Wind & Solar Substantially Cheaper Than Nuclear In UK
Originally published on RenewEconomy.
The first renewable energy auction held in the UK under its new “contract for difference” pricing mechanism has pulled the rug from underneath the nuclear advocate argument that it is the cheapest form of clean energy. It has also surprised the UK government, and some of the renewable developers themselves.
We publish a more in-depth look from Simon Evans at Carbon Brief here, but the striking result of the renewable energy auction was how both wind and solar came substantially below the price budgeted by the government.
Ignoring a couple of outlying bids, both wind energy and solar came in at around £80/MWh, which is well below the £120/MWh budget for solar, and the £95/MWh by the UK government, and the £92.50/MWh negotiated for the proposed £42 billion Hinkley C nuclear reactor. The strike prices for these wind and solar technologies will be progressively scaled down in coming years. The UK government hopes they will require no subsidies post 2020.
Offshore wind remains above the cost of nuclear, although recent experience in Denmark suggests that those costs are also coming down more quickly than imagined.
We should be cautious about some of the prices though. The £50/MWh price bid by a couple of parties appears to have been an accident, a result of them not quite understanding the bidding process.
“We got our CfD … oh Dear,” was the title of a brief blog written by James Rowe, director of Hadstone Energy, which is the promoter of the 19MW Wicks solar farm. Rowe lamented that the result is barely above the market price for electricity, meaning virtually no subsidy. At around £79, it would have been doable, but at a squeeze, he says. This was confirmed by another developer, Lightsource, which bid £79/MWh for its 15MW solar farm, but said it would result in wafer-thin margins.
“The Solar Trade Association will no doubt welcome this as another great leap towards subsidy-free solar. Wick Farm just got there a couple of years before anyone else!” Rowe quipped. Both solar developers said solar should be added more capacity in the next options.
This is a more detailed breakdown of the bidding.
There is often disbelief in the ranks of project developers at the results of such auctions. This occurred in the Dubai auction that obtained a price of US5.84c/kWh for a 200MW solar plant, and at both the recent wind and solar auctions held by the ACT government in Australia.
Still, the results of the bids underline that wind and solar are cheaper than the nuclear option, and require prices for just 15 years, after which they will get the market price. The Hinkley contract increases with inflation for 35 years, by which time it will be something around £320/MWh, according to a recent Austrian study. (Austria is outraged by the scale of state subsidies for Hinkley and is seeking to have them reversed).
And before anyone starts posting comments about the “grid” costs of solar or wind, let’s not forget that UK’s National Grid said that upgrades to cope for Hinkley C would result in additional grid costs of £160 million a year, which will be passed on to consumers. That’s about $12 billion over the first 35-year lift of the project.
Reprinted with permission.
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It’s actually £332.5/MWh not just £92.50/MWh, if you take into account the 10 year construction time, that those feed-in tariffs are paid for 35 years (not just 20 years) and include an inflation rate adjustment of 2% (which renewable energies don’t receive).
Whereas, onshore wind power only receives £30.7 /MWh in feed-in tariffs. link
The old onshore wind FITs were for 20 years and not indexed. The guaranteed prices in the new auctions (under the complex “contracts for difference” scheme, basically FITs in spicy banker sauce) are for 15 years only.
“”contracts for difference” scheme, basically FITs ”
Thanks. That confirms my reading of how the system works.
If the wholesale price of electricity doesn’t reach the “strike price” then someone (ratepayers/taxpayers in general?) kick in the difference. If wholesale prices exceed the strike price then the generator doesn’t get to keep the extra.
It’s a guaranteed price described in too many words.
Hinkley would be indexed and 35 years. (Which you know but others might not.)
And Hinckley gets a 35 year guaranteed payout at that rate. Renewables would give there right arm for that.
What’s your guess as to the odds that Hinkley is built?
I’m guessing it’s slipped well under 50:50 after the auction. I expect “the options will be considered” for a long time…
It’s starting to be a soap opera. At the rate it’s going, there is a good chance it won’t be built. A colossal waste of money is Hinkley.
The kwh prices of solar will go down, how many years of production are included. 15, 30 years?
Never info about decommission cost nuclear plants.
Sellafield UK cost untill now 100 billion and added 2 billion every year, time frame 100 years. makes total decommission cost of Sellafield UK 300 billion dollars. tax money.
nobody interested.
Dave Toke (an energy expert at Aberdeen University) is fun to read on the slow-motion Hinkley C meltdown (link, link). It’s turned into a circular firing squad, with each party demanding ever higher guarantees from the others. The May general election in the UK will, on current polling, lead to a Labour-led minority government. Look for another in-depth review losing more time.