{"id":8588,"date":"2024-06-24T08:24:32","date_gmt":"2024-06-24T08:24:32","guid":{"rendered":"https:\/\/blogs.bath.ac.uk\/edswahs\/?p=8588"},"modified":"2024-06-24T08:24:32","modified_gmt":"2024-06-24T08:24:32","slug":"renewable-subsidies","status":"publish","type":"post","link":"https:\/\/blogs.bath.ac.uk\/edswahs\/2024\/06\/24\/renewable-subsidies\/","title":{"rendered":"Renewable Subsidies"},"content":{"rendered":"

I have been trying for a while to shed some light on the opaque mess that is UK electricity pricing. \u00a0What follows comes from Eigen Values<\/a>. \u00a0It is not comfortable reading.<\/p>\n

In the UK, renewables are subsidised by three different schemes. Feed-in-Tariffs (FiTs) fund mostly solar power. The latest report for 2022-23<\/a> shows the scheme cost over \u00a31.7bn and average total payment was ~\u00a3193\/MWh, about 3X the current cost of gas-fired power at around \u00a365\/MWh<\/a> (see Figure A). \u00a0I should say that, as the co-owner of Semington A<\/a>, I have an income from solar FiTs.<\/p>\n

\n
\n\n\n\n
<\/td>\n\"Figure<\/a><\/td>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>
Figure A - Feed-in-Tariff (FiT) Generation and Total Payments (\u00a3 per MWh)<\/figcaption><\/figure>\n<\/div>\n

Contracts for Difference (CfDs) fund a range of technologies, but most of the subsidy goes to offshore wind. Latest data from the LCCC<\/a> shows the subsidy per MWh fell dramatically during the energy crisis, but is now back at \u00a395\/MWh for offshore wind, \u00a373\/MWh onshore and \u00a360\/MWh for solar. April 2024 was a record month for overall subsidies with \u00a3268m paid out with average strike prices at \u00a3146\/MWh for offshore wind, \u00a3113\/MWh for onshore and \u00a3110\/MWh for solar power (See Figure B).<\/p>\n

\n
\n\n\n\n
<\/td>\n\"Figure<\/a><\/td>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>
Figure B - Record Overall CfD Subsidies in April 2024<\/figcaption><\/figure>\n<\/div>\n

The CfD subsidy for burning trees in biomass plants rose from about \u00a37\/MWh in March to nearly \u00a360\/MWh in April. This encouraged more biomass generation and the total subsidy paid for biomass jumped from \u00a32m in March to over \u00a334m in April 2024. The total CfD subsidy paid for the last 12 months is over \u00a32bn, and the trend is clearly upwards.<\/p>\n

By far the biggest subsidy scheme is Renewables Obligations Certificates, costing over \u00a37bn per year. This scheme awards certificates for each MWh generated, a different number depending upon technology. April reference prices for intermittent renewables have been around \u00a353\/MWh, meaning the average price paid for offshore wind under the ROC scheme has been \u00a3176\/MWh, onshore \u00a3118\/MWh and solar \u00a3146\/MWh including the value of the certificates (See Figure C).<\/p>\n

\n
\n\n\n\n
<\/td>\n\"Figure<\/a><\/td>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>
Figure C - Approximate Cost of ROC Funded Renewables 2024-25 (\u00a3 per MWh)<\/figcaption><\/figure>\n<\/div>\n

Future renewables are also going to be more expensive than current market rates. The Government\u2019s announcements of prices for their Allocation Rounds are often quoted in 2012 money. In 2024 money, Allocation Round 6 (AR6)<\/a> is offering \u00a3102\/MWh for fixed offshore wind, \u00a3246\/MWh for floating offshore wind, \u00a389\/MWh for onshore and \u00a385\/MWh for solar power, all far higher than current market prices (see Figure D).<\/p>\n

\n
\n\n\n\n
<\/td>\n\"Figure<\/a><\/td>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>
Figure D - AR6 CfD Strike Prices Offered vs Recent Market Prices (\u00a3 per MWh)<\/figcaption><\/figure>\n<\/div>\n

It should be noted that FiTs, ROCs and CfDs are all index-linked, so prices will continue to rise with inflation. It is clear our bills are going to continue to rise for the foreseeable future as cheap gas is forced out in favour of expensive renewables.<\/p>\n

In addition, we pay extra for balancing the grid when the wind is not blowing (or blowing too hard) and the sun is not shining. In the year ending March 2024, these balancing services cost<\/a> \u00a32.46bn. Most of these costs should be attributed as a cost of intermittent renewables. That's a total of over \u00a312bn being paid to or because of renewables each year.<\/p>\n

More costs are coming down the line as the National Grid ESO has announced \u00a354bn of spending<\/a> on the electricity network infrastructure up to 2030 and a further \u00a358bn<\/a>in the 2030-2035 period, a total of \u00a3112bn, or over \u00a310bn per year for more than a decade.<\/p>\n

I hope it is clear to all now that renewables are not cheap and are never going to be.<\/p>\n

.\u2026\u2026.......................................\u2026..<\/p>\n

You can see the complexity even if you can\u2019t fully grasp the detail. \u00a0Perhaps this is why no one ever tries to explain it.<\/p>\n","protected":false},"excerpt":{"rendered":"

I have been trying for a while to shed some light on the opaque mess that is UK electricity pricing. \u00a0What follows comes from Eigen Values. \u00a0It is not comfortable reading. In the UK, renewables are subsidised by three different...<\/p>\n","protected":false},"author":237,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[2,4],"tags":[],"class_list":["post-8588","post","type-post","status-publish","format-standard","hentry","category-comment","category-news-and-updates"],"acf":[],"jetpack_featured_media_url":"","jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/blogs.bath.ac.uk\/edswahs\/wp-json\/wp\/v2\/posts\/8588","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.bath.ac.uk\/edswahs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.bath.ac.uk\/edswahs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.bath.ac.uk\/edswahs\/wp-json\/wp\/v2\/users\/237"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.bath.ac.uk\/edswahs\/wp-json\/wp\/v2\/comments?post=8588"}],"version-history":[{"count":0,"href":"https:\/\/blogs.bath.ac.uk\/edswahs\/wp-json\/wp\/v2\/posts\/8588\/revisions"}],"wp:attachment":[{"href":"https:\/\/blogs.bath.ac.uk\/edswahs\/wp-json\/wp\/v2\/media?parent=8588"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.bath.ac.uk\/edswahs\/wp-json\/wp\/v2\/categories?post=8588"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.bath.ac.uk\/edswahs\/wp-json\/wp\/v2\/tags?post=8588"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}