Offshore wind power costs are set to fall by 50% over the next five years, becoming cheaper than nuclear power for the first time.
Three offshore wind projects secured government subsidies, with two agreeing to build the farms for a “strike” price of £57.50 per megawatt per hour. Comparatively, new nuclear power plants agreed a subsidy of £92.50 per MWh for 2022-23.
The latest round of government auctions, where the lowest bidder wins, defied even the most optimistic of experts as rates halved from those agreed in the first contracts awarded in 2015.
The contracts are fixed for 15 years, paid for by consumers on their energy bills, which is 20 years less than terms agreed for Hinkley Point C nuclear station, being built in Somerset.
With significantly lower costs and shorter contract terms, supporters of renewable energy see this as a victory. Many believe that offshore wind and similar technologies are the future of the UK’s energy policy as the government pushes to meet carbon emission targets.
Caroline Lucus, Green Party co-leader, said: "This massive price drop for offshore wind is a huge boost for the renewables industry and should be the nail in the coffin for new nuclear. While clean, green wind power has the potential to seriously cut people's bills - the government's undying commitment to new nuclear risks locking us into sky high prices for years to come. Put simply, this news should be the death knell for Hinkley.”
The government recently announced plans to ban the use of petrol and diesel in new vehicles by 2040, and the nuclear industry believes the rise in the popularity of electric cars creates room for all low carbon power sources to work together.
“As National Grid have recently highlighted, the amount of power we will need as road vehicles shift from petrol and diesel to clean electricity will increase. We need new infrastructure to meet that pressing need,” said Tom Greatrex, chief executive of the Nuclear Industry Association.
“With two thirds of the UK’s currently despatchable generation capacity due to retire by 2030, including all but one of the current nuclear fleet, the UK will need the full range of low carbon technologies to provide the reliable, secure and readily available power for homes, businesses and public services,” he said.
The round of auctions resulted in the awarding of 11 new contracts, including biomass and waste plant energy schemes, which will help reduce costs across the renewable energy sector.
The government says the new projects will generate enough power for 3.6m homes and create thousands of jobs.
“The offshore wind sector alone will invest £17.5bn in the UK up to 2021 and thousands of new jobs in British businesses will be created by the projects announced today. This government will continue to seize these opportunities as the world moves towards a low carbon future, and will set out ambitious proposals in the upcoming Clean Growth Plan,” said Richard Harrington, minister for energy and industry.
ExxonMobil’s report Outlook for Energy: A view to 2040 said global demand for energy is expected to grow by a quarter between 2015 and 2040 due to population growth, a doubling of worldwide economic output and the rapid expansion of the middle class.
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