Fears that offshore wind farm subsidies awarded without competition were
too generous set to be confirmed as result of competitive auction comes in
cheaper
By Emily Gosden, Energy Editor
They were hailed by the Government as “a new stage in Britain’s green
energy investment boom”: five big new offshore wind farm projects, awarded
£12 billion in subsidy contracts less than a year ago.
But this week, evidence is expected to emerge that the prices handed to the
projects were too generous – saddling consumers with millions of pounds in
needlessly high energy bill levies for 15 years to come.
The National Audit Office, Competition and Markets Authority and Public
Accounts Committee have already warned that ministers may have signed
consumers up to a bad deal because the contracts were awarded last April
without proper competition.
On Thursday, ministers are expected to prove the point when they announce
subsidies for another big offshore wind farm that was subject to
competition – and that senior wind industry figures say will inevitably be
cheaper as a result.
The development comes as it emerged the wind industry is lobbying
Government to be allowed to build even bigger turbines onshore, in a move
it claims is necessary if consumers want better value for money in return
for the subsidies they pay.
Bill-payers are estimated to already pay close to £2 billion a year in
subsidies for onshore and offshore wind farms.
Under Government plans to tackle climate change, ministers are offering new
green energy projects contracts guaranteeing them a subsidised price –
several times the current market price of power – for every unit of
electricity they will generate.
Three offshore wind farms due to start generating power in 2017 were last
year awarded contracts at £150 per megawatt-hour of electricity, while two
others due to be running by 2018 or 2019 were offered £140.
In total, the NAO estimated that over their 15 year contracts the five
projects will require £11.7bn in subsidies and warned that companies could
reap “excessive” profits because of the lack of competition. Margaret
Hodge, chair of the PAC, said consumers were being “ripped off by
incompetence in Government”.
Ministers have now introduced competition for further projects, forcing
companies to take part in a “reverse auction” where the cheapest green
energy projects win.
On Thursday they are expected to announce which projects have been awarded
subsidies of up to £260m a year.
Keith Anderson, chief corporate officer of ScottishPower, whose proposed
East Anglia wind farm is one of those competing for subsidies, told the
Telegraph that the subsidy price awarded this week would be lower than last
year’s.
The maximum price an offshore wind project to be built after March 2017 can
bid for is £140. “It’s absolutely inevitable that if you run an auction
with a cap of £140, there is an incredibly high likelihood that [final]
price will end up being lower than £140,” Mr Anderson said.
By far the biggest beneficiary of the contracts awarded without competition
last year was Danish energy giant DONG Energy, which owns three of the five
offshore wind farms and stands to reap £7.8bn in subsidies.
Benj Sykes, head of its UK wind business, said he did not know whether his
company’s projects could have been built more cheaply but he insisted the
subsidy price was not “in any way giving us any sort of return that is not
justified”.
He said it had been important to award the contracts in order to “maintain
momentum and drive projects forward”.
Gordon Edge, director of policy at RenewableUK, said the contracts last
year were “vital to engender a sense of confidence among offshore wind
developers at the earliest stage of the process”.
A Department of Energy and Climate Change spokesman said: “To keep the
lights on after inheriting a legacy of underinvestment in our energy system
we needed to move quickly to secure new capacity. The early contracts were
successful in giving investors the confidence they needed, meaning that we
have been able to move to real competition for contracts much faster.”
Meanwhile, German energy giant RWE is lobbying ministers for new planning
guidance to make it easier to build onshore wind turbines taller than 125m
(410 feet), which it claims currently struggle to get through the planning
system.
The company says that taller turbines would generate more power and require
a lower subsidy price as a result.
Mike Parker, head of onshore wind at RWE Innogy UK said: “By allowing
turbines that are only slightly larger, say 131m high instead of 125m, so
little additional visual effect, we can reduce the cost of energy and get
the same amount of total energy from fewer turbines.”
A 5 to 10 metre increase in the height of the top of the turbine would
increase output by 10 to 15 per cent, with a comparable percentage
reduction in the required subsidy price, RWE says.
The company is calling for “an amendment to the Government’s online
Planning Practice Guidance” to reflect this.
Gemma Grimes, director of onshore renewables at RenewableUK, said:
“Planning guidance is a key issue for the wind industry. There are a number
of local authorities that recognise the benefits of allowing various
heights of wind turbines. It’s important that both Government and industry
work together to maximise cost reductions.”
Dr Lee Moroney, principal analyst at the Renewable Energy Foundation, which
is critical of the sector, said: “Both those living near to wind turbines
and those faced with the prospect are quite clear that they would prefer
smaller turbines or none at all.
“However, the industry clearly hasn’t been listening or just doesn’t care,
and is now pressing for a green light for even larger turbines. Government
should reject this self-serving request for special treatment.”
She added: “As turbine height and blade length increase so visual impact
and in particular noise levels will also increase, with the increase
tending to be non-linear. Larger turbines will just make a bad problem very
much worse.”
Kris Hopkins, the Local Government Minister, said: “This Government has
changed national planning guidance (relating to onshore wind) to ensure
that proper weight should be given to the protection of England’s valuable
landscape and heritage. We have no plans to change planning rules to
encourage taller wind turbines.
“Promoting renewable energy and protecting the global environment is a
worthy cause, but we shouldn’t needlessly trash the local environment in
the process.”
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