The UK could deploy 1 GW of onshore wind under the contract for difference (CfD) regime without subsidy, according to a report released today by industry body Scottish Renewables.
The study, conducted by Baringa Partners, looked into the cost of a potential 1-GW auction, where established renewable energy technologies, including onshore wind and ground-mounted solar, compete for 15-year CfDs. Mature technologies in the UK are currently locked out of bidding for long-term contracts for electricity generation. Scottish Renewables called for this to change.
The study assumes that the auction for mature renewables takes place in 2018/19, with projects coming online between 2021 and 2023. It estimates that the auction would clear at GBP 49.4 (USD 61.8/EUR 58) per MWh, in real 2017 terms, entirely on onshore wind as in the UK it is more competitive than solar.
Successful projects will receive top-up payments above the wholesale power price in the first years but will provide overall savings to consumers. According to the report, the 1 GW of capacity will need to receive GBP 8 million per year in the first five years. For the remaining years, however, the generators will pay back an average GBP 7 million per year due to expected wholesale price rises. On a present value basis, this will mean a net budget payback of GBP 18 million over the period in real 2017 terms.
Scottish Renewables said that the capacity delivered through the auction, most of which to be in Scotland, would result in over GBP 1 billion of private sector investment across the UK. It would also offset some 8 million tonnes of carbon dioxide (CO2) during the 25-year lifetime.
“Even with no direct subsidy required, the government can still play an important role in offering a low-risk route to market for new onshore wind via the CfD mechanism,” commented Peter Sherry, senior manager at Baringa Partners.