New windfarms to become far cheaper than Hinkley Point, experts claim
11th September 2017 | Commercial Energy
Windfarms around Britain’s coast will beat the planned nuclear power station Hinkley Point on price when the winning bidders for a £290m-a-year pot of government subsidies are announced to Monday, experts predict.
Such a milestone would mark a dramatic cost reduction for a technology that was once far more expensive than atomic power, and could fuel calls for a rethink over the UK’s future energy mix.
Industry watchers said successful offshore windfarm developers may secure guaranteed payments for power as low as £70-80 per megawatt hour in the government’s auction, known as the Contracts for Difference Allocation Round.
In comparison, France’s EDF has been promised £92.50 per MW hour for power from the two reactors it is building in Somerset, around twice the wholesale price. The subsidies are paid by consumers via levies on energy bills.
“I think (windfarm developers) will bid very aggressively and below the headline strike prices of Hinkley Point,” said Richard Howard, head of research at the energy analysts Aurora Research, adding that the anticipated lower price was a result of dramatic cost reductions by the industry, brought about by the technology maturing.
For example, developers are using much bigger turbines than half a decade ago, and less steel in the foundations that attach them to the seabed. The sector is also now perceived to be a much lower risk, bringing down the cost of capital.
If the guaranteed price of power is as low as £70 per MW hour – a level at the extreme end of what industry figures think is credible – that would mark a 42% reduction on the £119.89 price awarded for offshore windfarms in the last auction, held two years ago. Contracts awarded in 2014 were £155.
Emma Pinchbeck, executive director at the industry group RenewableUK, said, “I think it’s a watershed moment for renewables. If the price comes in as low as people are suggesting, it means large-scale renewable generation will be cheaper than incumbent technologies. The idea that renewables are expensive is going to be undermined.”
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