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Wind power isn’t as cheap as it seems

Wind energy prices are currently more than three times the price of fossil fuel energy prices. Will this change in the future?

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The energy giant ScottishPower has announced it’s building a wind farm 40km off the coast of East Anglia. It’ll cost around £2bn and power around half a million homes. But is it worth it?

Well, let’s look at the company first and the answer is yes. It’s subsidised by the Conservative Government. Not as much as it would like however, and you might remember that last year it had to scale back the plans because the subsides on offer were too low. Originally it wanted to create a wind farm with a generating capacity of 1200 megawatts which is estimated to be roughly enough to power a city the size of Birmingham.

But in the autumn of last year the government announced that the budget cap for wind farm projects would be £235m. And then just after the election it announced it would be closing down the ‘Renewables Obligation’ public subsidy fund for all onshore wind farms. At the time Keith Anderson the chief corporate officer for ScottishPower questioned the rationale behind it: “Onshore wind is clearly still the most cost effective large scale way of deploying renewable technology in the UK. Economically, you would therefore question, why in God’s name would you want to bring that to a premature halt.

He threatened that it might reconsider plans to go ahead with the multi-billion pound offshore project if finances were in jeopardy, which looks to have been a smart move as shortly afterwards it announced it would now be going ahead with the East Anglia project.

But how does it affect customers? Wind energy prices are currently more than three times the price of fossil fuel energy prices. It’s roughly £40- £80 per Mwh and offshore wind costs around £120 Mwh. It’s second only in price to tidal power. However increasing the size and scale of offshore wind projects means that the price will come down. ScottishPower says it’s already dropped from £160Mwh.

In additional, it argues that the turbines on this offshore project are two to three times the size of ones on current onshore farms which will help to bring down costs even faster. ScottishPower says the subsidies are justified in the long term in order to make this cost of energy cheaper.

It also points to the creation of jobs – in the region of 3000 – that the wind farm will generate and the fact that now for the first time the UK itself will start to manufacture wind turbines.

It’s not difficult to understand just why generating electricity from offshore wind is so expensive. It requires constructing and maintaining complicated pieces of kit – while out at sea. The government aims to reduce subsidies to £100Mwh by 2020 but industry experts are conflicted about how realistic that is. Mott McDonald’s chief energy economist Guy Doyle says it is a “big ask” that assumes very little will go wrong in the meantime. He believes the long term costs will go down – just maybe not that quickly in the next five years.

There is no doubt that wind energy is one of the most expensive types around – now. But ScottishPower insists that the work which is being put in in terms of technological advancement, skill development and expertise will mean that in years to come this renewable energy will become much more efficient. It’s a case of take your medicine now, and you’ll get better soon.
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