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Offshore wind smashes nuclear prices
Britain’s renewable energy revolution passed a key milestone as the cost of subsidising offshore wind power fell below the cost of subsidising new nuclear power plants for the first time.
Remarkably, the cost of subsidising offshore windfarms dropped by more than 50 per cent in two years. Plummeting costs has taken even the most optimistic observers and renewable energy pressure groups by surprise.
But nuclear firms have said that the UK needs to maintain a mix of reliable low-carbon energy sources.
The figures come from the Department for Business, Energy and Industrial Strategy, who awarded subsidy contracts to firms using “less established technologies” like tidal and offshore wind to generate electricity.
Firms were invited to bid for a government funding pot with the lowest bids being accepted.
Industry experts had expected offshore wind companies to enter bids between around £70 and £80 per megawatt hour but two firms surprised everyone by entering bids of £57.50 per MWh for new offshore windfarms.
This ‘strike price’ is guaranteed for 15 years and rises with inflation. It is half of what new offshore windfarms were being awarded in the last comparable auction two years ago and is well below the 2022/23 subsidy of £92.50 for the new nuclear plant at Hinkley Point.
Caroline Lucas, co-leader of the Green Party said that the result of the auction should sound a death knell for Hinkley Point C, under construction in Somerset.
She said: “This massive price drop for offshore wind is a huge boost for the renewables industry and should be the nail in the coffin for new nuclear.
“While clean, green wind power has the potential to seriously cut people’s bills – the government’s undying commitment to new nuclear risks locking us into sky high prices for years to come.”
However, the nuclear industry argues that wind power should not be compared to nuclear because wind only provides intermittent power when the wind is blowing.
Tom Greatrex, chief executive of the Nuclear Industry Association, said: “It doesn't matter how low the price of offshore wind is. On last year's figures, it only produced electricity for 36% of the time.”
In total, the new offshore windfarms agreed at this auction would have a generating capacity of 3.2GW, the same as Hinkley Point C, but capacity is not the same as actual energy generated.
EDF, the French company behind Hinkley, said on Sunday: “New nuclear remains competitive for consumers who face extra costs in providing back-up power when the wind doesn’t blow or the sun doesn’t shine. There are also costs of dealing with excess electricity when there is too much wind or sun.”
The unpredictability of wind and other renewable power does not detract from the remarkable falls in the costs of generation.
The cost of building offshore windfarms has plummeted by nearly a third since 2012 and developers believe that new, bigger turbines could lead to further cost reductions in the future.
Energy analysts believe that the UK government has helped make offshore wind power a success by nurturing the industry, providing incentives for it to expand and running these kinds of auctions for subsidies.