Allow onshore wind to compete for CfDs to cut costs, say Baringa Partners

A study has found that the UK could deliver 1GW of new onshore wind capacity at no additional cost to consumers over and above the long-term wholesale price of power, according to a new study from Baringa Partners.

However, this depends on mature renewables being able to bid in CfD auctions for long-term contracts, such as those offered to offshore wind and the new nuclear facility at Hinkley Point. Established renewable energy technologies – including onshore wind and solar – have been locked out of the Contracts for Difference (CfD) framework since the 2015 Conservative manifesto pledge to ‘end any new public subsidy’ to onshore wind farms, with the current auction process only open to less established renewable technologies such as offshore wind.

The report, produced by industry experts Baringa Partners concludes that an auction would result in further reductions in the cost of onshore wind power.

This year’s auction is expected to clear at £49.40 per MWh, meaning that successful onshore wind projects would receive limited ‘top-up’ payments over and above the wholesale price of power in the first years of their operation, but would then pay back a greater amount to the public purse over the remainder of their contract as the wholesale power price increases.

The capacity delivered through the auction would result in more than £1bn private sector investment in renewable energy generation across the country.

Niall Stuart, chief executive of industry body Scottish Renewables, which commissioned the report, said: “The UK Government has already published research showing that onshore wind is on track to be the cheapest form of electricity generation in the UK, and this report shows that the industry is continuing to drive down costs.”

Mr Stuart added: “Crucially this is the first analysis of its kind that shows investment in the most competitive onshore wind projects can now be delivered in a way that is in line with the Conservative manifesto pledge to end new subsidies for the sector.

“Projects would be expected to receive limited ‘top-up’ payments in the first years of their operation, but would then pay those back – and more – in the latter years of their contract, meaning an overall saving for consumers.”

Commenting on the report, Peter Sherry, senior manager at Baringa Partners and lead author of the report, said: “The dramatic reductions observed globally in both renewable and storage technology costs represent a game-changer for the sector and can help move us a step closer to solving the ‘trilemma’ of how to deliver reliable and clean energy at an affordable cost for consumers.

Related content:

Submission window opens for 2017 CfD allocation round

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