The UK Government has held its reverse auction for energy production subsidies, and offshore wind power has come in cheaper than many expected.
In the reverse auction process, green energy companies bid for the lowest guaranteed energy price over a 15-year period. The winning companies then have a predictable income stream – independent of fluctuations in energy prices – on which to base their investment decisions. Should the wholesale price of electricity exceed the guaranteed price, the government will actually receive money.
Two new windfarms secured a record-low price of £57.50 per megawatt hour (MWh), which is about half the average price awarded in the previous 2015 auction and substantially below the £92.50 promised to EDF for its Hinckley Point C nuclear plant. It is also rather close to the current wholesale electricity price of around £40 per MWh, meaning the level of subsidy is much lower. Onshore wind is already thought to be competitive with gas in some areas, but onshore projects are no longer allowed to compete for subsidies.
While some believe the government should reconsider its approach to new nuclear, EDF is keen to point out the intermittency issues with wind power and stresses that nuclear power is still needed for a diverse, low-carbon energy mix.
The drastic drop in guaranteed prices reflects how the offshore wind industry has matured in recent years. Advances in scale are yielding greater efficiency, while new lubricants, such as Mobil SHC Gear 320 WT from Mobil UK distributors, also help protect equipment and reduce maintenance.