UK Offshore Wind Now Cheaper Than Gas & Nuclear

The UK’s latest competitive auction saw offshore wind prices tumble to record lows of as little as £57.50 per MWh, a 47% decrease on past offshore wind prices, and dipping well below the price guaranteed to the Hinkley Point nuclear power plant.

The UK Department for Business, Energy and Industrial Strategy (BEIS) announced on Monday the results of its latest Contracts for Difference (CfD) competitive auction, in which a total of more than 3 gigawatts (GW) was awarded worth up to £176 million. At the time the big news was the impressive strike prices for two offshore wind farms to be delivered in 2022/23 — £57.50 MW/h for DONG Energy’s 1,386 MW Hornsea 2 off the coast of Yorkshire, and EDPR’s 950 MW Moray off the northeast coast of Scotland.

The strike prices represented an average drop of 47% over the strike prices awarded in the first CfD competitive auction held in February of 2015 — testament to the growing importance and value attributed to offshore wind in Europe.

What was not immediately apparent but which soon became clear was that the latest UK strike prices for offshore wind revealed the technology was now demonstrably not only cost competitive but actively cheaper than other mainstream energy generation technologies — specifically, nuclear and gas.

A strike price of £57.50 MW/h for two offshore wind farms to be delivered in 2022/23 (and £74.75 MW/h for Innogy and Statkraft’s 860 MW Triton Knoll, expected to begin generating in 2021/22) falls well below the price guaranteed for the planned Hinkley Point C nuclear power plant of £92.50 MW/h.

Further, these new offshore wind strike prices are cheaper than the levelized cost of gas, according to figures from the BEIS — for gas projects intended to start generating in 2020 and 2025 (source/PDF). The same figures supremely underestimate the decline of offshore wind, as well, which should only serve to further set the cat among the pigeons.

“Today’s results mean that both onshore and offshore wind are cheaper than gas and nuclear,” said RenewableUK’s Chief Executive Hugh McNeal. “But this young, ambitious industry can go even further. The Government can help us by continuing to hold fiercely competitive auctions for future projects, as it has promised, and by putting offshore wind at the heart of its upcoming Industrial Strategy.”

Unsurprisingly, most of the talk is now focused on Hinkley Point — nuclear energy being always considered the most controversial of energy generation technologies. Already an albatross hung around the neck of the current UK Government which approved the plan, opponents of nuclear, and Hinkley Point in particular (not to mention anyone looking to score points off the current administration) are taking turns to use these latest strike prices as fodder for their arguments.

“This massive price drop for offshore wind is a huge boost for the renewables industry and should be the nail in the coffin for new nuclear,” said leader of the UK Green Party Caroline Lucas. “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. Put simply, this news should be the death knell for Hinkley.”