Wind power reached a significant milestone last week. For the first time ever, onshore and offshore wind together generated 10 GW of electricity in the UK, three times the power expected from Hinkley Point C nuclear power station, and around 23% of the country’s demand at the time. Of course this was a particularly windy day: the usual figure is just over 9% of the mix. But it demonstrates that the grid can successfully integrate large amounts of wind power.
Offshore wind continues to grow in strength
Last week also saw Greg Clark, Secretary of State for Business, Energy and Industrial Strategy, travel up to Hull to open the new Siemens factory. Siemens has invested £310 million in a new plant that will manufacture the blades for offshore wind turbines. Almost 800 new jobs have been created, with the majority filled by local Hull residents. This kind of investment in the domestic supply chain for renewables is what the forthcoming industrial strategy will seek to encourage.
The offshore wind sector is set to continue its expansion: last month, the Government released further details of the next two auctions for new offshore wind in the early 2020s. Although the Government has set ambitious cost-reduction targets, projects commissioned in other European countries, such as the Netherlands and Denmark, have had impressively low prices. So there is every reason to be confident the UK industry can meet the challenge.
Onshore wind faces turbulence
The situation for onshore wind is much less optimistic. The Conservative Party manifesto for the 2015 general election contained a pledge “to halt the spread of subsidised onshore wind farms”, by ending “any new public subsidy for them” and ensuring “local people have the final say on windfarm applications”. These commitments were swiftly met following the election through the Energy Act 2016 and revised planning guidance to local authorities.
Yet this technology has potential to contribute to meeting the UK’s energy needs. Earlier this month, the Department for Business, Energy and Industrial Strategy (BEIS) published updated cost estimates for the different generation technologies. For projects commissioning in 2020, onshore wind is forecast to be the cheapest way to make electricity. Their models predict that, including the carbon price, onshore wind projects will generate electricity for £63 per MWh, while highly efficient combined cycle gas turbines (CCGTs) – the next cheapest technology – will produce power for £66 per MWh.
Currently, long-term contracts (Contracts for Difference), which guarantee a fixed revenue stream for developers of new energy infrastructure, are only being awarded to nuclear and offshore wind. Onshore wind, despite being much cheaper, is not eligible to bid. Consumers’ energy bills are starting to rise again, largely due to rising wholesale costs from a weaker pound. But the annual cost of supporting renewables, which is added to consumer bills, is forecast to increase significantly in this parliament, from £5.2 billion this year to £8.4 billion by 2020/21. Excluding onshore wind will cause the subsidy bill to increase more than is necessary, as contracts for new capacity will instead be awarded to more expensive technologies.
The future for onshore wind
Given the political discourse around them, it is surprising that polling shows broad public support for onshore wind farms, even in rural areas. ComRes data from October 2016 shows 73% of the British public support onshore wind. In rural areas, where people are more likely to directly experience turbines, they enjoy 65% approval. Further research is required into what Conservatives in particular think about onshore wind, and whether they object more to the subsidy element or their own potential proximity to turbines. Bright Blue will shortly be publishing new polling, conducted by Populus, to try to answers these questions.
Some have proposed ‘community energy’ schemes to overcome local opposition to new developments. These involve local residents either receiving some payment from the developers in return for their consent, or taking a stake in the project themselves. Renewables company Good Energy has proposed building a new onshore wind farm in Cornwall, which would be co-financed by local residents. This would be the first onshore wind farm constructed without government subsidy. They hope the community financing for the project will demonstrate to the planning committee that it enjoys local support.
Technological innovations could also improve onshore wind’s prospects. For instance, Shell, EON, and Schlumberger have recently invested in a new high-altitude kite technology that generates electricity from the wind. The firm developing this idea is based in Essex. The technology is expected to have much lower capital costs by dispensing with the expensive towers and blades used by conventional wind farms. Two kites pull in opposite directions to create a rotating motion while tethered to a turbine on the ground to produce electricity.
Conclusion
There is a strong case that onshore wind should no longer receive subsidy: it is a mature technology that has had an opportunity to become cost-competitive. However, as we argued in Green and responsible conservatism, it is important to distinguish between a subsidy and a long-term contract. A project is only subsidised when the total lifetime payments it receives under the long-term contract exceed those received by other conventional generators.
No new, capital-intensive energy infrastructure can be built in the UK without a long-term, government-backed contract. Even new gas plants will only be built if they can secure a 15-year contract through the Capacity Market mechanism, which is the Government’s policy for guaranteeing security of supply. Allowing onshore wind to compete for fixed contracts against other technologies could help keep down consumer bills. And this could be done without subsidy and without removing control over planning decisions from local communities.
Sam Hall is a researcher at Bright Blue