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REF Blog

Moray East Windfarm: The Benefits of Deferring CfD Uptake & a Remote Location

Summary

On its website the Moray Offshore Windfarm (East), known as Moray East and comprising one-hundred 9.5 MW turbines located off the North East coast of Scotland, describes itself as a “highly competitive offshore wind project”.

It is certainly notable for its extremely high levels of income, over £1 billion since it began generating in June 2021 and up to July 2023, with a strikingly high average of £234 per megawatt hour generated, well in excess of the average price of £168/MWh, received by gas-fired generators in the same period.

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Why are “Unsubsidised” Wind Farms Receiving Constraint Payments?

Payments to wind farms to reduce output are an ongoing national scandal, with the cost to consumers now totalling well over £1 billion since the payments began in 2010.

We have repeatedly observed that the prices charged by wind farms to reduce output not only routinely exceeded the subsidy income lost when constrained but were hard to justify in any case. Grid congestion preventing dispatch is a foreseeable commercial risk and the windfarms should not be compensated at all for such an eventuality.

However, it has been accepted by government and the regulator that such compensation – for lost subsidy – should be paid.

However, in recent months Scottish wind farms that are not in receipt of income support subsidy, so called “subsidy-free”, wind farms have also been charging the electricity system operator to reduce output when generation in Scotland exceeds grid capacity and local demand.
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Constraint Payments to Wind Power in 2020 and 2021

Large volumes of wind energy are being discarded in Scotland in order to preserve grid stability, with a fleet average of over 13% of generation constrained off in the years 2015 to 2021, inclusive, with a high of 19% of generation in 2020. Some wind farms have been discarding between 20% and 50% of their output, while being rewarded with generous constraint payments from the electricity consumer for doing so. The reductions in environmental benefits are not given adequate weight in the planning system, where the low marginal benefit of additional wind capacity appears to be poorly understood. This blog offers detailed data on the volumes of wind energy constrained off at a fleet level in Scotland between 2010 and 2021, and for every individual wind farm in 2020 and 2021.

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Offshore Wind Subsidies per MWh Generated Continue to Rise

It is frequently claimed that the subsidy cost of offshore wind farms has fallen over the past few years. The UK government itself is on record as recently as November 2020 claiming that:

Government support to unleash the potential of offshore wind generation has seen the cost of it fall by two thirds in the last 5 years.

Echoes of these claims are commonplace. The Times (08.07.21) reports the think tank Policy Exchange as remarking that “the cost of offshore wind power had fallen steeply in recent years”.

As work by Professor Gordon Hughes has shown, the capital and operating costs of offshore wind do not support these observations, and, as this blog will demonstrate, it is a matter of fact that the cost of consumer subsidies to offshore wind per unit of electrical energy generated (MWh) has risen and continues to rise year on year.

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Costs, Performance and Investment Returns for Wind Power Presentation

There is ongoing interest in Professor Gordon Hughes’ empirical work on the economics of wind power, with occasional requests for talks and summaries, and updates and recent reflections. The attached paper was presented recently to a London-based financial organisation. It summarises afresh the work published by REF in 2020, and offers additional comments.


Public Accounts Committee Evidence on the Economics of Small-Scale wind generation in NI

On the 10th of April this year Professor Gordon Hughes of the University of Edinburgh submitted a paper on the economics of small-scale wind generation in Northern Ireland as formal evidence to the "Inquiry into Generating Electricity from Renewable Energy” conducted by the Public Accounts Committee of the Northern Ireland Assembly.
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The reality of relying upon renewable power: a personal view

Professor Gordon Hughes has written the following blog describing his experience of sourcing reliable energy supplies to power a remote rural broadband network in Scotland.

I have written a number of papers on the costs and performance of wind power and other forms of renewable energy. Even serious empirical research provokes responses along the lines that any questioning of the merits of renewable energy amounts to original sin or blasphemy. There is little that I – or anyone – can do to convince those who treat the superiority of renewable energy as an article of faith. Still I wonder how much practical experience such commentators have of the reality of relying solely on renewable power in commercial applications. For this reason other readers may be interested in what I have learned as an economist faced with the practical issue of relying upon renewable energy.
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The Shetland Islands: Renewables and Corporate Interests

Renewable energy is often claimed to empower local communities as well as providing economic benefits. Part of the logic is that renewables seem to offer “energy independence”. The truth is less straightforward. In this article, co-authored with Professor Gordon Hughes of Edinburgh University, REF examines the case of the Viking Energy wind farm in the Shetlands and more broadly that of Scotland itself.

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Wind Power Economics – Rhetoric and Reality

The following is the text accompanying the talk given by Professor Gordon Hughes, School of Economics, University of Edinburgh on 4 November 2020 to launch his two new reports for REF on:

Wind Power Costs in the United Kingdom  and

The Performance of Wind Power in Denmark

For a recording of the event, please click here.

It is difficult to make predictions, especially about the future. [Attributed variously to Niels Bohr (Nobel Prize in Physics) and Sam Goldwyn (movie mogul)]

The theme of my talk is the disparity between predictions about the future costs and performance of wind power (especially offshore wind) - the Rhetoric - and the actual evidence that is available on what it costs to build and operate wind farms and the amount of power they produce over their lifetime – the Reality.
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