Analysis by independent think tank New Green Alliance has revealed even if the UK government sets prices for offshore wind power at double the level paid in the last successful Contracts for Difference auction, it will still be cheaper than gas power, and prices will be less volatile.
Sources suggest the strike price for low carbon offshore wind power will be set around £55-£75 per megawatt hour in the upcoming Allocation Round 6 for CfDs, but the body has calculated that even at £75 per MWh in 2012 prices, new offshore wind will be around 25% cheaper than new-build gas power.
London is under pressure as the previous auction attracted no bids from offshore wind companies, with the think tank stating failure to build more low-carbon generation will mean the UK misses its targets to build renewables, and fails to lower people’s energy bills by harnessing more cheap and abundant wind power.
It added politicians should prioritise supplying secure, stable and in the long term, cheaper power over political posturing over the role of fossil fuels in the UK’s energy security. British homes were the worst hit by the energy crisis in western Europe last year due to the high dependency on gas for heating homes and generating electricity the body said, claiming. six million households are living in fuel poverty as the country heads into winter.
It said the UK government took a gamble on driving down the cost of offshore wind in previous CfD auctions and set prices too low at a time when runaway inflation is affecting all forms of power generation, and despite warnings from businesses.
The gamble failed, and consumers will pay the cost said New Green Alliance, adding London has committed to build 50GW of offshore wind power, but 15GW has been built so far, and a further 13GW is contracted or planned. The leaves a shortfall of 22GW which now needs to be made up in the next two auctions.
If companies don’t bid for and build offshore wind, the UK will need more power from another source, which will certainly be more expensive than renewables the think tank said. A number of UK gas-fired power plants are reaching the end of their lives – 7.5GW of this capacity is over 25 years old, the typical lifetime of combined-cycle gas turbine gas power plants it went on.
“The government needs to stop being penny wise and pound foolish when it sets prices for low-carbon power in Allocation Round 6,” said policy analyst at Green Alliance Liam Hardy.
“The average UK energy bill is double what it was two years ago, mostly because of the high price of gas – but we are surrounded by abundant and cheap wind energy. Do we want to pay a bit more for offshore wind than we did in previous years, or a lot more for expensive, imported gas?”