UK offshore wind power has just become materially cheaper than nuclear. This is a major step forward for UK renewable energy and we hear from Matthew Clayton, MD of sustainable investment company, THRIVE Renewables about what this means for the industry.
On September 11 this year, it was announced widely, across the BBC, Telegraph and Guardian, that the tariffs required for new offshore wind farms had halved since the 2015 auction for clean energy projects.
The implications of this dramatic cost reduction could be hugely beneficial for the UK energy sector – if the players play their cards right.
Here’s one potentially gargantuan implication: as a result of the cost decline, it’s now possible to develop new offshore wind farms for a guaranteed price of £57.50[1] per megawatt hour. This compares with the Government’s commitment to pay £92.50[2] per megawatt hour to the planned Hinkley Point.
The required renewable capacity to match the planned generation of Hinkley Point C could be delivered in less than two years, in a fraction of the time and at a fraction of the cost.
Matthew Clayton, managing director of Thrive Renewables, a Good With Money Good Egg company that allows people to invest directly in UK renewable projects, said: “The results of the offshore auction price is a great success for the sector and a milestone for the transition to a cleaner energy system. The UK is playing to its physical strength, we are exposed to a powerful wind regime and as an island, we have a long coastline.
The Government can on one hand be pleased with the cost reduction, but on the other hand, this does make the cost of Hinkley Point C nuclear plant now seem way out of the market.”
The renewables revolution
The UK’s renewable energy capacity has been steadily gaining pace, BEIS Energy Trends report for Sept 2017 shows renewable electricity generation capacity grew to 37 gigwatts in 2017, having installed 4.4 gigawatts of new renewable generation over the course of 2017. Renewables are now generating more than a quarter of the UK’s electricity.
Matthew says: “At current levels of deployment, the required renewable capacity to match the planned generation of Hinkley Point C could be delivered in less than two years, in a fraction of the time and at a fraction of the cost.”
Even as technology stands at present, wind, solar and hydro can undercut the £103.50/MWh [2] which has been promised to Hinkley Point C by more than 30 per cent. When savings are reaching billions of pounds, there is scope to take more innovative steps to both the electricity system, adding technology to better balance the daily variability of demand and supply, and to store electricity generated by renewable technologies.
But key renewable technologies remain largely excluded from this party. “The Government shouldn’t forget they are currently excluding the lowest cost sources of energy from the auction. If onshore wind, solar pv and hydro were able to participate in the auction then we’d be seeing even faster progress towards true sustainability.
If policy was driven by least cost emissions abatement, both onshore and offshore renewables would be contributing to a cleaner system, delivering a low carbon power source for less.”
Across Europe it appears to be a different story where onshore renewables are permitted to bid into national tariff auctions. Germany has recently awarded 1 gigawatt of onshore wind capacity at a price of €42.80/MWh (£38.15/MWh), demonstrating how competitive onshore technologies are becoming.
“With the continued progress and cost reductions in renewables, and the rapid developments in technology reducing the peaks in electricity demand (striving to flatten the nation’s electricity demand profile) and in battery and other storage, we are fast approaching a system where renewables can provide the vast majority of our power,” said Matthew.
But the opportunity to directly invest into offshore wind is limited, as this tends to be the domain of the major Scandinavian (often state owned) and European Utilities. “If we delved into the detail of our responsibly managed pensions, then we are likely to be investing indirectly into this sector.
We applaud the progress being made by the major utilities which are driving the offshore wind sector, which has almost halved the cost of power which it can deliver in the space of just three years. But would urge to Government not to overlook the least cost renewable options as part of a system wide approach,” he said.
There are positive rumours (reported by the Telegraph on 4 October) that the Conservative party may be revisiting the exclusion of onshore technologies, giving renewed confidence to the sector that if the Government is given sufficient clarity on energy policy, the industry will deliver a sustainable energy system.
About THRIVE Renewables
Thrive Renewables was established over 20 years ago by leading ethical bank Triodos Bank, and has more than 6,300 investors and more than 90MW of renewable generation capacity under management. In 2016, an independently-run Thrive delivered enough clean energy to meet the energy demand of 43,700 UK homes’ equivalent and saved 72,000 tCO2e emissions.
Thrive Renewables provides an opportunity to invest directly in a portfolio of renewable energy projects, delivering financial returns and contributing to tangible greenhouse gas emission reductions. Thrive Renewables also works with developers to develop and build new sources of renewable energy to create a smart energy system fit for the future. www.thriverenewables.co.uk
1] DECC Energy Trends 2016
[2] The £92.50 / MWh Feed in Tariff offered to Hinkley C is in 2012 money. Adjusting the Tariff to 2017 is £103.50/ MWh
[1] In 2012 prices, £64.30 once adjusted by inflation to today.
[2] In 2012 prices, £103.5 once adjusted by inflation to today.
