Government red tape could limit the number of wind projects approved in the United Kingdom and cost taxpayers $1.9 million (GBP 1.5 billion), according to a recent report by the non-profit Energy and Climate Intelligence Unit (ECIU).
The UK’s offshore wind fleet has reached 13.9 gigawatts (GW), the second-largest in the world next to China, thanks to the government’s Contracts for Difference (CfD) scheme, which is a system of auctions for future projects. The auctions have helped the wind industry by providing incentives to renewables companies, offering a guaranteed price for energy generated, the report explained. With the CfDs scheme, wind farms would be contracted at a lower price than the wholesale price, creating savings for taxpayers.
“CfDs incentivize investment in renewable energy by providing developers of projects with high upfront costs and long lifetimes with direct protection from volatile wholesale prices, and they protect consumers from paying increased support costs when electricity prices are high”, the UK government’s website says.
According to the ECIU report, Treasury rules do not take into account predictions that gas prices would stay high and put an arbitrary limit on the number of farms that can be contracted, thus limiting the number of wind farms getting approved in the auction. The UK government recently increased the budget for the auction from $216.9 million (GBP 170 million) to $242.4 million (GBP 190 million), but the report said that this is likely to make little difference to the outcome of the auction and “ignores the fact that renewables are predicted to save money, not add cost to bills”.
The report noted that the previous auction round did not max out its budget due to “inflexible rules”, missing out on 1.0 GW of wind power and a corresponding GBP 225 million per year. This year’s auction, due to be completed in September, could secure only around 2.0 GW of offshore wind projects, which would lead to missed savings of over GBP 1.5 billion per year from cheaper renewable energy compared to the estimated 7.0 GW that could have been secured, the report said. The missed projects could also represent a significant setback to the UK’s target of 50 GW of offshore wind by 2030, the report added.
“Government seems to be focused on North Sea gas licenses and tax breaks for oil companies that won’t bring down bills while tying up offshore wind farms that generate electricity cheaper than gas in red tape”, ECIU Energy Analyst Jess Ralston said. “Even with inflation pushing costs up for offshore wind, it will still generate electricity much cheaper than gas power stations. Stifling wind farms pushes up bills. Treasury’s rules seem to be actively working against bringing them down.”
“Updating the old rules would enable the Government to secure as much capacity as possible, bringing down bills, creating job opportunities, particularly for staff leaving the declining oil and gas industry”, the report concluded.
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