mix that could win contracts is shown to save consumers £1.9 -£2.2 billion. This support is already paid for through energy bills and the new cost-efficient mix would lessen the impact.
Dorothy Thompson, Chief Executive, Drax Group, said: “This independent research shows it’s crucial we get the right mix of energy generation. The UK’s system faces growing challenges, from costs to reliability as traditional forms of generation are replaced with renewables.
“Intermittent renewables like wind and solar are vital as we continue to clean up energy generation, but they need to be backed up by a constant supply of electricity that can be flexed up and down to make sure the UK’s businesses and households always have power on demand.
“Opening up energy auctions to include other renewables could save consumers £2 billion and with more biomass in the mix energy security is also boosted.
“Using the latest technology we’ve upgraded half our power station to run on compressed wood pellets, which give an 80%-plus carbon saving against coal. With the right support we stand ready to finish the job.”
Daniel Radov, NERA Economic Consulting Associate Director, added: “In partnership with Imperial College we have been pleased to model the total costs of different power generation technologies, and help to inform the policy discussion around renewable energy and decarbonisation.
“To ensure that we achieve environmental targets as efficiently as possible, it is essential to have policies in place that provide the right incentives to minimise costs. We hope the combination of Imperial’s whole-system energy modelling with NERA’s ability to model the details of the CfD auctions will contribute to a better understanding of the advantages and disadvantages of different policy approaches.”
Drax Energy owns and operates the UK’s largest power station in Selby, North Yorkshire, typically providing some 8% of the UK’s electricity. A vital strategic asset, the Group has transformed itself into a predominantly biomass-fuelled electricity generator through its use of innovative technology and sustainably sourced wood pellets.
The largest decarbonisation project in Europe is underway to provide the UK with cost effective, low carbon, and reliable renewable power.
Click here to view the full NERA Economic Consulting/ Imperial College London report.