Price paid for offshore power to rise by 50%
bbc.co.uk
bbc.co.uk
> The BBC understands the government now will raise the price it pays from £44 per MWh to as much as £70.
> It is hoped more offshore wind capacity will lead to cheaper energy bills.
https://www.ofgem.gov.uk/energy-data-and-research/data-porta...
The below statement confuses me deeply as getting more wind is entirely out of our control. "it costs you nothing to produce an extra MWh (all you need is more wind)"
Planet Money ep on the strategy at play. Uruguay managed to build an entire wind grid by offering guaranteed rates for electricity for 20 years. I think UK is trying something similar. Guaranteed minimum payments to offset the risk associated with the massive startup costs.
This news is about the UK government seeking new bids after it had previously asked for bids around a much lower strike price and it got no takers for the auction. In a world where everything is more expensive, the government somehow imagined people building wind farms would be willing to charge less money and none of the builders were interested.
They're not minimum payments. The risk is eliminated by promising to pay a fixed price for the energy, in the form of an adjustment to the wholesale price given for the sale of the actual electricity. If wholesale electricty prices are very high (as they were e.g. shortly after Russia turned the gas off) the wind generators actually have to pay the government because the contract is for the difference.
It's exactly the right shape of deal for Wind and Solar, which are mostly about capital investment to build the power plant, with no fuel and minimal maintenance necessary. CfD is also a reasonable shape for a nuclear power deal, fuel is very cheap but there is much more maintenance for a nuclear plant than a wind farm, although less than for a coal plant.
In practice this seems to be capped at zero as when the price goes negative the producers simply don't produce energy.
Suppose I'm a wind farm with a strike price of £75 and thanks to high gas prices the current wholesale electricity price is £150 per MWh. I can (and certainly will) sell my wind electricity, but I have to pass £75 of the £150 back to the Low Carbon company.
This winter can't necessarily be expected to be as mild as last winter, but the French nukes are back online, which is a big boost for all of Western Europe, and there's more wind online in the UK even after just twelve months.
I'd recommend you watch Starmer's interview on exactly this topic where he brings up all of the problems you just highlighted. He discusses a high-level idea of what he wants to do to fix the issue but part of the political pain is the blunt fact of inaction or reversal of green investment over the last 13 years.
> So the problems with NIMBYs and local opposition
The NIMBYism was created by the Tories when they changed the rules so that a single objection can kill a planning application for onshore wind farms. That's why this is an effective ban rather than an outright ban.
> we were never reliant on Russian gas
In a roundabout way, we are reliant on Russian gas. If we weren't, the UK wouldn't have been among the worst hit by fuel prices going through the roof. Anyone with half a brain knew immediately that those reliant on Russian gas would switch over to the same sources that the UK used, putting upwards pressure on the price that we would pay.
The media reporting that claimed otherwise was misleading. It relied on surveys about support for wind turbines that were questionably worded and ignored the actual, on-the-ground reality of the problems that companies were having before that change in the rules.
Also, up until very recently abandoning onshore wind in favour of offshore basically worked. It got a whole bunch of wind turbines built with far less NIMBY problems than before (partly because they're out of sight and partly because fewer, larger farms were easier to get through planning), prices were trending down to lower than onshore, that wind turbine factory reopened and competitors set up their own in the UK thanks to the consistent demand, it even encouraged other countries to also do big offshore wind roll outs.
> Anyone with half a brain knew immediately that those reliant on Russian gas would switch over to the same sources that the UK used, putting upwards pressure on the price that we would pay.
Yeah, which is the whole reason that talking point about how the cancelled onshore wind was enough to replace all the gas that the UK imported from Russia was deceptive and meaningless. Replacing the UK's own gas imports from Russia was trivial and not the problem, the problem was precisely that other countries which used far more Russian gas switched over to the same suppliers the UK relied on for the rest of our gas. It's deceptively worded to make a relatively small amount of energy sound like a big, impactful fix for our problems.
Starmer specifically talks about the planning system in his interview at the Future of Britain conference.
> It got a whole bunch of wind turbines built with far less NIMBY problems than before
That could have happened anyway, except we'd also be further ahead in at least some onshore wind, too.
> Yeah, which is the whole reason that talking point about how the cancelled onshore wind was enough to replace all the gas that the UK imported from Russia was deceptive and meaningless.
Nobody in any government or energy sector claimed this. And no, don't waste your time citing a Tory source because they've made a lot of verifiably nonsense claims on energy security in the past 18 months, so they're not a reliable source.
I wish headline writers would try not to be so miss leading though.
