With people going around saying things like “the epoch of renewables has arrived,” and this is a “massive step forward” for UK wind energy, you can’t blame us for being pretty excited about news concerning the world’s biggest offshore wind farm and the cost of nuclear power subsidies.
A contract to develop Hornsea Project Two has just been awarded to the Danish giant Dong Energy. When operational – estimated 2022 – it will provide enough power to keep the lights on in 1.3m UK homes. It comes 18 months after Dong Energy unveiled Hornsea Project One – but will far outstrip its bigger sister, with 1,386 megawatts compared to 1,218.
The contract was awarded in a UK government auction for low-carbon subsidies, and Dong Energy said afterwards that the guaranteed “strike” price is the lowest ever price for UK offshore wind – at £57.50 per MWh. The price of the subsidy is nearly half that awarded to Hinkley Point C, Britain’s first new nuclear power site, which got £92.50 per MWh.
Bidders for the contracts entered an auction-style process where they offered the lowest guaranteed prices for their electricity. The strike price is effectively a top-up payment that the government pays above the daily market price, roughly £40 per MWh. Around £240m a year had allocated to cover the strike prices of Hornsea Project Two and two other sites, but the competitive prices mean it will only likely need £176m a year.
When combined the three wind farm sites will have a generating capacity of 3.2GW. That’s what Hinkley Point C will produce. But they’re a lot cheaper, and cleaner.
This marks a fascinating time for the wind industry, and beyond. Experts say green energy has come to a tipping point in the UK. Cornwall Insight, the energy analysts, said: “The epoch of renewables as the most cost-competitive technology has arrived.” Liberal Democrat leader Vince Cable said that this “shows the need for a radical reappraisal by government of the UK’s energy provision.”
(Editor’s note: Of course, the more exacting readers among you will recall that just a few months ago Dong Energy successfully secured the right to develop two significant wind projects in the German North Sea – except in this case there were no government subsidies. This was a highly symbolic first for the industry, and as yet not one that has gone viral on the global market. However, “If we did not think we would be creating value for our investors, we would not have made this bid,” Dong’s Tom Lehn-Christiansen told the New York Times.)
But back to the UK and the impact it will have. “Not only will (it) provide low-cost, clean energy to the UK, it will also deliver high-quality jobs and another huge boost to the UK supply chain,” said Dong Energy Managing Director Matthew Wright. “Long-term and highly-skilled jobs are being created across the North of England and the UK supply chain is going from strength to strength.”
This wasn’t the only exciting venture to get a green light with government subsidy support. Moray East neat Scotland and Triton Knoll near Lincolnshire were also approved. Paul Cowling of Innogy, which won the Triton Knoll contract, said: “The importance of offshore wind in the UK’s energy mix is now beyond doubt. Wind energy should be at the very core of the UK Government’s energy policy and our long-term energy security.”