The Real Cost of Wind Power to Consumers
The Real cost of Wind Power to Consumers
Jack W Ponton FREng
The claim that “Wind power now UK’s cheapest source of electricity” recently appeared in two national newspapers. They cited Bloomberg, considered to be a reputable source of business information. However that is not quite what Bloomberg said, and wind power still remains more expensive for consumers than any conventional means of generation.
What Bloomberg actually said was:
“Wind power is now the cheapest electricity to produce in the UK as the price of renewable energy continues to drop”. (My emphases.)
The first part of the sentence is correct. Because of subsidies, the cost per MWh to the producer of wind energy is certainly less than that of any other technology.
The second part is incorrect and misleading, confusing price with cost. The production cost to the generator of renewables is indeed falling. However these savings are not reflected in a fall in consumer prices.
The cost of subsidies is passed on to the consumer. Renewables Obligation payments to earlier large scale onshore wind effectively doubled the wholesale price which the generator received. Under the rather less generous new system of guaranteed Strike Prices onshore wind may get ‘only’ 50-75% more than the wholesale price.
Consumers also have to pay for other costs which are a result of moving from electricity generated on demand near major consumers to electricity whose availability depends on the seasons and weather and is mostly produced far away from where it is needed. The National grid has to be extended and upgraded and backup dependable generation capacity is required for when there is insufficient wind.
A comparison of the costs of several forms of generation in the UK puts the average cost of new gas generation at £68/MWh and onshore wind at £190/MWh when backup and infrastructure costs are included. With the current ROC subsidy of £45/MWh, the price to the consumer will be greater still.
These costs – generation, transmission and subsidies - make up about three quarters of domestic electricity bills. Thus when all consumer-borne costs are taken into account the cheapest wind generated electricity is likely to be costing consumers about three times as much as electricity generated from gas. This puts even the guaranteed strike price of £92/MWh for Hinkley C, which being both controllable and on an existing site will incur few of the additional costs, into perspective.