Government overhauls to unlock renewables ‘would save Brits £1.5bn on energy bills’

Pictured: Fraisthorpe Wind Farm, Bridlington

This accusation comes from the Energy and Climate Intelligence Unit (ECIU), which has calculated the likely impact on bills from the UK’s most recent Contracts for Difference (CfD) auction round. This round began earlier this year will conclude by the end of September.

Under CfD auctions, renewable energy developers are guaranteed a set price for the electricity their project produces. The Government shields them from potential dips in price for a multi-year period.

The ECIU believes that only a “few” projects will make it through Treasury rules after entering the CfD – partly because this was the case with the previous round. The think tank is warning that barriers will be particularly steep for onshore wind farms, which have only been allowed to compete in the scheme this year after a ban enacted in 2015.

One barrier is that the Government enacts a limit on the number of wind farms that can be contracted. The ECIU is arguing that this limit is now arbitrary and outdated in light of the UK’s plan to host 50GW of offshore wind capacity by 2030 and end unabated fossil-fuelled electricity generation by 2035.

The ECIU is also urging the Treasury to reassess its price assumptions and predictions for gas and wind. It notes that the assumptions and predictions do not properly account for the gas price crisis, nor for the decrease in wind costs.

The current wholesale cost of electricity is linked to the wholesale price of gas, as work is ongoing to decouple the two.

Moreover, many wind sector players are calling for a more progressive pricing approach under CfD auctions, with pricing taking account factors of social and environmental value. The UK is considering this in ongoing CfD reforms; Changes will be enacted at the next round at the earliest.

With a streamlined planning process and interventions from the Treasury, the ECIU has calculated, enough additional wind-powered electricity could be generated and distributed to save UK residents and businesses £1.5bn on energy bills annually.

ECIU energy analyst Jess Ralston said removing barriers to renewables would bring down bills far more rapidly and steeply than the Government’s current plans to expand North Sea oil and gas extraction. This is because oil and gas projects take time to come online and the energy extracted will be sold on the international market.

Connection bottlenecks

Design aspects of the CfD scheme are not the only barrier to developing renewables in the UK.

Ministers are also under pressure to do more to attract international investors as markets like the US and EU implement multi-billion-pound subsidy packages for clean technologies. The UK’s response to the US Inflation Reduction Act and EU’s Green Deal Industrial Plan is expected at the Autumn Statement.

Another challenge is the planning system. The UK Government is currently working with bodies including Ofgem, the National Grid and the National Infrastructure Commission on reforms for the systems for large energy generation projects. The reforms follow a 65% increase in project delivery times between 2012 and 2021.

edie’s sister title Utility Week this week revealed that the National Grid Electricity System Operator (ESO) will offer the developers of 52 energy generation projects that are running behind schedule the chance to give up their place in the grid connections queue, without incurring cancellation charges.

Waiving these charges will cost around £40m, Utility Week has been told by ESO and Ofgem representatives. These costs will be recouped through customer bills. The costs are stated to have been lower than initially anticipated.

By freeing up the queue, projects which are ready to generate will have shorter waiting times. Only developers which have expressed interest in leaving the queue have been offered a chance to participate in the so-called amnesty.

Related news: Low-carbon energy to be offered record £227m in next CfD auction

Comments (1)

  1. Peter Reineck says:

    The biggest issue is not the cost of wind power but the way that the price is set. Customers pay the highest price for electricity – usually from natural gas – irrespective of the source. Profits for some and impoverishment for others!

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