UK Wind Farms to Undercut Fossil Fuels in Global First

Ian Lewis[1]

Ian Lewis

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Offshore wind power could soon undercut fossil fuels to become the cheapest form of energy in the UK.

A team of researchers at Imperial College London found that by the mid-2020's, wind farms will start selling energy at below-market cost and payback money to consumers for the first time.

Critics had long-bemoaned the hefty subsidies paid to green energy pioneers at the expense of consumers' energy bills.

However, the next round of turbines to be built will reverse that trend and pay the money back to the government- cutting the cost of household energy bills in the process.

Offshore wind power will soon be so cheap to produce that it will undercut fossil-fuelled power stations and maybe the cheapest form of energy for the UK. Energy subsidies used to push up energy bills, but within a few years, cheap renewable energy will see them brought down for the first time. This is an astonishing development

Said Dr Malte Jansen, from the Centre for Environmental Policy at Imperial College.

If this is the case, the UK's wind farms will be the first in the world to start paying back the government subsidies that got them off the ground.

Researchers say the sea-change is down to advancements in tech and investor-friendly policies:

This amazing progress has been made possible by new technology, economies of scale and efficient supply chains around the North Sea, but also by a decade of concerted policymaking designed to reduce the risk for investing in offshore wind, which has made financing these huge billion-pound projects much cheaper.

Said Dr Iain Staffell of Imperial College.

Researchers analysed trends in auctions for offshore wind projects in five different European countries.

As part of the bidding process, energy companies must tell the government how much their energy will cost to buyback.

Wind Farm Can’t Match the Market Price

If a wind farm can't match the market price, the government may choose to top up the difference.

When the cost of power produced by the farm eventually drops below the market price, the farm pays back the difference, which gets passed on as savings in consumers' energy bills.

The researchers found that the most recent round of bids in the UK were 'very likely' to produce energy which cost less than the market rate, for the first time ever.

The price of offshore wind power has plummeted in only a matter of a decade, surprising many in the field. The UK auctions in September 2019 gave prices that were around one-third lower than those of the last round in 2017, and two-thirds lower than we saw in 2015

said Dr Staffell.

The subsidy scheme is part of a wider push for green energy in the UK, including a target to slash the country's carbon emissions to net-zero by 2050.

As part of this carbon crunch, at least one-third of the UK's energy needs will be met by the offshore wind before 2030.

The researchers' findings come just weeks after the government opted to relax planning rules around energy-storage batteries, potentially increasing farms' capacity to store electricity fivefold.

The UK has the world's largest potential offshore wind capacity, but due to limited storage options, energy can't always be stowed away for times when the wind speeds are lower.

The key to capturing the full value of renewables is in ensuring homes and businesses can still be powered by green energy even when the sun is not shining, or the wind has stopped blowing. Removing barriers in the planning system will help us build bigger and more powerful batteries, creating more green-collar jobs and a smarter electricity network

Minister for Energy and Clean Growth Kwasi Kwarteng said.

According to the researchers, the success story told by their findings could pave the way for more radical green innovation, such as using turbines to produce hydrogen fuels, which could replace gas and petrol in homes and transportation. 

Money Savings Advice Author Ian Lewis

Ian Lewis

Ian Lewis is one of our specialist financial writers. Ian has over 15 years of financial writing experience, having worked for some of the largest financial publications in the UK covering topics from mortgages, equity release, loans and financial claims, to name a few.

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