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A strike price as low as £45/MWh for onshore wind generation would be feasible if such projects were given the opportunity to compete in Contracts for Difference (CfD) auctions.
Emma Pinchbeck, executive director of RenewableUK, told a Westminster Forum conference on the future of the EMR (electricity market reform) last week that the sector is approaching no requirement for subsidy.
She said: “Wind and solar are the cheapest form of energy generation. If you could do onshore wind in a CfD, a price of £45/MwH is not unreasonable.”
But renewables still required the price stability offered by the CfD rather than having to negotiate the fluctuations of the wholesale market.
“The wholesale market is not a strong enough signal in its own right to bring enough capacity forward to do those things,” added Pinchbeck.
“As we bring on more renewables the price signal is reduced so we don’t think we can rely on that alone.”
Pinchbeck also urged the government to set up a fund to support the commercial roll out of less established low carbon technologies.
She said: “We are very good at funding R&D in this country but less good at helping technologies get to scale.”
Mike Thompson, head of carbon budgets at the Committee on Climate Change, said the UK could not rely purely on established technologies in order to meet its carbon reduction targets.
He said: “We need to make sure we continue to do what we’ve done well with offshore, not just supporting things that are currently cheapest but the things that could be cheapest and give us lots of capacity in the future such as floating wind
The conference also heard a string of pleas to the government not to use its ongoing review of the EMR to scrap it.
Thompson said the low carbon auctions have been “arguably” the biggest success story of the decarbonisation drive kickstarted by the Climate Change Act, which marks its tenth anniversary next week.
Pointing to the introduction of the Green Deal insulation scheme under the coalition government, he said: “There have been examples where policies have been changed and we’ve had spectacular reversals of progress.
“I don’t want that to happen to the EMR: the goal is not to overhaul it, we should be unleashing it.”
Aled Moses, senior regulatory affairs advisor at Ørsted UK, urged the government not to abandon the CfDs until it could be proved that a better alternative existed.
“We should only make that decision when we know it’s not required and we are definitely not at that stage.
“Until there is evidence otherwise, CfDs should be regarded as the way forward.
“We have a mechanism in the UK that works and delivers. The CfD is investable and financeable and its brings clean generation on in a way we haven’t seen: the cost reductions are amazing.
He was backed by Jens Price Wolf, commercial director of Drax Power, who said the existing framework of low carbon subsidies should not be revolutionised but could be tweaked to better the recognise the value of flexible responses within the system
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