The Alternative Green Energy Thread

JKenH

It’s a bit quiet on the wind front today. 0.13 GW is about 0.5%of installed capacity and 0.42% of demand.

http://www.gridwatch.templar.co.uk/

Edit: I had been thinking today’s wind was exceptionally low but in August it fell to 0.071 GW. By comparison last years minimum was 0.141GW. That’s quite a difference.

https://gridwatch.co.uk/WIND

JKenH

How do we reconcile these statements by Alistair Phillips-Davies, chief executive of SSE?

Alistair Phillips-Davies, told Sky News the price cap in this auction of £44MW/h, only a little above last year's price, meant it was not viable. "The sums didn't add up, we wouldn't have been able to make an economic bid at that level. We'd have been struggling with write-offs, and we've seen some competitors in the sector have unfortunately suffered in recent weeks."

He also said "We've got to remember at the moment offshore wind is looking a bargain compared to wholesale energy prices. It's half the price or less of where the current market is, so we need to be building more."

Offshore wind is being sold to the public on the basis it is cheap. Much has been made of the £39/MWh strike price achieved at last year’s auction as justification for rolling out more wind but when the government this year sets a strike price of £44/MWh the industry say they can’t build the wind farms at that price and want more money. SSE’s CEO references €150 (£129) for offshore wind in Ireland. Is that the price we will have to pay in the future? For reference the average wholesale price last year (according to Electric Insights) was £127/MWh.

Wind generation is either cheap or it isn’t. We can’t be quoting figures for how cheap it is based on CfD contract prices when nobody will build wind farms at those levels.

https://www.coastfm.co.uk/news/business/offshore-wind-power-warning-as-government-auction

QrizB

JKenH said:

How do we reconcile these statements by Alistair Phillips-Davies, chief executive of SSE?

Alistair Phillips-Davies, told Sky News the price cap in this auction of £44MW/h, only a little above last year's price, meant it was not viable. "The sums didn't add up, we wouldn't have been able to make an economic bid at that level. We'd have been struggling with write-offs, and we've seen some competitors in the sector have unfortunately suffered in recent weeks."

He also said "We've got to remember at the moment offshore wind is looking a bargain compared to wholesale energy prices. It's half the price or less of where the current market is, so we need to be building more."

If the current price is £127/MWh, then half of that is £63.50/MWh. Which is more than £44/MWh.

JKenH said:

SSE’s CEO references €150 (£129) for offshore wind in Ireland.

Note the article says "operating under a different structure". I haven't been able to find exactly what the terms of the contracts are.
€150 was the cap. The auction was let for a little over half that - about €86/MWh.

https://www.reuters.com/sustainability/ireland-awards-four-contracts-first-offshore-wind-auction-2023-05-11/
https://www.irishtimes.com/ireland/2023/05/12/first-large-wind-farm-off-west-coast-among-four-offshore-energy-auction-winners/

JKenH

QrizB said:

JKenH said:

How do we reconcile these statements by Alistair Phillips-Davies, chief executive of SSE?

Alistair Phillips-Davies, told Sky News the price cap in this auction of £44MW/h, only a little above last year's price, meant it was not viable. "The sums didn't add up, we wouldn't have been able to make an economic bid at that level. We'd have been struggling with write-offs, and we've seen some competitors in the sector have unfortunately suffered in recent weeks."

He also said "We've got to remember at the moment offshore wind is looking a bargain compared to wholesale energy prices. It's half the price or less of where the current market is, so we need to be building more."

If the current price is £127/MWh, then half of that is £63.50/MWh. Which is more than £44/MWh.

JKenH said:

SSE’s CEO references €150 (£129) for offshore wind in Ireland.

Note the article says "operating under a different structure". I haven't been able to find exactly what the terms of the contracts are.
€150 was the cap. The auction was let for a little over half that - about €86/MWh.

https://www.reuters.com/sustainability/ireland-awards-four-contracts-first-offshore-wind-auction-2023-05-11/
https://www.irishtimes.com/ireland/2023/05/12/first-large-wind-farm-off-west-coast-among-four-offshore-energy-auction-winners/

£44 in 2012 money is around £60 today so, as you say, around half the current wholesale price.  My problem is that Mr  Phillips-Davies is basing his argument that we should build new wind generation on that premise but at the same time saying we can’t actually build new generation at that figure. The market has just demonstrated that no one is prepared to build new wind at that price so we shouldn’t be claiming that is the cost of wind generation. 

