06/10/2017

The recent dramatic fall in prices for offshore wind power has helped dispel presumptions about the cost of decarbonisation, but also spurred further conversation about how we should meet growing energy demand.


The record-breaking contracts awarded for off-shore UK wind farms last month marked a significant turning point for renewable energy generation in this country.

What was so momentous about the Contacts for Difference auction in September was just how low the price of this green technology has dropped in a relatively short pace of time.

Only three years ago, the rate at which these enormous, swirling turbines installed out at sea produced power was priced at approximately £150/MWh. After this most recent auction, two firms promised to build wind farms for off the coast of Britain for a guaranteed strike price of £57.50/MWh.

This not only beat projections, but obliterated them, with the government forecasting in late 2016 that it would take offshore wind until at least 2025 to break the 100MW/h barrier.

Bigger turbines (the latest stand at almost 200m tall), improved technology and new innovations, as well as lower costs helped by the downturn in the oil and gas industry have all contributed to these rapidly falling prices.

As a result, offshore wind is now among the cheapest new sources of electricity generation in the UK, joining onshore wind and solar, with all three cheaper than new gas and new nuclear energy.

Challenging preconceptions about renewables

These auction results then have helped challenge preconceptions about renewables, shifting the debate from how they are too expensive, towards just how cheap they can go.

This in turn has increased conversation about how these variable sources of zero-carbon power – with wind power chief amongst them – can be integrated into the grid whilst maintaining sufficient supplies of power throughout the year.

One of the traditional challenges against offshore wind, apart from the fact that it is an intermittent source of power, has been that it would never be economically viable.

However, with the ‘strike price’ now as low as it is at £57.50, even with whole system costs added – which includes balancing unexpected short-term fluctuations in output and providing back-up capacity for still days when renewable generation is low – that argument can now be effectively countered.

Estimates suggest that these so-called whole-system costs will add around £10-15/MWh to the strike price, meaning the total cost of producing energy from offshore wind is little more than £70/MWh.

That compares very favourably to the government-backed £18 million Hinkley C nuclear plant which will produce electricity at a cost of £92.50/MWh.

Unsurprisingly, such a comparison is now causing many to question whether nuclear energy is the best option towards reducing our greenhouse gas output.

However, despite its cost, nuclear power is likely to continue to play an important role in our future decarbonised energy mix, as it is a zero-carbon technology which – crucially – delivers a continuous, uninterrupted supply.

That is unless there are significant advancements made in the technology, affordability and deployment of battery storage at grid level over the coming years (and recent developments have shown considerable promise in this area).

Either way, it is clear that Britain will need a diverse mix of low-carbon energy in order to meet carbon reduction targets, and at the same time meet the country’s growing energy demand.

Therefore, with wind power having provided a huge step forward in the energy revolution, it might now also increase pressure on the government to run auctions for onshore wind and solar, which are likely to be even cheaper.

Lowering the cost of decarbonisation

Onshore wind and solar schemes supported in the first CfD auction in 2015 came in at around £80/MWh, but since then the government has banned the two technologies from the auction, halting their subsidies.

However, in a report commissioned by Scottish Renewables, consultants Baringa Partners say new auctions could secure 1GW of onshore wind for £46/MWh, undercutting the cost of wholesale energy and hence meaning it would be effectively subsidy-free. Cornwall Energy says some onshore schemes could fetch as low as £40/MWh.

Securing subsidy-free renewables would not only significantly cut the cost of decarbonising the UK energy system, but also save consumers money on their energy bills in the process.

With cheaper, more abundant sources of green energy coming online, it would also help meet the UK’s increasing energy demand in the coming years just as the UK’s remaining coal plants shut down and old nuclear goes offline.

Such a gap in electricity supplies will be even wider if electric vehicles prove as popular as expected.

In the meantime, despite falling costs, the UK must confront the challenge of managing the variable output of wind and solar and integrating them into the electricity grid. The government’s strategy to encourage a more flexible grid through the likes of energy storage, demand-side response and smart metering and data solutions, will be essential going forward to keeping costs to a minimum.


Achieving a smarter energy system

As one of the country’s leading support services to the energy industry, we are committed to helping delivering this future of smart energy for Britain. Not only do we have vast experience in connecting renewable energy and storage projects to the grid, we have a substantial track record of investing in smart technology geared towards achieving the grid flexibility we will require as the energy system faces the challenges brought on by what is being dubbed the ‘world energy trilemma’ (sustainability, equity and security).

Owing to this commitment to smart energy – something we’ve been focused on delivering for over twenty years – we are in a prime position to help the industry meet these challenges, whether it be through our expertise in utility infrastructure and connections, smart metering and data, or our energy management and consultancy.

Being smart doesn’t just mean investing in the latest technology and most talented people, it also means having a deep understanding of our field and the know-how and expertise to provide our clients with the most cost-effective and practical answers – a trait that we’ve built our name on.


If you’re interested in how we can help your organisation with our end-to-end energy solutions, get in touch with us today on 02920 739 500 or email us and we’ll get back to you.

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