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Published on October 20th, 2015 | by Joshua S Hill

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Renewable Energy Cuts Wholesale Cost Of Energy

October 20th, 2015 by  


A new report has concluded that renewable energy is cutting the wholesale price of energy as well as decreasing the impact of subsidies on bill payers.

Specifically, wind and solar generators reduced the wholesale cost of electricity by £1.55 billion in the UK in 2014. In net terms, the cost of supporting wind and solar generation technology in 2014 was only £1.12 billion — 58% less than the cost reflected in the country’s Levy Control Framework.

These are the primary conclusions from a new report published by British energy company Good Energy, and with the backing of the University of Sheffield.

“This analysis puts the bill payer at the center of the debate around renewable energy subsidies,” said Good Energy Chief Executive Juliet Davenport, OBE. “Let’s give them the full picture and not just half of it. What is not taken into account is the fact that renewable energy, such as wind and solar, has actually been bringing the cost of energy down for consumers. The bill payer money invested into supporting renewables yields significant benefits, let’s be very clear about that.”

The report comes at the same time as the UK Government is scaling back numerous renewable energy support schemes, including the Feed-in Tariff and Renewables Obligations schemes — all under the onus of keeping taxpayers energy bills lower.

The report aims to investigate a phenomenon known as the Merit Order Effect, whereby government support mechanisms increase tax payers utility bills in the short term, while renewables act to reduce them by driving down wholesale electricity prices. Specifically, according to the report, the Merit Order Effect will actually increase the more renewable energy is deployed, with the authors of the report noting that “the current level of savings suggest that, if renewable support is viewed in net terms, the projected future overspend of the Levy Control Framework may not be a reality.”

Overspend of the Levy Control Framework has been one of the primary driving factors given by the UK Government for slashing renewable energy subsidies. The Framework was so successful that it reached its original total much earlier than anticipated, and overspend was anticipated. However, according to this new report, when viewed in terms of net terms, the overall savings by the end of the original Levy Control Framework period may be greater than the suspected overspend.

The report was also backed by researchers from the University of Sheffield, who are planning to publish their own report on the savings onshore and offshore wind are contributing to wholesale energy costs.

“Decarbonising electricity generation is critical for the future sustainability of the planet,” explained Dr Lisa Clark, from the Department of Physics and Astronomy at the University of Sheffield. “In the UK wind is a really important source of renewable electricity.”

“At the moment the costs of renewable subsidy schemes such as Feed-in Tariff and Renewable Obligation have cast doubt over future of renewables. But there are very few reports of the actual financial savings from renewable generation like wind and existing savings to consumers. However, this report provides clear evidence that UK wind generation is typically saving UK consumers around £1.5 billion per year. This is more or less the same amount that the subsidies cost. At the University of Sheffield we have recently finished a similar study and we find very similar numbers.

“So not only is wind energy decarbonising our electricity generation, it isn’t costing any more than any other source of electricity to do so.”

The full report can be viewed here (PDF). 
 
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About the Author

I'm a Christian, a nerd, a geek, and I believe that we're pretty quickly directing planet-Earth into hell in a handbasket! I also write for Fantasy Book Review (.co.uk), and can be found writing articles for a variety of other sites. Check me out at about.me for more.



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