The annual renewable energy auction saw a record 131 contracts agreed yesterday, a far cry from last year’s round which saw no bids from offshore wind developers. The 9.6 gigawatts (GW) of projects – almost half of which are wind to be generated by nine giant North Sea schemes – could provide electricity to the equivalent of 11 million homes.
How can we explain this dramatic turnaround to produce what the Government called the “biggest round ever”? Simple: the state has offered a much higher subsidy in the event of prices falling.
The auction system guarantees developers a fixed price for the electricity they generate over 15 years. They are paid the difference between the fixed price agreed with the Government and the wholesale price when they sell their electricity, if the wholesale price is lower. If the wholesale price is higher than the fixed price, companies have to pay back the difference.
Several of the offshore wind projects already had contracts but were rebidding in order to receive a higher price. Ed Miliband, the Energy Secretary, said they were “securing investment into our country” but at a cost to consumers. His boast that average household bills will be £300 a year lower in 2030 than now is beginning to look unlikely, not least for older people whose winter fuel allowance is being removed.
Even the 5GW of wind is not enough to meet Labour’s unrealistic target to decarbonise the grid within six years. There is also the small matter of transporting the electricity, which will require one of the country’s biggest ever infrastructure projects.
Where are the plans for that?