Andrew Montford is the deputy director of Net Zero Watch.
As many of us expected, a series of offshore windfarms have just revealed that they cannot fulfill their promises to sell us cheap power. ‘Ask again in a year’s time’ is the best they can offer – little help amidst an energy crisis.
The cost to consumers of the refusal to activate the so-called ‘Contracts for Difference’ (CfDs) is substantial. The two windfarms that have been delayed could produce 8 million megawatt hours of electricity between them. That means a bill to the consumer of the order of hundreds of millions of pounds. This is not the first time this has happened either. Last year’s 12-month delay cost something similar.
Mind you, things aren’t bad for those generators who do decide to activate their contracts. Every April, everyone in the scheme gets an increase in prices. This year, the Government’s generosity on our behalf has been extraordinary. Most offshore windfarms have been getting increases of between 10 and 15 percent.
The result of this largesse is that pretty much every generator in the scheme now is now getting more than market prices. Some are getting double market prices. Others coming on stream in the next few years get even more than that. So generators inside the scheme have been handed an extra £200 million per year.
In the meantime, ministers and civil servants are blithely insisting that offshore wind is really, really cheap. Jeremy Pocklington, the Permanent Secretary at the Department for Energy Security and Net Zero, recently told the Public Accounts Committee that his officials thought that offshore windfarms coming on stream in 2025 would be delivering power at £50 per megawatt hour, less than half of current market prices, and a quarter of the level that some CfD contracts are now paying.
This is rather remarkable when we are simultaneously being told that new windfarms will not be built without further subsidies from the taxpayer.
The explanation is that the £50 figure is wrong. If you look at the underlying assumptions, there is, for example, the extraordinary suggestion that the cost of building an offshore windfarm will soon have fallen to less than half the levels seen just a few years ago.
Unfortunately for Pocklington, we know the names of the windfarms that are due to come on stream in 2025. We can see from their public announcements that they are hoping for small capital cost reductions, but nothing more than that. This is borne out by their financial accounts too.
Take the Seagreen windfarm currently under construction off the Angus coast. At just over 1 gigawatt capacity, Pocklington would have you believe that it might cost as little as £1.4 billion to build. But the windfarm’s most recent financial accounts show that by March 2022 it had already spent £2.2 billion, and was still to complete the installation of the turbine foundations! That milestone was only reached a few days ago.
That Pocklington would tell the committee, with a straight face, that offshore wind has seen a cost revolution suggests that he doesn’t know what he is talking about.
We are certainly rapidly approaching the point at which these so-called ‘experts’ can no longer plausibly deny the overwhelming evidence that offshore wind is both extremely expensive and not becoming appreciably less so.
The crunch point will soon be upon us. In the next month or so, Pocklington and his team will produce a new set of predictions of the costs of renewables, and we will be able to see if they have allowed clear facts about the current costs of offshore wind to influence what they say about the future. I fear not.
Plausible deniability is the essential tool of the bureaucrat, and by remaining silent about current costs, they are left free to make entirely unsubstantiated claims about the future. If they tell us that wind will be cheap once again, reasonable people will assume the worst. Let’s wait and see.
Andrew Montford is the deputy director of Net Zero Watch.
As many of us expected, a series of offshore windfarms have just revealed that they cannot fulfill their promises to sell us cheap power. ‘Ask again in a year’s time’ is the best they can offer – little help amidst an energy crisis.
The cost to consumers of the refusal to activate the so-called ‘Contracts for Difference’ (CfDs) is substantial. The two windfarms that have been delayed could produce 8 million megawatt hours of electricity between them. That means a bill to the consumer of the order of hundreds of millions of pounds. This is not the first time this has happened either. Last year’s 12-month delay cost something similar.
Mind you, things aren’t bad for those generators who do decide to activate their contracts. Every April, everyone in the scheme gets an increase in prices. This year, the Government’s generosity on our behalf has been extraordinary. Most offshore windfarms have been getting increases of between 10 and 15 percent.
The result of this largesse is that pretty much every generator in the scheme now is now getting more than market prices. Some are getting double market prices. Others coming on stream in the next few years get even more than that. So generators inside the scheme have been handed an extra £200 million per year.
In the meantime, ministers and civil servants are blithely insisting that offshore wind is really, really cheap. Jeremy Pocklington, the Permanent Secretary at the Department for Energy Security and Net Zero, recently told the Public Accounts Committee that his officials thought that offshore windfarms coming on stream in 2025 would be delivering power at £50 per megawatt hour, less than half of current market prices, and a quarter of the level that some CfD contracts are now paying.
This is rather remarkable when we are simultaneously being told that new windfarms will not be built without further subsidies from the taxpayer.
The explanation is that the £50 figure is wrong. If you look at the underlying assumptions, there is, for example, the extraordinary suggestion that the cost of building an offshore windfarm will soon have fallen to less than half the levels seen just a few years ago.
Unfortunately for Pocklington, we know the names of the windfarms that are due to come on stream in 2025. We can see from their public announcements that they are hoping for small capital cost reductions, but nothing more than that. This is borne out by their financial accounts too.
Take the Seagreen windfarm currently under construction off the Angus coast. At just over 1 gigawatt capacity, Pocklington would have you believe that it might cost as little as £1.4 billion to build. But the windfarm’s most recent financial accounts show that by March 2022 it had already spent £2.2 billion, and was still to complete the installation of the turbine foundations! That milestone was only reached a few days ago.
That Pocklington would tell the committee, with a straight face, that offshore wind has seen a cost revolution suggests that he doesn’t know what he is talking about.
We are certainly rapidly approaching the point at which these so-called ‘experts’ can no longer plausibly deny the overwhelming evidence that offshore wind is both extremely expensive and not becoming appreciably less so.
The crunch point will soon be upon us. In the next month or so, Pocklington and his team will produce a new set of predictions of the costs of renewables, and we will be able to see if they have allowed clear facts about the current costs of offshore wind to influence what they say about the future. I fear not.
Plausible deniability is the essential tool of the bureaucrat, and by remaining silent about current costs, they are left free to make entirely unsubstantiated claims about the future. If they tell us that wind will be cheap once again, reasonable people will assume the worst. Let’s wait and see.