The renewables lobby has for years been saying how wind generation is getting cheaper and cheaper with each increase in turbine size and that over promotion has come back to bite them. The average price of electricity in 2019 (pre COVID and Russian invasion) was £42/MWh and we were promised it would get cheaper with more wind generation. That isn’t happening. The wind industry says now it can’t be built for £60/MWh  (inflation adjusted CfD price).

1961Nick

JKenH said:

QrizB said:

JKenH said:

How do we reconcile these statements by Alistair Phillips-Davies, chief executive of SSE?

Alistair Phillips-Davies, told Sky News the price cap in this auction of £44MW/h, only a little above last year's price, meant it was not viable. "The sums didn't add up, we wouldn't have been able to make an economic bid at that level. We'd have been struggling with write-offs, and we've seen some competitors in the sector have unfortunately suffered in recent weeks."

He also said "We've got to remember at the moment offshore wind is looking a bargain compared to wholesale energy prices. It's half the price or less of where the current market is, so we need to be building more."

If the current price is £127/MWh, then half of that is £63.50/MWh. Which is more than £44/MWh.

JKenH said:

SSE’s CEO references €150 (£129) for offshore wind in Ireland.

Note the article says "operating under a different structure". I haven't been able to find exactly what the terms of the contracts are.
€150 was the cap. The auction was let for a little over half that - about €86/MWh.

https://www.reuters.com/sustainability/ireland-awards-four-contracts-first-offshore-wind-auction-2023-05-11/
https://www.irishtimes.com/ireland/2023/05/12/first-large-wind-farm-off-west-coast-among-four-offshore-energy-auction-winners/

£44 in 2012 money is around £60 today so, as you say, around half the current wholesale price.  My problem is that Mr  Phillips-Davies is basing his argument that we should build new wind generation on that premise but at the same time saying we can’t actually build new generation at that figure. The market has just demonstrated that no one is prepared to build new wind at that price so we shouldn’t be claiming that is the cost of wind generation. 

The renewables lobby has for years been saying how wind generation is getting cheaper and cheaper with each increase in turbine size and that over promotion has come back to bite them. The average price of electricity in 2019 (pre COVID and Russian invasion) was £42/MWh and we were promised it would get cheaper with more wind generation. That isn’t happening. The wind industry says now it can’t be built for £60/MWh  (inflation adjusted CfD price).

Although the article focusses on the fiscal side of more wind deployment, there's also the problem of connecting that power to the grid & then transmitting it to where it's needed. That's probably a larger problem to overcome whereas the CfD price can simply be increased.

I personally think planning approval is making new grid infrastructure so long winded & expensive that it should now come under the 'national security' banner... especially after we've experienced what the war in the Ukraine can do to energy prices & supply. Last winter was pretty mild yet gas prices were regularly over 300p/therm well into December with spikes north of 700p/therm earlier in the year while Europe filled it's storage. A really cold winter could be a catastrophe both in terms of supply & cost of imports.

Exiled_Tyke

I haven't heard the RE industry mention that their sources would continue to get cheaper ever since inflation started to hit the construction industry.   And lets no forget that when cfd's were around £40 retail price was around 15p/kWh and we are now double that.  It looks to me and in line with others above. Wind is still incredibly cheap but government is not making allowances for the fact that inflation has affected electricity and the economy as a whole. 

JKenH

Exiled_Tyke said:

I haven't heard the RE industry mention that their sources would continue to get cheaper ever since inflation started to hit the construction industry.   And lets no forget that when cfd's were around £40 retail price was around 15p/kWh and we are now double that.  It looks to me and in line with others above. Wind is still incredibly cheap but government is not making allowances for the fact that inflation has affected electricity and the economy as a whole. 

Despite the increase in construction costs the renewables lobby continues to push the line that wind generation is continuing to fall in price - see the claims below (both this month)

The Energy Technology Revolution Will Drive Renewable Energy Prices Even Lower

A report by RMI says renewable energy prices will drop dramatically by the end of this decade, making wind and solar irresistible.

