A record low price set for offshore wind power is good for UK jobs, the taxpayer and household bills. It is bad news for Hinkley C and the nuclear industry
The persistent myth that green energy is expensive has been shredded by the revelation that windfarms will be built around Britain’s coast far more cheaply than new nuclear reactors.
New power stations in the UK today are usually only built with the certainty provided by subsidies paid through energy bills, so the record low guaranteed price awarded to the developers of three new mega offshore windfarms today is, first and foremost, welcome news for consumers.
It is also good for the economy post-Brexit, for the foreign-owned developers behind the multibillion-pound projects, and the increasingly UK-based supply chain that supports them, such as Siemens’ £310m wind turbine factory in Hull.
But there is no mistaking the fact that the low prices, labelled “astonishing”, “exceptional” and “astounding”, are terrible news for nuclear proponents.
Ministers last year awarded French state-owned EDF £92.50 per megawatt hour of power generated by two new reactors at Hinkley Point C in Somerset.
The price is nearly twice that of wholesale power and is goldplated by being inflation-linked and written in stone for 35 years. EDF said this week that future nuclear plants, such as the new one it wants to build at Sizewell in Suffolk, would be cheaper than Hinkley.
But even the most vociferous nuclear supporters think that Sizewell C and a Japanese-backed bid to build new reactors at Wylfa in Wales would not come in below £80 per MWh, compared with the £57.50 per MWh over 15 years for new offshore windfarms.
Ironically for the party that champions free market economics, the Conservatives’ commitment to a fleet of new nuclear power plants is being challenged by competition.
Windfarm developers have to compete against one another in a reverse auction, ensuring the government gets the cheapest price for the low carbon power it needs. The price this time crashed so much that only £176m-a-year of the £240m subsidy pot set aside by officials will be needed.
The timescales and monolithic nature of nuclear projects means it would be hard, albeit not impossible, for the government to run a competitive process for them. Playing EDF off against consortiums such as Horizon, which is behind Wylfa, is not really an option.
Of course, wind power is variable, unlike the steady power provided by nuclear, so there are costs to the energy system of integrating all those new turbines. But experts say those costs are relatively negligible, especially if coupled with flexible and smart technologies such as batteries, which the government is backing with hundreds of millions of pounds.
So large-scale renewable power built in the next decade will be inarguably much cheaper than nuclear.
But it’s not just about cost – offshore windfarms can be built quicker, too. Their modular nature means they can be built in stages, and offshore wind generally has a good track record of being built on time in the UK. The projects that won subsidies this week should be operational by 2023.
By comparison, Hinkley Point C is officially slated to be operational by 2025 but EDF admitted earlier this year that it could run 15 months over schedule. And the track record of plants being built with Hinkley’s reactor design is infamous: Olkiluoto in Finland is a decade behind schedule; the other, at Flamanville in France, is six years late.
The price awarded to offshore windfarms is also even lower than new gas power plants, but this week’s auction is unlikely to spell the death of gas, which can be built much more cheaply and quickly than nuclear. Witness the German utility Uniper publicly mulling over the idea of taking apart its gas power stations in Germany and rebuilding them in the UK.
But today could be, as the trade group RenewableUK puts it, a “gamechanger” for ministers in charge of setting energy policy.
With a major government review of the cost of energy due out in October, there are calls for Theresa May to at the very least commit to further support for offshore wind and, more radically, to drop plans for new nuclear. It’s become clear which way the wind is blowing.