The Alternative Green Energy Thread

michaels

Allegedly the Spanish bit of the company did not make the parts to the quality the German designers had specified.

In the short term these costs will fall on the manufacturer not the bottom line of the operator but of course in the long term it will push up prices.

markin

If costs don't return to normal, why would they? won't all the past auctions now fail with all farms in the pipe simply vanishing , Unless the Gov boost the contracts some how. Or re-run the auctions.

michaels

markin said:

If costs don't return to normal, why would they? won't all the past auctions now fail with all farms in the pipe simply vanishing , Unless the Gov boost the contrats some how. Or re-run the auctions.

Makes sense to e - I have always said these auctions were like options, the bidders have the option not to build if it turns out that they can no longer make money from their winning bids.

JKenH

I started out intending to post this on the Ripple thread then decided it might be more appropriate here.

Although this story does not relate directly to Ripple’s Scottish wind project it does give some indication of the scale of cost increases which the onshore wind industry is facing. One might expect the finances of the Kirk Hill project to be similarly affected by some of the issues raised, even if with the up-front crowd funding it may escape some of the increased finance costs other developers are seeing. I would be a little cautious about the headline of the article, though, as I wouldn’t have expected windfall tax to impact on construction costs although I can see it could affect finance costs and profitability once completed. 

CWP shelves 308MW Sanquhar 2 over windfall tax

“Sanquhar 2 was projected to cost c. £300m however infrastructure costs have been hit with a triple whammy of extreme inflation, four-fold increase in interest costs and a weak pound. Costs now exceed £500m which remains cheaper than gas-fired electricity – however strangely polluting gas generators are exempt from ‘windfall tax’.”

https://renews.biz/88473/developer-shelves-sanquhar-2-over-windfall-tax/

Netexporter

The sooner the electricity market is decoupled from the price of gas the better. But  then Ofgem have never been noted for doing the right thing in a timely manner.

JKenH

markin said:

If costs don't return to normal, why would they? won't all the past auctions now fail with all farms in the pipe simply vanishing , Unless the Gov boost the contracts some how. Or re-run the auctions.

The current government will want to be seen to be encouraging the roll out of more wind generation but, given that they have one eye on the next election, they may seek to focus their spending on vote winning policies. (That is not intended as a criticism of the Tories - all political parties think of votes first - but just an acceptance of the way things are). Renewable energy has yet to deliver tangible savings on energy bills (some may even argue it has increased them)  and currently the government may not consider bailing out the wind farm developers to be a priority. 

As Kathryn Porter argues, wind is no longer a nascent technology and after 20 years or more of development should (if it ever can) be able to stand on its own feet. If wind power is so cheap (and energy prices currently high) why are CfDs needed at all? If wind is now genuinely cheaper than gas,  then why are CfDs needed at all? Fine, if we want renewables for political/climate reasons, then we should spend the money and subsidise them but if they can’t compete without support then maybe it’s time to drop the pretence that they are actually cheaper than gas or they will reduce our energy bills. 

It’s time to be honest and say wind generation is an important part of our climate policy, but isn’t financially viable on its own so will have to be paid for in increased energy bills or through taxation. That’s not a message a politician with any chance of winning a majority wants to send so it’s back to kicking the can down the road. 

Edit: My intention was to reply to @markin but accidentally included quote from @michaels. Correct quote now included. Apologies to @michaels

michaels

The economics are pretty complicated and the uncertainty in the gas market makes them even more so.  CFD are not a direct subsidy (at current market prices) but the price guarantee allows access to cheaper financing so is an indirect subsidy.

There is also the issue that the more wind you build the more of its output will be curtailed and the lower the average price of generation so the more valuable to the supplier (and costly to the consumer) the CfDs become.  The argument is nuanced though - CfD wind perhaps lowers the average market price but in turn this increases the balancing payment cost - is the consumer net better or worse off in such circumstances?

JKenH

Netexporter said:

The sooner the electricity market is decoupled from the price of gas the better. But  then Ofgem have never been noted for doing the right thing in a timely manner.

Indeed, from a consumer’s point of view that would be great but that would make wind generation even more uneconomic. If we were able to decouple from gas prices and price renewables separately then wind would be expensive to the consumer when there wasn’t much wind blowing and incredibly cheap (possibly negative pricing) when there was a lot of wind. I can’t see wind farm developers wanting that - the link to gas generation works well for them.

As @michaels said the economics are pretty complicated. 

JKenH

I wonder if any one noticed this paragraph in the recent Guardian article quoted on the G&E  news thread.

Higher energy bills forecast for UK households next year

The cost of gas and electricity on the wholesale energy markets makes up just over 50% of the typical household bill. The rest of the bill includes charges to pay for grid upgrades, which are needed to connect new renewables, and the cost of government policies such as supporting low-carbon energy projects.

https://www.theguardian.com/money/2023/oct/24/higher-energy-bills-forecast-for-uk-households-next-year

JKenH

Electricity prices ‘must rise by 70pc to pay for more wind farms’

No new wind farms will be built off Britain’s shores unless the Government lets operators earn more money from the electricity they produce, the chief of the nation’s biggest generator has said.

Tom Glover, country chair of RWE’s UK arm, said the price offered by the Government to wind farm operators must rise by as much as 70pc to entice companies to build.

Developers must be offered between £65 and £75 per megawatt hour (MwH) for the power generated from wind farms, Mr Glover said.

https://www.telegraph.co.uk/business/2023/10/25/electricity-prices-rise-70pc-pay-wind-farms-energy/