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CarbonBrief and the Costs of Scottish Wind Power

Following a report in the Sunday Times in Scotland on 4 November 2012 entitled “SNP fad for wind 'will cost us £400'”, CarbonBrief  approached us because they were apparently surprised that the costs of subsidising Scottish wind could reach nearly £1 billion per year by 2020. We provided the data which underpinned the calculation. However, this was only selectively reproduced on the CarbonBrief blog.

 

The effect of these omissions is to downplay the costs of Scottish wind aspirations. For example, their blog neglects to mention the extra costs inherent in the calculation, such as the impacts on cost of living when industrial and commercial consumers pass on their increasing energy costs through the prices of goods and services provided to households.

We reproduce below the full email sent to CarbonBrief:

Re the £410 figure: That is related, not to the 100% target, but to the amount of Scottish wind power operational, being constructed, with planning permission but not yet built plus an assumption that 50% of the amount currently in planning will be consented and built.  About 3GW is operational in Scotland, nearly 4 GW is under construction or with permission awaiting construction and more than 4 GW is in the planning system. These figures come from DECC’s planning database.

The total we used for 2020 then is just under 9 GW assuming no more than is currently in the system is built before 2020.

With a load factor of 27%, a ROC band of 0.9 ROCs per MWh and a subsidy rate of £50 per ROC, this equates to subsidy cost of approx. £1 bn per annum. On top of this there are specific wind integration costs (extra grid and grid strengthening, capacity payments for standby backup plant, constraint payments to wind farms when the grid cannot integrate all the wind power generated). These have been estimated by Colin Gibson, formerly power Networks Director at National Grid. See our work on Fuel Poverty – link at http://www.ref.org.uk/publications/245-energy-policy-and-consumer-hardship for further details. The integration costs add another £60 per MWh bringing the total costs of Scottish wind power to £2.2 bn per annum. If we assume households bear a share of the costs in proportion to their usage (i.e. that large industrial users do not get discounts which is by no means a certainty), then one third would bear directly on households. i.e. £740 million per annum or £300 per household assuming 2.4 million Scottish households (one tenth of GB total). The remaining £1.5 bn, being the industrial and commercial share, will be passed on to households indirectly in the form of increased costs for goods and services.

Offshore wind costs is calculated in an analogous way where the total assumed built by 2020 is 1.7 GW, load factor 35%, ROCs 1.8 per MWh adding another £800 million, the domestic share coming to approx £100.

More information on ROCs and their prices are at http://www.ref.org.uk/energy-data/notes-on-large-scale-green-generators and http://www.ofgem.gov.uk/Sustainability/Environment/RenewablObl/Pages/RenewablObl.aspx. The estimate of £50 per MWh is near the lower end of historic ROC values from Ofgem and excludes the extra LEC subsidy which is worth about £5 per MWh so may underestimate the subsidy costs unless some policy change reduces them.

The current situation is that wind subsidies exceed £1 bn per annum; Scottish wind gets £420 million in subsidy i.e. a tenth of the population gets more than 40% of the subsidy.

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