Report: Onshore Wind Now So Cheap it Could Go ‘Subsidy-Free’

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Onshore wind is now cheap enough to deliver power to UK consumers without subsidy, according to a report released today by management consultancy Baringa Partners.

Commissioned by Scottish Renewables, the report finds the government could deliver 1GW of new onshore wind capacity at no additional cost to consumers above the wholesale cost of power.

The findings mean the cost of decarbonising the UK energy system could be cut significantly, saving consumers money on their energy bills in the process.

However, realising the promised savings depends on onshore wind being given access to the energy market. It is currently barred from Contract for Difference (CfD) auctions, where developers bid for 15-year price support contracts that give them a guaranteed price for the power they generate.

The Conservative Party pledged to halt new subsidies for onshore wind farms in its manifesto at the 2015 election. The government has subsequently failed to include both onshore wind and solar farm projects in CfD auctions, despite the fact all other new build energy projects receive some form of subsidy and developers maintain they can undercut the contracts handed to nuclear and offshore wind developers.

The Baringa report urges the government to allow onshore wind access in the so-called ‘pot one’ CfD auction rounds, which are meant to cover more mature clean energy technologies.

It suggests onshore wind could clear an auction with prices of £49.40 per MWh, which is currently just below the wholesale electricity price – which stood at £50 per MWh in December 2016 according to Ofgem.

If the price of power dips below this – and historic trends suggest it could – the onshore wind projects would be able to access top-up payments to make up the difference, but if the wholesale price rises over time these payments would be eliminated – resulting in onshore wind projects that could reasonably be classified as ‘subsidy free’.

The report argues the government would not be breaking its manifesto pledge by allowing onshore wind access to a CfD, as the savings in the long-term would likely outweigh any short-term subsidy costs.

The new figures come as official data from the Department of Business, Energy and Industrial Strategy (BEIS) reveals sluggish winds and dry weather have caused a slight dip in the amount of electricity the UK generated from renewable sources last year.

Provisional estimates for 2016 generation in the UK reveal a dip of one per cent in renewable generation, despite a 13.7 per cent rise in new renewables capacity over the year as new solar and onshore wind came online ahead of recent subsidy cuts.

Hydro generation fell by 15 per cent compared to 2015 thanks to lower rainfall, while offshore and onshore wind generation fell by 5.8 per cent and 7.8 per cent respectively. However, the drop was partially offset by a jump in solar generation, up 36 per cent to a record 10.3TWh thanks to increased capacity.

Despite the poor weather conditions 2016 was still the second highest year for renewable electricity generation, and lower electricity use overall meant renewables’ share of the electricity mix for 2016 barely changed, coming in at 24.4 per cent, compared to 24.6 per cent in 2015.

As of December 2016, the UK had 34.6GW of renewable electricity capacity. Wind – both offshore and onshore – are the lead generation type for renewables, followed by bioenergy, solar, and hydro.