The UK awarded 8.4 GW of offshore wind projects at prices far below gas and nuclear, saving consumers nearly £1.7 billion a year.
  • BrightCandle
    2·
    16 days ago

    The minimum price agreed of £91.20 per MWh is a 9.12p a KWh. That is kind of high the typical wholesale price at the moment is lower than that and Solar typically comes in at more like £50 a MWh in the UK. The prior deals were at £50 and £70 so this is quite an increase in guaranteed minimum pricing. I am not so sure this is a good idea at this price, its not going to be reducing bills.

    • BananaTrifleViolin@piefed.worldEnglish
      2·
      16 days ago

      The price does seems about right to me. The whole sale prices are currently about £75 but looking back prices are usually a bit higher and apparently post-2022 energy shock, average around £80-£94 (ignoring the peak of the energy shock itself). They’re well above the pre 2022 prices, but I don’t think it’s thought likely prices will be coming back to those levels in the near future.

      This is run under the “Contract for Differences” framework - when the price is below the minimum price the producers get a subsidy to close the gap (so if it’s £75, the producers get £15 per MWh) but if it’s above the £91.20 minimum price they pay the difference back. It’ll encourage build out, gives the developers stable revenue and predictability and helps smooths out volatility in prices overall.

      This is only really a bad price if the average wholesale price is likely to go substantially back down below £80 long term. That doesn’t seem likely as we still have the major drivers of high energy prices: UK wholesale prices are driven by gas prices (as the marginal producer), with reduced cheaper piped gas supplies due to the Ukraine causing a likely permanent reliance on expensive LNG as the new floor for gas prices. So it’s unlikely we’ll go back to the old cheap gas prices from prior to 2022 - even if the Ukraine war ends tomorrow, Europe strategically is not going to rely on Russian gas and will continue to use LNG, and LNG stays the marginal producer (not piped gas even if we use more). That’s not even taking into account the green side of this.

      UK whole sale energy prices won’t drop substantially until gas is permanently replaced as the marginal producer (i.e. the last most expensive supplier to provide energy is no longer expensive gas power stations and something cheaper). That won’t happen until wind and solar are ubiquitous and we have good energy storage infrastructure to ensure we don’t need gas whenever renewable production is below what is needed moment to moment. That seems a long way off still (although this wind build out should help move closer) - in the meantime LNG will likely set the UK wholesale prices, and it’s unlikely to get much cheaper than where it is now. If anything, if there is anothere energy shock, it’ll go up.