British wind energy: too stringent rules risk costing citizens 1.5 billion pounds
According to new research from the Energy and Climate Intelligence Unit (ECIU), bill payers lose £1.5bn a year as Treasury red tape blocks new offshore wind projects.
The climate agency warns that Treasury rules limiting the number of wind farms that can enter offshore wind auctions will limit the number of approved projects, but still keep bills higher. Contributions will be paid by British households.
Offshore wind projects are secured through bidding processes, known as allotment rounds, in which projects are given income guarantees known as strike prices.
This scheme is called a contract for difference, where wind farms must be contracted for less than the wholesale price, creating savings for taxpayers.
However, ECIU calculates that inflexible rules on project numbers mean that the previous auction, the fourth award round, fell short of the budget. Therefore, there will be no supply of energy at an exercise price lower than the market price.
For this reason, as many as 1 GW/h of power have not been placed, equal to a saving of 225 million pounds per year.
ECIU warns that the current fifth round of allocations, due to end next month, could secure just 2GW of offshore wind, leading to lost savings of more than £1.5bn a year from cheaper renewable energy , compared to the approximately 7 GW that could have been secured.
While the Government recently increased the budget for the auction from £170m to £190m, there are increasing supply chain constraints driving up the cost of building new turbines.
ECIU warned that globally high inflation coupled with CfD maximum strike prices – the highest price for generation agreed before the auctions – could have been adjusted to reflect these changes to ensure enough bidders in the latest round .
Jess Ralston, energy analyst at ECIU, said: "The government appears to be focusing on North Sea gas licenses and tax breaks for oil companies which will not reduce bills while blocking offshore wind farms generating electricity at a lower price than gas in bureaucracy. What is going on?
“Even with inflation driving up costs for offshore wind, it will still generate electricity much cheaper than gas-fired power plants. Choking wind farms drives up utility bills. Treasury rules appear to be actively working against their culling.
The government is targeting 50GW of offshore wind by the end of the decade, above current peak electricity consumption levels of around 48GW, meaning it could help make the UK a net exporter, a target set for 2045.
The UK's offshore wind fleet is the second largest in the world, after China, with a current capacity of 13.9 GW, but it faces challenges from rival markets, including the EU and the US, which have large grant agreements. There is a risk that UK subsidies will have to increase, increasing the cost to citizens.
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The article British wind energy: too stringent regulations risk costing citizens 1.5 billion pounds comes from Scenari Economics .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/eolico-britannico-norme-troppo-stringenti-rischiano-di-costare-15-miliardi-di-sterline-ai-cittadini/ on Fri, 18 Aug 2023 15:58:36 +0000.