A net-zero loophole being exploited by wind farm owners could add as much as £300 per year to consumer bills by 2028, campaigners have claimed.
About 70 per cent of the £8 billion figure relates to wind farms that may postpone their contracts, while 25 per cent is linked to nuclear, Net Zero Watch said Credit: Chris Watt/Chris Watt
The owners of two wind farms that struck deals with the Government to generate electricity for a guaranteed rate have already postponed the start of the contracts in order to benefit from record prices – in a move that it is claimed could lead to consumers paying between tens and hundreds of millions of pounds a year more than expected.
Net Zero Watch, which scrutinises climate policies, said the system incentivises all of the firms due to enter similar contracts to make use of the loophole, rather than pay sums back to consumers as they would have to do if the contracts were to begin as planned.
If all of the energy firms with contracts due to begin before 2028 decide to postpone the start of the deals, consumers would end up paying up to £8 billion per year more than expected, or £300 per household, according to the campaign group.
About 70 per cent of the £8 billion figure relates to wind farms that may postpone their contracts, while 25 per cent is linked to nuclear, Net Zero Watch said.
The disclosure comes after it emerged that Kwasi Kwarteng, the Business Secretary, believes that developers postponing the start dates of “contracts for difference” (CFDs) in order to profit from record energy prices, are “undermining the renewables scheme and not behaving within its spirit”.
The Business Secretary believes developers postponing the start dates of contracts for difference to profit from record energy prices are ‘undermining the renewables scheme and not behaving within its spirit’
Craig Mackinlay, the chairman of the Net Zero Scrutiny Group of MPs, said: “The Government says it is looking into fixing this problem, but it will be years before households see the results; in the meantime bills are going to be hundreds of pounds higher. Hard-pressed families need lower bills now, not in 2028.”
The estimated £8 billion on which consumers would lose out was calculated using an average market price of electricity of £200 per megawatt hour (MWh), based on the cost in the first quarter of 2022, which reached a record high of £250 per MWh in March following the Russian invasion of Ukraine.
The wholesale price has since dropped below £90, but the fall is expected to be temporary.
The Government provides firms with a guaranteed price for their electricity in order to stimulate the development of renewable energy, via CfDs with individual wind farm and nuclear power plant owners.
However, some developers with contracts have already chosen to postpone the start of the deals in order to sell freely on the wholesale market during record energy prices – therefore avoiding returning vast sums in profits to the taxpayer.
Moray East, which became Scotland’s biggest wind farm when it became fully operational in April, agreed a price of £57.50 per MWh with the Government for its electricity.
However, it has delayed the start of its government contract for 12 months, meaning it will instead receive the wholesale price, and avoid having to pay the difference back.
Earlier this month, The Times reported that the Moray East wind farm in Scotland and the third phase of the Triton Knoll site in Lincolnshire are both now fully operational, but have postponed their contract start dates until next spring.
A spokesman for Moray East, whose owners include Engie and EDPR, told The Times that it was on course to sign its contract “within the contractual terms set by the process”.