Extended contracts and relaxed eligibility criteria will line the pockets of renewable energy developers with gold

DAVID TURVER

Yesterday, the Government published its plans to reform the Contract for Difference (CfD) subsidy scheme for the forthcoming Allocation Round 7 (AR7). The summary is that Miliband is going to line the pockets of renewable energy developers with gold to maximise the capacity he can deliver from the AR7 auction. This announcement is the subject of this week’s bonus article.

The most important change is that the length of new CfD contracts will be extended from 15 to 20 years for fixed bottom offshore wind, floating offshore wind and solar power. CfD contracts give developers an index-linked fixed price for their output, so this change is a blatant attempt to make CfDs even more attractive for developers. The impact assessment says there will be a reduction of medium-term subsidy costs because of a 11-13% reduction in strike prices. However, they do concede there will be extra subsidy costs in the long term because of the longer contract length. Scenario One assumes that the “capture price” (essentially the market value) of the output from renewables will be £40-45/MWh up to 2030, falling to £25-30/MWh by 2045. This is tacit acceptance that wind and solar often produce too much when demand is low, so the market value of their output can sometimes fall to zero. They need the fixed-price CfD subsidies to maintain their revenue stream. Scenario Two assumes higher capture prices and miraculously this delivers a long-term net benefit. Of course, as we have covered before, the costs of curtailment and the cost of connecting these projects to the grid are set to increase sharply by 2030. Miliband’s promise of a £300 reduction in energy bills is now a distant dream.

The Government have also decided to extend the eligibility criteria for fixed-bottom offshore wind projects. Now they will be able to apply for a CfD without having achieved full planning consent. This is a sign that Miliband is scraping the bottom of the barrel in an attempt to award as much capacity as possible in AR7.

The Secretary of State will also be given visibility of the bid stack for offshore wind and be able to vary the budget accordingly. The impact assessment says this should reduce the risk of underspending the offshore wind budget, which is another way of saying increasing the risk of more subsidies falling on consumer bills.

However, in slightly better news for consumers, the Government will not allow projects to re-bid capacity in AR7 that was won at lower prices in earlier allocation rounds. However, they are holding open the possibility of implementing an “enduring policy from AR8” that might allow this surrendered capacity to be rebid.

There are several other minor changes that are beyond the scope of this brief article.

Overall, it appears that Miliband is desperate to secure the maximum renewable capacity in AR7 and is willing to sacrifice consumer bills by lining the pockets of renewables developers with gold. In effect, he is trying to get as much capacity under contract in AR7 to make his Clean Power 2030 plan irreversible, even if he loses his job. This will set in stone crippling energy bills for decades to come.

We need something radical from the opposition Conservative and Reform parties if we are to avoid even more rapid deindustrialisation and economic collapse. Perhaps they should announce they will repudiate the contracts if they get into office?

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This article (Miliband Expands CfD Subsidies in AR7) was created and published by David Turver and is republished here under “Fair Use”

Future Energy Scenarios 2025

PAUL HOMEWOOD

It’s time for this year’s FES, which is the same fanciful nonsense as usual:

https://www.neso.energy/publications/future-energy-scenarios-fes

The 2030 stage I presume is little changed from their November Clean Power 2030 Plan, so let’s take a closer look at 2050.

As usual there are four scenarios, but I will concentrate on the Electric Engagement (EE), which assumes go full out on electrification.

Demand for electricity will more than double to 785 TWh, with peak demand reaching 144 GW.

This is the electricity system they envisage for 2050:

If we simplify this, we get this for EE in 2050:

In short, even including Interconnectors, we will only have firm capacity of 120 GW, Without Interconnectors, it drops to 96 GW, but we will need 144 GW to meet demand. The latter is based on ACS peak demand, essentially an average of peaks over several winters.

They should be using true peak demand, say on a 1-in-20 year basis, which would probably push the number up to around 160 GW.

We can effectively discount solar power in winter, and we know that we can have days and weeks on end with wind power running below 10% of capacity.

So how does NESO propose to fill this gap?

Storage will help to meet the peaks for an hour or so, but their own table above indicates that their 81 GW will only be enough for three hours. In a two week dunkelflaute, there will be no surplus power to recharge them ready for the next day.

Daily demand will probably average out at around 150 GW at its winter peaks, looking behind the NESO calculations.

So how will NESO fill the gap? Use less, apparently!

They naively believe they can draw 51 GW from EV batteries at peak times. How many drivers will even be at home at those times? And who in their right mind would plug their car in and simply allow the grid to draw off half their juice, in the hope it will be replaced overnight?

Even ignoring EVs, they also expect peak demand to be voluntarily cut by 31 GW, about a quarter. Half of this will come from switching off heating at home. Forget about switching your heating and hot water on in the early morning – you will just have to heat your home at night instead.

And, again, will there be enough electricity at off peak to charge up all those EVs?

NESO talk about “rewarding consumers” for halving demand. What they really mean is that if they don’t they will be punished via extortionate prices. It’s like telling a criminal he is lucky because you only cut one of his hands off, not both!

But perhaps the most remarkable admission in this NESO report is that conventional thermal power will still play the dominant role in 2050, not flaky renewables.

My dispatchable table above splits down:

The hydrogen comes from steam reforming with CCS and electrolysis, in roughly equal quantities.

We will therefore have to spend tens, probably hundreds, of billions building new nuclear, hydrogen burning generators, CCS gas plants, not to mention all of the associated infrastructure. Electrolysers and steam reformers will be needed, along with hydrogen storage and distribution networks.

So why bother to spend billions more on intermittent wind and solar farms?

Given the fact that hydrogen is much more expensive than natural gas, the electricity system we end up with be be horrifically expensive.

I’ll leave you with the NESO graph of the electricity supply in a “typical” week in winter:

Demand peaks at 137 GW.

On three days, large scale “demand turn down “ is required, as much as 63 GW.

This is despite low carbon generation and imports working flat out.

A closer look at that period of Tuesday into Wednesday, when renewable output was low – hour 39 to 68.

Renewables averaged 25.2 GW, still probably double we could reasonably expect on windless days. The system was reliant on 4.9 GW of storage discharging, which would not have lasted much longer than this 29 hour period.

And we were also heavily reliant on imports.

To balance the books, demand had to be reduced by 10.8 GW, from a total of 97.3 GW.

Forget about charging your cars and running your heat pumps at off peak. There would not be enough electricity even at those times to meet overall demand for the whole day.

SOURCE: Not a Lot of People Know That

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