The shift from 15-20 years in CFD tenor requires an adjustment as Sam says - by approximately 12%. On that basis, the real cost in 2024 money is £101.92 per MWh. And this does not, of course, reflect the full cost as consumers will continue to need to retain lots of gas back up remunerated to stand idle, to plumb in more expensive electricity connections to remote generating sites, and pay more balancing costs and constraint payments. The idea of CFDs - as Sam points out - was to ease this "sunrise"offshore wind technology towards commercial viability. We are now more than a decade in and have now seen costs rise over the two most recent auction rounds, during which time power prices for offshore wind have doubled from the 2022 round, and now stand at a roughly 40% per cent premium to current wholesale prices - even accounting for discriminatory carbon costs and high gas costs. Moreover these high prices are locked in for 20 years. It's a disaster for the UK, where - as everyone can now see - industry is shutting down left right and centre due to excessive energy costs. Yet the government will doubtless try to spin this as some sort of triumph..
any view on whether that £91 price is higher than it would have been had the govt not begun a consultation on moving existing FIT and ROCs contracts from RPI -> CPI ?
I can't help but think that crystal ball gazing in the world of renewable energy costs is not as useful as perhaps we may think. Why? Because, there's always a plausible case that renewable energy costs may come down in the future thus giving politicians a path to concluding "well, this ain't my problem. Leave it to my successor to sort out this problem. I won't be in Government at any rate, so why does it matter". This thinking has beset UK policy making for some time.
I still vividly remember the piece to camera by Nick Clegg in circa 2010 dismissing the case for investment in nuclear given it wouldn't come online until 2021. As a person living in 2026, all I can do is laugh out loud.
The recent developments in perovskite panels, or the purported breakthrough by Donut Labs in solid state batteries, both provide further ammunition for kicking the can on renewable energy investment if a politician were so inclined. And future breakthroughs will similarly add cause for slowing down.
But perhaps sometimes politicians just need to commit to their principles, and hope with a fair wind that their decision will be proven the right one in the course of time.
The shift from 15-20 years in CFD tenor requires an adjustment as Sam says - by approximately 12%. On that basis, the real cost in 2024 money is £101.92 per MWh. And this does not, of course, reflect the full cost as consumers will continue to need to retain lots of gas back up remunerated to stand idle, to plumb in more expensive electricity connections to remote generating sites, and pay more balancing costs and constraint payments. The idea of CFDs - as Sam points out - was to ease this "sunrise"offshore wind technology towards commercial viability. We are now more than a decade in and have now seen costs rise over the two most recent auction rounds, during which time power prices for offshore wind have doubled from the 2022 round, and now stand at a roughly 40% per cent premium to current wholesale prices - even accounting for discriminatory carbon costs and high gas costs. Moreover these high prices are locked in for 20 years. It's a disaster for the UK, where - as everyone can now see - industry is shutting down left right and centre due to excessive energy costs. Yet the government will doubtless try to spin this as some sort of triumph..
any view on whether that £91 price is higher than it would have been had the govt not begun a consultation on moving existing FIT and ROCs contracts from RPI -> CPI ?
Great article.
I can't help but think that crystal ball gazing in the world of renewable energy costs is not as useful as perhaps we may think. Why? Because, there's always a plausible case that renewable energy costs may come down in the future thus giving politicians a path to concluding "well, this ain't my problem. Leave it to my successor to sort out this problem. I won't be in Government at any rate, so why does it matter". This thinking has beset UK policy making for some time.
I still vividly remember the piece to camera by Nick Clegg in circa 2010 dismissing the case for investment in nuclear given it wouldn't come online until 2021. As a person living in 2026, all I can do is laugh out loud.
The recent developments in perovskite panels, or the purported breakthrough by Donut Labs in solid state batteries, both provide further ammunition for kicking the can on renewable energy investment if a politician were so inclined. And future breakthroughs will similarly add cause for slowing down.
But perhaps sometimes politicians just need to commit to their principles, and hope with a fair wind that their decision will be proven the right one in the course of time.