UK at risk of ‘going overweight’ on offshore wind in CfD auctions

Scale of offshore wind projects could hoover up the bulk of budget allocations

Offshore wind should be excluded from the testbed pot of renewable energy subsidy auctions, according to a former government advisor.

Gareth Miller, chief executive of Cornwall Insight, told a Westminster Forum conference on the Electricity Market Reform (EMR) that offshore wind had been a “tremendous success story” but he questioned whether it should continue to be counted as a “less established” renewable technology in the Contracts for Difference (CfD) auction process.

Miller, who advised the Department of Energy and Climate Change on investment said the “world has clearly moved on” since the technology was designated, highlighting the £57.50 per megawatt hour (MW/h) cleared by offshore wind projects in the latest CfD auction was lower than the figure achieved by established renewable technologies in the first exercise two years ago.

He said it was comparable to the BEIS (business, energy and industrial strategy) department’s own estimated generating costs for new build CCGT (combined-cycle gas turbine) plants.

“We’ve seen a tremendous reduction in the cost of deployment of certain technologies and arguably we should be redefining how we segment those technologies as they come into CfD auctions. If we don’t, we are crowding out the genuinely less established technologies that need some subsidy and support to come through,” Miller said.

He argued the scale of offshore wind projects meant that one or two projects could hoover up the bulk of CfD budget allocations. 

“We are at a very great risk of going very overweight on offshore wind. Wave, tidal and geo-thermal have nowhere to go, the question is whether we want those technologies to be deployed,” he said.

Miller added that the CfD process needed to better take account of the total system effects of over-relying on intermittent renewables, which are less flexible than other forms of generation like renewable fuelled power stations that can be switched on and off more easily in response to fluctuating demand.

Several speakers at the EMR conference expressed reservations about the recently published Helm review’s proposal that renewable projects, like wind, should bear the costs of intermittent generation rather than loading them onto consumers.

Steve Hargreaves, director of corporate strategy at EDF, said that while the French owned generator was likely to be “most keen” on the concept due to the nature of its generating capacity, he did not understand how it would work.

“Back up is a property of the system and it’s incredibly inefficient to force every plant to have its own back up.”