Renewable energy costs have fallen, and are projected to keep falling, because these technologies are riding ​“learning curves.” For every cumulative doubling of the deployed tech, its cost declines by a quantifiable percentage that varies by technology. Over the past 40 years, the average learning rate has been 20% for solar and 13% for wind.

https://cleantechnica.com/2023/09/01/the-energy-technology-revolution-will-drive-renewable-energy-prices-even-lower/

Solar and wind energy are becoming cheaper

Exponential rates of deployment are driving down renewable prices at unprecedented pace, rendering higher cost hydrocarbons uncompetitive in most markets.

RMI forecasts that what is already the cheapest form of electricity in history will roughly halve in price again by 2030, falling as low as $20/MWh for solar from over $40MWh currently.

The cost of renewable electricity has plummeted over the past 10 years, overcoming a key barrier to widespread deployment. Solar and battery costs have declined 80% between 2012 and 2022, while offshore wind costs are down 73% and onshore wind costs are 57% down, BNEF data shows.

“Exponential growth of clean energy is an unstoppable force that will put more spending power in the pockets of consumers. The benefit of rapid renewable deployment is greater energy security and independence, plus long-term energy price deflation because this is a manufactured technology – the more you install the cheaper it gets,” said Kingsmill Bond, Senior Principal, RMI.

https://www.evwind.es/2023/09/09/solar-and-wind-energy-are-becoming-cheaper/93915

As to your second point, the government set the price for the 2023 auction some 10% higher (in 2012 terms) than the 2022 bids. Even had the price been set at the same level as the 2022 bids it would have been adjusted upwards by the prevailing inflation rate so in effect the auction price ceiling has risen by in the region of 20% in today’s money above last years bids.

It may not be as simple as construction costs increasing. Operating and maintenance costs may also be higher than anticipated. Coincidentally I was talking to an engineer today who is working on reinforcement works to the nacelles on North Sea turbines, necessary because unanticipated flexing had set up harmonics causing blade failures.

Edit: maybe another read of this article which I first posted in June will help to understand some of the concerns about profitability in the offshore wind industry. The problems are not solely related to construction costs rising following the Russian invasion. There are more fundamental issues, as some of the major players in the industry were already reporting losses prior to the Russian invasion of Ukraine. 

Time to accept that wind farm costs are not falling

https://watt-logic.com/2023/06/14/wind-farm-costs/

silverwhistle

The problem is that the capital markets want some security when it comes to lend the massive front-loaded amounts that wind needs, without the capital allowances and subsidies that fossil fuel extraction gets.

As pointed out generating without the means to get most of it to market also adds insecurities.

It seems odd that the land based wind in the new auction gets ~£52? per MWh. What is the thinking behind that? The government were warned about inflation yet did nothing, a common trend it seems for a lame duck administration. A penny on a kWh over the imposed price limit, with oncosts for grid etc. would still lead to a retail price of around 12p, and most of us would be happy with that.

SSE is also interesting in that it is developing the large Coire Glas pumped storage scheme. Again massive costs, and although we know we need mechanisms for smoothing out demand, there has still been no clarification as to the mechanism of getting a return on investment.

It should also be pointed out, in reply to complaints of cheaper wind not being reflected in retail prices, that the gas tail at the margins has been wagging the dog and it is disingenuous to blame cheap wind for that.

QrizB

silverwhistle said:

It should also be pointed out, in reply to complaints of cheaper wind not being reflected in retail prices, that the gas tail at the margins has been wagging the dog and it is disingenuous to blame cheap wind for that.

Although, the allowance in the Ofgem cap calculation for CFD payments was negative for a period. CFD-supported generation was visibly making energy prices lower.

(I think it's back to being positive at the moment, as wholesale electricity prices have fallen below the generation-weighted average CFD price.)

I can share links later if anyone is interested.

silverwhistle

silverwhistle said:

The problem is that the capital markets want some security when it comes to lend the massive front-loaded amounts that wind needs, without the capital allowances and subsidies that fossil fuel extraction gets.

It should also be pointed out that inflation isn't just material costs, but after the disastrous 6 weeks of Truss and Kwarteng the cost of capital is an extra few screws in the coffin.

The government were told that the limit they had imposed would result in no bids, well before closure. I'd love to know their reasoning for not increasing, now that what they were told has been confirmed. Incompetence, bribery, not listening (my personal favourite), they're a Russian sleeper cell (that would be this Chardonnay..), sheer indolence - which judging by attendances at Westminster is another favourite, busy securing another job in anticipation of leaving Westminster? I shan't start a poll, but I'd really like to know why the current administration is so utterly useless?