Offshore windfarms set to become cheaper source of electricity than nuclear power stations
Offshore windfarms are set to become a cheaper source of electricity than the Hinkley Point nuclear power plant and are also on track to undercut coal-fired power stations.
The Government, which has been trying to support offshore in the hope of turning the UK into a world-leader in the sector, plans to hold an auction next month in which generators will bid for a guaranteed price for their electricity, with the lowest offer declared the winner.
This means that if the market price for electricity falls below that level after the turbines are built, the Government makes up the difference using money from a levy on energy bill payers.
The planned nuclear plant at Hinkley Point in Somerset has been given a guaranteed price of £92.50 per megawatt-hour (mwh) for 35 years — a generous deal that was required to reassure investors they would see a return on the hefty up-front costs of the plant.
Offshore wind in Europe cost about £190/mwh in 2012, according to Bloomberg New Energy Finance, but this figure has nearly halved in the last five years to just over £100/mwh.
And now the industry is now predicting the UK will see offshore wind become cheaper than some of the more traditional sources of power generation.
While the Government has an official policy against providing subsidies for onshore wind, it has sought to promote the more expensive offshore turbines, partly because of the chance to establish a new industry in the UK based on the expertise developed by the North Sea oil and gas industry. It appears this may be starting to pay off years earlier than anyone expected.
Keith Anderson, chief corporate officer of Scottish Power, one of the main players in the wind industry, told The Independent that he was confident the April auction would see an offshore wind generator bid below the ‘strike price’ given to Hinkley Point.
“I am very hopeful the auction will come in below the Hinkley contract. I feel very positive about that,” he said.
“And these contracts are for only 15 years, 20 years shorter than the Hinkley contract.”
And Dong Energy, the Danish wind power giant, went even further.
Henrik Poulsen, the firm’s chief executive officer, told Bloomberg that offshore wind could already compete with coal, depending on the conditions.
“If you have a sufficiently large site with the right wind speeds, then I do believe you can build offshore wind at least at the same price as new build coal in many places around the world including the US,” he said.