Offshore wind projects could cost bill payers £1.5 billion a year due to new Treasury rules, according to new Energy and Climate Intelligence Unit (ECIU) analysis.
While inflation pushing up the costs of offshore wind slightly, new farms are set to produce electricity much cheaper than the regular wholesale electricity price, which is largely set by gas power stations. The cost of the gas is predicted to stay two to three times higher than pre-crisis for the foreseeable future, say the ECIU.
With the government’s contracts for difference (CfDs) scheme, these wind farms would be contracted at a lower price than the wholesale price creating a saving for bill payers.
Treasury rules that don’t take account of predictions that the gas price will stay high and that put an arbitrary limit on the number of farms that can be contracted, are set to constrain the number of wind farms getting through the auction and so keep bills higher.
Despite an increase in the auction budget from £170 million to £190 million, but the analysis finds that this is likely to make little difference to the outcome of the auction and ignores the fact that renewables are predicted to save money, not add cost to bills.
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ECIU energy analyst Jess Ralston said the government’s priorities are on “North Sea gas licences and tax breaks for oil companies that won’t bring down bills while tying up offshore wind farms that generate electricity cheaper than gas in red tape.”
“Even with inflation pushing costs up for offshore wind, it will still generate electricity much cheaper than gas power stations. Stifling wind farms pushes up bills. Treasury’s rules seem to be actively working against bringing them down,” she added.
A spokesperson for the Department for Energy Security and Net Zero said: “We do not recognise these figures – last year’s contracts for difference scheme auction was the largest ever, issuing contracts to nearly 100 clean tech projects, and we increased this year’s budget to reflect the large volume of eligible applications received.
“The UK is a world leader in renewable technologies, with the four largest operational offshore wind farms in the world providing enough capacity to power the equivalent of at least 10 million homes per year.
“Contracts for Difference is designed to protect generators against price fluctuations, and compares favourably to other international schemes. We understand there are supply chain pressures for the sector globally, and we are listening to their concerns.”
