Under the second round of the ‘contracts for difference’ auction, electricity generated from new offshore wind projects will be delivered as low as £58/MWh from 2022-23 according to latest Brit-Govt. figures.
And these have been given the ‘thumbs-up’ by an independent firm of energy consultants.
Phil Grant, a partner at Baringa Energy, explained: “Let’s recall that the Government set the industry the challenge of beating £100 /MWh by 2020 only five years ago.
“Clearly, the new CFD supply contract average of £66.13 [62.14 is the weighted average] per MWh reaches far beyond this threshold. For the industry to achieve significant cost reductions in such a short space of time is cause for celebration.
“Projects delivering in 2021-2022 have been priced at £75.75. This drops to £57.50 for those delivering just one year later, with two-thirds of the 3.3 GW of capacity awarded falling into this cheaper category.
“Indeed, our latest wholesale price projections indicate that the 2022-2023 projects may not need to receive a subsidy on top of the wholesale electricity price for the majority of their lifetime.
“Significant cost reductions have also been achieved in battery, solar and onshore technology. Nuclear remains the outlier, with its 35 year contract priced at £92.50/MWh looking ever more expensive for the consumer.
“A relatively small proportion of total GB demand will be priced at this level (less than 4%), so the impact on consumer bills will be modest. However, the fact that low prices for consumers can be achieved should give this and future Governments confidence that the offshore sector can deliver value for money, despite the competing challenges of security of supply, decarbonisation and affordability.
“However, naysayers will argue the low cost of renewable energy does nothing to solve the problem of intermittency and lack of flexibility in the system, and could in fact increase the issue of intermittency.
“But Contracts for Difference are just one moving part of a much wider ecosystem that includes numerous promising developments in electric vehicles, smart energy and battery technology, and – with dramatically falling costs – the Government’s long-term climate targets are looking increasingly credible.”
12 Sept 2017
Pixie Energy is an incubator and a facilitator of strategic research and project work, focusing on energy regulation, policy and markets at the local and national level. Find out more about Pixie Energy