Month: January 2020

Renewable Energy: What’s the Cost?

Renewable Energy: What’s the Cost?

Last year, wind farms in the UK received £136m in payments to turn off production from their turbines. This was an increase of £8m over the previous year’s payments.  Due to the intermittent nature of renewable energy you cannot produce on demand; these shutdowns occur when the electricity network has no requirement for the power being produced. The compensation payments are paid by National Grid ESO when a wind farm is asked to switch off. The price paid for the shutdown has to match the loss in revenue, which often includes a subsidy payment as well as the sale value of the electricity. These payments are recouped from consumers through energy bills.

These figures are released annually to much furor and latched onto by the anti-renewable/turbines organizations as another reason why we should ditch ‘overly costly, ineffective’ renewable energy. However, these figures only tell part of the story.

The energy mix in the UK has changed dramatically over the last decade and we are now at the lowest level of fossil fuel use ever. In fact, we have gone from 7% of our electricity being generated by renewables in 2010 to 37% in 2019. We have reduced our reliance on coal from 75% of electricity to 2.2%, since 1990 levels. This has seen a massive CO2 drop over the decade, with most of the CO2 savings having been made by these changes to our electricity generation.  

This boost in renewable energy has in large part been due to the subsidies put in place by the Government over this time, with ROCs and FiTs driving investment in the renewable sector and creating the renewables industry we have today. These subsidies have now come to an end, with new renewables projects proceeding subsidy free or with backing from the much less costly CfD payments.

There is often a view that nuclear power is a more cost-effective solution to these problems. However, the level of backing these new plants require is double the per MW  value of the current ROC payments, with this still not being enough to encourage new developments. Indeed, Hitachi and Toshiba have pulled out of 3 proposed plants during the past year. At present, there are eight nuclear sites generating nuclear power in the UK. However, only one of these is planned to be operating by 2030.

The Government has backed 40GW of offshore wind by 2030 and it’s likely this will not be enough to fill the gap that nuclear power and reaching NetZero by 2050 will require.  Further solar and onshore wind will also be being needed. This amount of dependence on renewable energy will require a huge increase in energy storage, with National Grid’s Future Energy Scenarios predicting a capacity need of between 21GW and 38GW by 2050. Current storage capacity is 4GW.

As we move along this path it’s likely year on year constraint payments will increase until we have the right mix of energy storage available to store this potential power. However, the recent weather events in Australia and across the UK and Europe have shown the real-time consequences of climate change. Given the lack of alternatives available to us and the dire consequences of inaction now predicted across the scientific community, constraint payments seem like a small price to pay.

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