It's up to, and it would essentially be fixed at that cost. I'd rather £70 MWh than the current £90 MWh that can swing wildly up and down.
Yeah they are doing something, they are causing the issues !!! so they can say we are doing something!
They are wasting time, money and energy! with minimal action(s).
in two to four years there is going to be a "massive" energy shock to uk energy supply by total lack of planning and action(s) by this very government!
The goal(s) are to outsource everything and say it was not out problem(s) and play a blame game!
Since then things have changed.
I'm not a tory by any stretch, but I'll give credit where it's due. They do appear to be doing things to reach their own targets.
I somewhat agree that we aren't moving fast enough, but then no one is. We're the biggest producer of offshore wind in absolute terms, and renewables may actually beat out fossil fuels this year to be the biggest contributor to electricity generation. You can't say that's nothing.
Have you got any citations for this 'supply shock'?
> Companies have said that the cost of building wind farms has soared because of rising inflation and interest rates, while the maximum price they can charge for the electricity they generate has been relatively low.
There's a very subtle link between all of these, which perfectly exemplifies the need to think holistically/systemically. Let's break these statements down:
1. "rising inflation and interest rates"
One might think that FED and ECB rule these, when they only follow the pace of the use of money. So what is money? It is a device to attribute value to products and services. So what is a product? It is matter that has been transported in your hands, and arranged in a very specific fashion, out of very specific materials. You know what is the only thing in the universe that can transport and arrange matter? Energy. The materials collected for a product are also energy, but not in the einstein sense, in the sense that if you had more energy you would be mining more of them. Nature gives us matter for free. It just lies there [1].
Money is created to try to make a 1:1 for energy. And as oil depletion is looming, as Russia attacked Ukraine, there's less available energy.
We have: -energy -> +inflation
2. "cost of building wind farms has soared because of rising inflation and interest rates"
Inflation is the fact that in money terms (also energy terms), products and services cost more. What's interesting is when you want to build energy producing things.
So for wind farms, we have: +inflation -> -energy
Now electrical energy is not the same as oil & gas energy. Except that it is. These become fungible on the electricity market, as gas can produce electricity. And using gas for electricity means not using gas for other things. Oil and gas prices are linked (being fungible for heat, and in chemical plants). So that means less oil, which is used in windfarm production heavily (transport of copper, transport and installation of the blades, etc.).
So we have a loop: -energy -> +inflation -> -energy. This loop is a differential equation, and it has an exponential solution. It is exponentially decreasing or increasing? And also let's consider that we might want energy to do other things than building device to produce energy. Doing energy for the only sake of doing energy is not desirable, and some [2] call it the "Mordor economy".
Which bring us to the EROI: Energy Return Over (Energy) Invested. That's what rules this exponential to increase or decrease.
3. "while the maximum price they can charge for the electricity they generate has been relatively low"
Well isn't that talking about EROI? Meaning that market prices are not enough to sustain the differential equation in an increasing manner? The increase in price they got from the UK government just means one thing: the part of the economy dedicated to use energy to produce device producing energy must increase. They need it so that the wind loop is not exponentially decreasing.
This also means the share for other uses for energy must decrease. This means less health services, fewer products, or lower quality ones. Less heating, less transport. But the wind energy will be sustained.
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And this will get waaay worse:
* There's gonna be less oil, less gas over the years
* Even the gas-producing UK is saying they had to make more room for the wind farm sector
* We'll want to electrify a lot more, which means even more share for the energy sector that might have EROI problems
* That's without energy storage, which wind and solar need
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TLDR: This differential system is what, IMHO, is why we desperately need to change our minds towards systems that have a better EROI. Nuclear energy has a great EROI.
[1] Energy is more slippery. It wants to spread out (that's called Entropy). You have to collect it and spend exponentially more (energy) the higher it is spread. For example the background radiation at 2.7 Kelvin will _never_ be useful.
[2] I can't recommend enough the works of Nate Hagens and Jean-Marc Jancovici. Here is a primer: https://www.youtube.com/watch?app=desktop&v=WYLKtz5A5pA
As you say, energy is fungible, which means that if we do actually manage to build sufficient renewables first this in theory becomes much less of a problem because we can use their output to meet our energy demand and offset the decline of fossil fuel production.
The economics of nuclear power are somewhat similar, whilst I think fossil fuels with poor EROEI are a little different in that more of the energy consumption is spread out over the production life. Also, the UK has unfortunately been struggling to build new nuclear like most countries, and the amount of time construction has been taking would be a huge issue even if the EROEI was good.