Hacker News Reader

Comment by martin-adams | Hacker News Reader

They can, but the problem they face is that they can't get any of the developers to want to build them because the ROI is set too low.

https://www.theguardian.com/environment/2023/sep/08/what-wen...

View on HN

That's a very recent phenomenon though right? Presumably the current rates of inflation have a big impact. It wasn't so long ago that we were seeing record low strike prices being accepted for offshore wind, down to about £40/MWh.

It’s mostly the fact that the more wind you build the less each turbine will make in profit as in general they all spin at the same time pushing the prices down when they produce electricity.

The solution is to increase demand during those moments and thus these new interconnects to Denmark and Norway. Other option is to build storage or new consumption (hydrogen, ammonia, e fuels, etc)

I don't think that is particularly an issue, at least in the UK. They have a guaranteed price per unit. If the wholesale price is above that then it is paid back.

There are a couple of things which are misleading about the quoted CfD strike prices. Firstly they are in 2012 prices. Secondly, they are inflated by CPI every year which means the market prices then lower than a true fixed price would be priced. Thirdly, in all rounds prior to the most recent round, what was granted by govt were actually options to enter into a CfD, so developers were able to walk away and replace CfDs with higher-priced market PPAs at COD if they wanted to (and many have indeed done that). As a result, the business plan which some developers have followed has essentially been to bid the lowest price they could get sufficient debt financing with and then try to improve on that with higher priced PPAs or finding financing willing to take merchant risk at COD.

I actually meant to say interest rates above but that these strike prices are inflated by CPI isn't really obvious so I'm glad you've mentioned it.

Is there anywhere I can read about these arrangements? It would be really interesting to know the true cost per mWh delivered from some of these schemes.

Yes, interest rate rises have made a meaningful difference too via their impact on cost of capital/discount rates/IRRs demanded.

There's a summary at the House of Commons library website here. I hadn't seen it before today but it seems to cover most of the key points I'm aware of (from investing in the UK and European power space for work) and is reasonably concise: https://commonslibrary.parliament.uk/research-briefings/cbp-...

Thanks for digging that out. I'll take a look at it later.

Reply on news.ycombinator.com