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Exclusion of onshore wind energy from CfD

Exclusion of onshore wind energy from CfD
February 6, 2020 Andrea Mariano

Background

In the past years the UK government has introduced a scheme to incentivise investments in new low-carbon electricity generation. Such scheme is called Contracts for Difference (CfD) and has the aim of providing stability and predictability for investors by guaranteeing a price (strike price) for the electricity generated from utility scale renewable energy schemes [1].

exclusion of onshore wind

Figure 1 – Wind and solar farm development [2].

The exclusion of onshore wind capacity from CfD

Despite the low price of electricity produced by onshore wind farms (circa £60/MWh in 2016 [3]) the UK government has decided to exclude onshore wind developments from the last round of CfD. Furthermore, planning requirements have become stricter, resulting in slowing the pace of deployment to a new negative record. Under such strict conditions, for the last four years onshore wind added almost no capacity in England. However, it is worth mentioning that such strict rules pertain only to developments in England. Wales, Northern Ireland, and Scotland have adopted a more relaxed planning policy.

The lack of government policy for both planning and financing will negatively affect the repowering of existing onshore wind sites, leading to a significant amount of capacity loss. RenewableUK has estimated that 8GW of the existing 13GW of onshore wind capacity will be decommissioned in the next 10 years. Repowering these sites with the most advanced technology can triple the decommissioned capacity [4].  

However, private investments are flowing back into onshore wind [4]. SSE is planning to extend one site in Sutherland with an additional 11 turbines. In total the site will have a capacity of 117MWs. The support for the project is on a “merchant basis” which is different from CfD and power purchase agreements (PPA) since energy is sold on a competitive market [5]. Obviously, the SSE extension is not the only case, and more projects are in the pipeline. EDF and Vattenfall are planning to create new developments which will implement newer and taller wind turbines [6][7].

Conclusion

More projects are going online without subsidy and this is good news for consumers [8]. Furthemore, price for onshore wind energy is expected to reduce down to £50/MWh [9]. Meanwhile the offshore wind sector is also set to become cheaper (the government has forecast prices between £48.13/MWh and £51.23/MWh) [10]. It is therefore likely that government support will also be cut for this sector soon. 

However, it remains inexplicable why the cheap and green energy produced by onshore wind development is excluded from CfDs meanwhile more expensive solutions, such as nuclear (£89.50/MWh for Hinkley Point C [11]), are fully supported by it. This considering that the government has pledged to become carbon neutral [12]. 

Pager Power

Pager Power has expertise in helping wind developers assessing impacts for both offshore and onshore wind farms upon aviation, telecommunications and supporting developers through the planning process and assisting with the engagement of stakeholders.

[1] Contracts for difference, EMR Settlement Limited, date: n.d., last access: 02/02/2020.
[2] Solar cell panels in the foreground, wind turbines in the middle ground, and electricity pylons in the background; unidentified location, Kenueone, date: 5/05/2016, last access: 02/02/2020.
[3] ELECTRICITY GENERATION COSTS, BEIS, date: 11/2016, last access: 02/02/2020.
[4] The British public supports onshore wind – why won’t the government?, Michael Phillips, 22/05/2019, last access: 03/02/2020.
[5] SSE Renewables to build first subsidy-free wind farm, BBC, date: 31/01/2020, last access: 04/02/2020.
[6] Largest onshore turbines lined up for UK wind farms, Andrew Lee, date: 09/01/2020, last access: 04/02/2020.
[7] UK wind farms project pipeline revealed, Connor Ibbetson, date: 21/01/2020, last access: 04/02/2020.
[8] Subsidy-free onshore wind project is good news for consumers, Rob Norris, date: 02/09/2019, last access: 04/02/2020.
[9] Research shows future onshore wind projects save consumers £50 a year, Rob Norris, date: 13/06/2019, last access: 04/02/2020.
[10] UK renewable energy auction prices plunge, Nathalie Thomas, date: 20/09/2019, last access: 04/02/2020.
[11] Hinkley Point C, GOV.UK, 29/09/2016, last access: 04/02/2020.
[12] More onshore wind development ‘not right for England, Government says, David McPhee, date: 13/05/2019, last access: 04/02/2020.

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