Offshore wind farm

Offshore wind electricity price falls to record low; tidal lagoon secures grid connection

The cost of subsidies under the government’s “contracts for difference” arrangement for new offshore wind farms has dropped to a record low in the latest round of contracts being awarded for clean energy projects.

Prices for new offshore wind farms in the latest auction for the contracts - which guarantee a set price for power from schemes such as offshore wind farms - have fallen to £74.75 per megawatt hour for projects delivered in 2021/22 and £57.50 for projects in 2022/23.

Subsidies have fallen 50 per cent since the last auction in 2015 and are down even further on the £150/MWh given to the first wind farms awarded contracts for subsidies.

Under the contracts for difference system, companies put in bids for the “strike” price they will be paid for electricity generated, with those submitting the lowest bids securing the deals.

Along with offshore wind farms, biomass and energy from waste plants have secured subsidies for low-carbon energy in the latest auction, with a total of 11 successful schemes.

The results show that the price of offshore wind has fallen well below that of nuclear, with the new Hinkley Point C power plant securing subsidies of £92.50/MWh in negotiations with the government. The cost involved in constructing the project have also spiralled beyond original expectations. 

Costs of subsidies are down 50 per cent on the last auction, whose results were announced in February 2015, in which offshore wind power projects won subsidies of between £114 and £120/MWh.

Minister for Energy and Industry Richard Harrington said: “We’ve placed clean growth at the heart of the Industrial Strategy to unlock opportunities across the country, while cutting carbon emissions.

“The offshore wind sector alone will invest £17.5bn in the UK up to 2021 and thousands of new jobs in British businesses will be created by the projects announced today.”

He said the Government would be setting out ambitious proposals to seize industrial opportunities as the world moved to a low-carbon future, in its forthcoming “clean growth plan” which is due to be published in the autumn.

Bigger turbines, higher-voltage cables and lower-cost foundations, as well as the growth in the UK supply chain and the downturn in the oil and gas industry which has meant lower costs for vessels, have contributed to the falling prices.

The newest eight megawatt (MW) offshore turbines stand almost 200 metres high, taller than London’s Gherkin, with 80m long blades producing enough electricity to power a home for 29 hours with a single rotation.

Caroline Lucas, co-leader of the Green Party, said the massive price drop for offshore wind should be the “nail in the coffin” for new nuclear.

She said: “While clean, green wind power has the potential to seriously cut people’s bills, the government’s undying commitment to new nuclear risks locking us into sky-high prices for years to come.

“The government should now commit to this technology and scale up investment in offshore wind so that it becomes the backbone of British energy.”

Meanwhile, Tidal Lagoon Power has secured the grid connection for a 3,240MW capacity tidal lagoon expected to generate among the cheapest electricity of all new power stations built in the UK.

Conceptual rendering of the tidal lagoon project

Tidal lagoons use the power of tides to generate electricity and are thought to be less expensive than both offshore wind and nuclear power over the first 60 years of their 120-year life, according to a review of the technology earlier this year. 

The project, located between Cardiff and Newport, has been selected as the first to employ at full-scale the blueprint being established by the Swansea Bay Tidal Lagoon.

Tidal Lagoon Power’s chief executive, Mark Shorrock, said: “Our offer to the UK Government is to contract Swansea Bay Tidal Lagoon for a lower subsidy per megawatt hour than Hinkley Point C. While we await the Government’s response to this offer and to the independent Hendry Review of tidal lagoons, we have continued our development work on the subsequent programme.

“Today, we have secured the grid connection for a tidal power station equal in installed capacity to Hinkley Point C. Looking at the pounds per megawatt hour unit cost of new build power stations, nuclear is currently priced in the nineties, the latest offshore wind projects are expected to drop into the seventies and our models show Cardiff Tidal Lagoon beating them all in the sixties.”

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