Onshore wind generation could be cheapest new energy if included in CfD mechanism, says Arup

New research by Arup for ScottishPower Renewables suggests that onshore wind to become the lowest-cost form of new energy generated in the UK if it were included in the existing Contract for Difference (CfD) mechanism.

The report, Established Low Carbon Electricity Generation, found that a CfD strike price cap of around £50-55/MWh would deliver onshore wind at a similar price to the consumer of a new gas power station.

The report argues that a Market Stabilisation CfD is urgently needed, despite onshore wind being an established technology, because onshore wind is one of the few electricity technologies that is fully exposed to volatile wholesale electricity market prices, having been excluded from the second round of CfDs. Including onshore wind in the CfD regime – even at a “subsidy-free” price – would bring forward investment and level the playing field with gas generation, Arup said.

Filippo Gaddo, head of energy economics at Arup said: “Currently, onshore wind has no access to guaranteed long-term revenue streams. Other generators, including carbon-emitting generators, are able to secure up to 15-year capacity contracts. However on-shore wind investors are fully exposed to fluctuations in the wholesale electricity price, increasing the risk and cost of investments. Access to a Market Stabilisation CfD mechanism would make a significant difference to driving efficiency – ensuring that the UK’s transition to low carbon generation progresses in the most cost effective manner.”

Lindsay McQuade, policy and innovation director, ScottishPower Renewables said: “Arup’s report clearly shows that access to a market framework, designed to reduce risk and provide a level playing field with gas generation, would enable onshore wind to continue delivering cheap electricity to households and businesses across the UK – some £40/MWh cheaper than new nuclear against the proposed strike price cap of £50-£55/MWh.  This relative saving would increase in an auction as investors would compete to secure a contract – making it even cheaper. Development of a market stabilisation mechanism provides the opportunity to deliver value for money for UK consumers by continuing cost-effective deployment of onshore wind well into the 2020s.”

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