Friday, 27 February 2015

Scotland gets half of renewable auction capacity as renewable prices tumble ever farther below nuclear

Almost half (1GW out of 2.1 GW) of the capacity of the Government's auction for renewable energy has been awarded to projects based in Scotland. Lots of schemes were unsuccessful in the 'contract for difference' (CfD) auction organised by the Department of Energy and Climate Change (DECC) - but at least the ones that are successful are projects that have been granted planning permission. Hopefully  these will be implemented - the onshore schemes are likely to be deployed, but there are question marks over whether the two offshore schemes given contracts will actually be installed. Solar pv farms were less successful, and some of those given contracts will not be implemented because they bid too low prices.

One thing is absolutely certain - the prices awarded to the contracts make even more clearer than it was already that renewable energy is generally a much cheaper option compared to nuclear power.

Onshore wind projects of 759 MW capacity and offshore wind projects of a total 1162 MW capacity won contracts. Altogether the capacity of the contracts in this auction will deliver around 1.5 per cent of UK electricity. But all bets are off for the moment about what will happen in the future until we know what the Government will be like after the next General Election. But another auction round will start in October 2015.

Onshore wind projects were given contracts for premium prices at around £81 per MWh, whilst offshore wind came in at just under £120 per MWh, prices varying according to the year in which they are set to be deployed (between 2016 and 2019). Several Scottish onshore wind schemes and one Scottish offshore wind scheme were among the winners.

Immediate comparisons are being made with the Hinkley C contract which was 'settled' at £92.50 per MWh in October 2013, although such comparisons grossly flatter the nuclear deal. This is because a) the renewable energy contracts last for a mere 15 years compared to the 35 years awarded to Hinkley C and b) the Hinkley C project has very valuable loan guarantees which the renewable energy projects do not possess c) the Hinkley C deal is valued in 2013 prices which are already out of date. We should also add a d) that faith in EDF in being able to deliver its project even under the current generous terms is on the low side and they are highly likely to receive further 'underwriting' commitments and, in the end, further payments for cost-overruns from one or more of the governments involved (French, British, Chinese) if the project is to be built (looking more unlikely, now - see previous blog posts). That's even before you count the cost of dealing with the waste which is always 'discounted' onto future generations.

The British are conducting a further experiment in the 'auction' method of allocating renewable energy projects. The last British experiment in the 1990s was disastrously unsuccessful under the so-called 'Non-Fossil Fuel Obligation' (NFFO). Few of the projects were actually implemented, partly because a lot did not receive planning permission and partly the developers bid in unrealistically low bids simply to get contracts.

This effort will fare better than the last (1990s) auctions for onshore wind - in that most of the onshore wind projects should get installed barring very negative shifts in currency values (the turbines are made abroad). £80 per MWh is a plausible price for onshore wind projects, even though the contracts last for only 15 years (£75 per MWh would be good for a 20 year contract). A couple of the solar farms will also be implemented at around £80 per MWh testifying to the increasing competitivity of solar pv technology. The outcome for the two offshore wind projects given contracts is less certain - the prices that have been bid have the unspoken aura that at least the developers involved expect to be awarded the loan guarantees that they have so far been denied.

But regardless of this renewable energy deployment is spurting ahead by leaps and bounds partly dues to the fact at the moment that developers have been straining at leash to get their projects in before the ending of the (relatively) generous (to the Big Six) Renewables Obligation. As has been said elsewhere, renewable energy output will very soon be more on an annual basis that nuclear power in the UK. And nuclear will have to wait an awful  long time for reinforcements.

As I've said before, I really do hope I live long enough to see another nuclear power station built (a real one, not a small experimental one, note). Because then I may be immortal.

But for now let's campaign for some loan guarantees to be offered for the two offshore wind projects just given contracts (East Anglia and Neart Na Gaolthe) . Which parties will sign up to that as an election promise?...................................

You can see the UK Government's announcement at

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