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UK Offshore Wind Rates Drop Below Nuclear

Thursday, September 14, 2017

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A drop in the cost of energy generated by offshore wind farms in the U.K. is leading some in the country to rethink the future of other power technologies, including new nuclear facilities.

Two new wind farms, DONG Energy’s Hornsea 2 and EDPR and ENGIE’s Moray, will begin generating five years from now at a price of 57.50 pounds (about $76) per megawatt-hour, per the U.K.’s Department for Business, Energy and Industrial Strategy. Triton Knoll, owned by Statkraft, will produce at 74.75 pounds per megawatt-hour, starting in 2021. The prices are guaranteed for 15 years, according to trade association RenewableUK, under the contract-for-difference (CfD) each facility was awarded by the government.

Offshore  farm
© / bunhill

Three new offshore wind farms have been awarded contracts for difference by the U.K.'s Department of Business, Energy and Industrial Strategy, all at rates lower than the next nuclear plant slated to come online.

Hinkley Point C, the under-development nuclear plant in Somerset, England, by contrast, is guaranteed 92.50 per megawatt-hour under its CfD. That plant is expected to begin operation in 2025, and the rate is guaranteed for 35 years.

As The Guardian notes, the three new wind farms combined will have a capacity of 3.2 gigawatts, equal to the planned capacity of Hinkley Point C, and will be fully online two years before the nuclear plant is, if all goes according to schedule.

How a CfD Works

The CfD is a contract issued between energy companies investing in low-carbon production and a BEIS company called Low Carbon Contracts Company. If market prices drop below the established “strike price” quoted in the contract, the LCCC must pay the energy companies the difference; if market prices are above the strike price, the companies must pay the LCCC.

The program is intended to help stabilize consumer prices while mitigating the risks associated with investing in alternative energy production; it effectively acts as a subsidy for green energy, as prices in the market currently run around 40 pounds per megawatt-hour. Lower strike prices indicate higher confidence in the affordability of the energy being produced, and mean that the government can permit more growth in the sector in question. Higher strike prices mean the government must spend more to subsidize growth.

Wind Versus Nuclear and Gas

The rates for the three new wind farms are also largely lower than the most recent figures from the BEIS describing the levelized cost of production of electricity via natural gas—66 and 166 pounds per megawatt-hour, for cycle gas turbines and open cycle gas turbines, respectively. Those numbers were released last November.

Hinkley Point construction
EDF Energy

The dropping price of offshore wind in comparison with nuclear power has put a spotlight once again on the construction of Hinkley Point C, a new nuclear plant in Somerset, England.

The decreasing costs of offshore wind are driving some to question the construction of new nuclear plants like Hinkley Point C, which is being bankrolled by EDF, a French state-sponsored company along with CGN, a Chinese state-owned entity. Hinkley Point C obtained its nuclear license in 2012, then experienced a series of delays, including a temporary suspension of the license by Prime Minister Theresa May. Construction for the facility began in March.

Liberal Democrat leader Vince Cable tweeted Monday (Sept. 11), “Renewable energy case boosted by sharp subsidy fall—need now for radical appraisal of UK energy provision.”

Renewable UK chief executive Hugh McNeal said in a statement, “We knew today’s results would be impressive, but these are astounding. Record-breaking cost reductions like the ones achieved by offshore wind are unprecedented for large energy infrastructure.

“Today’s results mean that both onshore and offshore wind are cheaper than gas and nuclear,” he added. “But this young, ambitious industry can go even further.”


Tagged categories: EU; Europe; Government; Nuclear Power Plants; Offshore; Power; Program/Project Management; Wind Farm; Wind Towers

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