The National Audit Office (NAO) has heavily criticised the former Department of Energy and Climate Change for allowing the Levy Control Framework cap to be exceeded in large part due to excessively high offshore wind costs.
In its report, ‘Controlling the consumer-funded costs of energy policies: The Levy Control Framework’, the NAO highlighted DECC’s inaccurate load factor calculations for failing to meet the £7.6bn cap on costs of low-carbon energy schemes up to 2020-21.
The LCF is currently forecast to hit £8.7bn in 2020-21.
The NAO said underestimated load factors for the five offshore wind farms awarded FIDeR (Final Investment Decision enabling Renewables) contracts and two auctioned CfDs were “crucial” to the overspend.
“One of the department’s crucial assumptions, the load factor of new-build offshore wind turbines, was not updated for 18 months, despite indications during this time that it may have been contributing to an underestimation of costs,” it said.
“Between 2013 and 2015, there was a two-year break between substantive exercises to gather data on technology costs. This was despite the fact that during this time the department entered into £615m of new commitments under the LCF by auctioning off CfDs.”
The report noted the Competition and Markets Authority’s estimate that the FIDeRs for offshore wind may have cost £250-£310m a year more than if they had also been subject to price competition.
Image: 3 Whitehall Place (DECC)
