Price support ‘looks too low’ for any new wind farms to get built
The government will fail to secure any new wind farms through a recently launched auction because the financial support on offer insufficiently reflects soaring costs, the boss of SSE has said.
Renewable energy developers are encouraged to invest in Britain by auctions for contracts guaranteeing consumers will pay a fixed price for the electricity their projects will generate.
The auctions, now held annually, are at the heart of the government’s plans to expand offshore wind capacity rapidly this decade. However, Alistair Phillips-Davies, SSE’s chief executive, said that this year’s auction, which began late last month, “doesn’t look like it is feasible. They’ve set the prices at the wrong level and I don’t think they’ll get anything built.”
SSE is one of Britain’s biggest offshore wind developers and its proposed Seagreen 1A wind farm off Scotland is eligible to take part in this year’s auction. It is understood the company will not do so because the prices are too low.
Contract prices for offshore wind farms have plunged over a decade, from the £150 per megawatt-hour awarded in 2014 to only £37.35 (all in 2012 money) awarded last year, as the industry developed and costs fell.
Over the past year, however, soaring costs of raw materials and problems in the supply chain have reversed this trend, pushing up turbine costs by about 30 per cent on some estimates. Despite this, the maximum price on offer for offshore farms this year has been capped at £44 per megawatt-hour, which Phillips-Davies, 55, said “looks too low”, even though it is in 2012 money and indexed to inflation.
“I don’t think anybody will bid at that price,” he said, predicting a repeat of a Spanish renewables auction late last year that secured only a fraction of desired capacity.
A government spokesman said it was “confident” of attracting applicants to the auction.
