An independent new report – commissioned by the company that owns Britain’s
biggest power station – has revealed consumers could save more than £2
billion if the Government’s planned renewable energy auctions were opened
up to include a wider mix of energy technologies.
Drax Power commissioned NERA Economic Consulting and Imperial College to
look at hidden costs that are not reflected in the contracts Government
awards for renewable generation.
These hidden costs, or whole system costs are increasing as intermittent
renewables – those reliant on the sun and wind – increase. These
intermittent renewables mean other forms of power generation need to kick
in, and flex up and down to meet electricity demand. These costs are
passed on to consumers via their energy bills.
Currently the Government is planning three auctions for new renewable
energy contracts – Contracts for Difference (CfDs) – over the next four
years, and all are focused on offshore wind.
The new research shows significant differences in the true costs of
renewables once these additional costs are recognised. Offshore wind could
require a CfD of £127 per MWh, onshore wind £92-97 per MWh, solar £96 per
MWh, and biomass £84 per MWh.
Once these new support levels are modelled over the planned energy
auctions, the new energy mix that could win contracts is shown to save
consumers £1.9 -£2.2 billion. This support is already paid for through
energy bills and the new cost-efficient mix would lessen the impact.
Dorothy Thompson, Chief Executive, Drax Group, said: “This independent
research shows it’s crucial we get the right mix of energy generation. The
UK’s system faces growing challenges, from costs to reliability as
traditional forms of generation are replaced with renewables.
“Intermittent renewables like wind and solar are vital as we continue to
clean up energy generation, but they need to be backed up by a constant
supply of electricity that can be flexed up and down to make sure the UK’s
businesses and households always have power on demand.
“Opening up energy auctions to include other renewables could save
consumers £2 billion and with more biomass in the mix energy security is
also boosted.
“Using the latest technology we’ve upgraded half our power station to run
on compressed wood pellets, which give an 80%-plus carbon saving against
coal. With the right support we stand ready to finish the job.”
Daniel Radov, NERA Economic Consulting Associate Director, added: “In
partnership with Imperial College we have been pleased to model the total
costs of different power generation technologies, and help to inform the
policy discussion around renewable energy and decarbonisation.
“To ensure that we achieve environmental targets as efficiently as
possible, it is essential to have policies in place that provide the right
incentives to minimise costs. We hope the combination of Imperial’s
whole-system energy modelling with NERA’s ability to model the details of
the CfD auctions will contribute to a better understanding of the
advantages and disadvantages of different policy approaches.”
Drax Energy owns and operates the UK’s largest power station in Selby,
North Yorkshire, typically providing some 8% of the UK’s electricity. A
vital strategic asset, the Group has transformed itself into a
predominantly biomass-fuelled electricity generator through its use of
innovative technology and sustainably sourced wood pellets.
The largest decarbonisation project in Europe is underway to provide the UK
with cost effective, low carbon, and reliable renewable power.
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