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The Times has reported that the Hornsea 2 windfarm, which had a contract to sell power at £73 per megawatt hour, will instead sell in the open market, where prices have averaged £200 per megawatt hour this year, and reached £508 last week.
Britain’s struggling energy consumers are likely to end up paying a billion pounds extra for Hornsea’s electricity over the next 12 months.
The new Prime Minister should urgently look into the legal options for cancelling or revoking these poorly written contracts, the spirit of which are being grotesquely abused to the huge disadvantage to British consumers.
By 2026, there could be more than 16GW of offshore windfarms exploiting the perverse loophole (Moray East, Hornsea 2, Triton Knoll, InchCape, Seagreen Phase 1, Neart na Gaoithe, Dogger Bank A, Dogger Bank B, Dogger Bank C, Sofia, Hornsea 3, Norfolk Boreas, Moray West and East Anglia Three.)
Assuming they deliver 50% of capacity each year, and the differential between market price and CfD price remains at £130/MWh, the cost to consumers will be £9billion per year, at a cost of £337 per household.
Time for emergency legislation to force them to go to their contracted rates?
Uk gov writing crap contracts. Who knew....
They need to decouple renewable electricity prices from those generated from gas.
Totally misleading article from climate change deniers. The wind farm operators can only sell at market rate for a limited time.
For balance:
What were the actual terms of the contract? Not The Times version.
I thought they just agreed a strike price und a CfD (contract for difference), the minimum they would get which would ensure the project was viable. Above that they would make more money themselves?
Could be wrong, when I was discussing this with asset owners I was more interested in selling them corrosion protection.
The idea was if market prices were below the strike price a subsidy would pay the difference. Likewise if market prices were above the strike price they would repay the difference.
https://www.gov.uk/government/publications/contracts-for-difference/contract-for-difference
But as the current market prices are far above the strike prices the new wind farms are delaying activating the CFDs.
Seems an over complicated system for me. If they want to incentivise wind farms with a fixed price just offer a fixed price contract?
Crap contracts.
The BEIS having to ask wind farms to activate the CFDs.
Totally misleading article from climate change deniers. The wind farm operators can only sell at market rate for a limited time.
What is a limited time? A Limited time appears to be well over a year. Why can they sell at market rate at all? They have got themselves a one way bet at our expense. Prices low - activate CFD immediately. Prices cripplingly high- take market prices for a substantial period.
Wind power, as in windmills are probably not a long term solution as they are expensive, and the gear boxes are expensive to maintain.
And wind isn't a constant...
... That said...
I'm pretty sure it's much worse than it needs to be because of price gaouging contractors that are charging a lot more than they need to..so we need to look at the people issuing the maintenance contracts, and which Conservative MP's they are in bed with.
That's where the real issue resides.
My (limited) understanding of the electricity market is that nuclear works much the same.
Basically gas is used as a benchmark so when it’s insanely expensive, everything else gets to also be insanely expensive, no matter the cost of production.
NB gas no more expensive to produce either, it’s just that everyone wants more of a limited supply than is actually possible.
There are a lot of ‘laws of unintended consequences’ in operation and ‘we didn’t model for that’ scenarios.
If the contract lawyers in BEIS, Dept for Energy or whatever are like the other Civil Service lawyers, they’ll be rubbish - they have very little wriggle-room, have little scope to move out the boilerplate they’re given and have very little opportunity to consult external specialist help. The power generators will have contract lawyers that will run rings around the Government ones.
Contract hardly matters. Just impose a windfall tax like they have on O&G producers.
My (limited) understanding of the electricity market is that nuclear works much the same.
Basically gas is used as a benchmark so when it’s insanely expensive, everything else gets to also be insanely expensive, no matter the cost of production.
It's supply and demand, but the actual economic principal, not the dumbed down version people quote (which is really just the supply side or even just getting it wrong and quoting economies of scale).
On the supply side everyone gets paid the max price and makes a profit based off that. If you need 10 units of something, and factories can produce 10, you put your tender out and pick the cheapest. If you need 100 units then you have to pick the 10th cheapest, and all the others (in a properly functioning marketplace) know this and charge the same, the best factories then make the most proffit.
Demand lead pricing is the opposite, the more you drop the price, the more people will buy the item, and everyone pays the same price. The "law of supply and demand" is when you plot both on a graph and the crossing point is the price/number you should order.
The reason prices have shot up is while we need the same ammount of electricity, and only a small fraction of its cost to produce is linked to gas, the whole market hinges on that, because it's theast resort and they can't not generate it. With any luck capitalism will do its job and invest in cheaper renewables, because it wants to make bigger margins just as much as we want to pay less.
Be very, very wary of anything Net Zero Watch publicises.
Net Zero Watch are heavily touting fracking as our way out of the energy crisis, which unsurprisingly won't make a jot of difference to our energy bills. Some shady Tory supporting types will no doubt benefit lucratively though, so that's all fine.
Basically gas is used as a benchmark so when it’s insanely expensive, everything else gets to also be insanely expensive, no matter the cost of production.
Kind of this.
“Just impose a windfall tax like they have on O&G producers”
There’s some irony there surely?
OP, As for links to netzerowatch climate change/damage denier's, capitalist, non accountable pressure group, well you need to take a good hard look at yourself!
They have got themselves a one way bet at our expense.
This is how every large contract with UK gov seems to work, no?
Bank losing money? No problem, have a bailout.
Can't find your backside with both hands? Married to a politician? Don't worry, have an insanely overpaid contract for some plastic tat that doesn't meet the spec and can't be used.
Don't know how to write software? Have a hundred mil to "have a go".
'Wind power, as in windmills are probably not a long term solution as they are expensive, and the gear boxes are expensive to maintain.'
Absolute nonsense. Compared to any alternative the OPEX is as cheap as it comes and the CAPEX isn't bad, especiallt compared to any alternatvies. For energy production OPEX rules, as the gas price problems demonstrate.
Just impose a windfall tax like they have on O&G producers.
The offshore windframs have already gone through a Govt auction process to get access to the seafloor as its Crown Estate so there has already been an effective windfall tax:
The thing to remember is that the Strike prices (the minimum price that a power station can sell energy for) is there to ensure that projects are viable as they tend to be very long term investments and if this is adversely affected by market fluctuations then it just discourages any new power stations being built.
IIRC Hinkley Point C has a strike price of £93/MwH which everyone was screaming about back when the contract was signed.
The market is going to reverse the situation as new power stations are built especially if they're renewables (wind, solar etc) as they are far cheaper to run than Gas, Nuclear or Coal. Building Gas, Coal or CHP stations is off the table as we now have to reach Net Zero so perversely its "good" that the market rates are so high as it means that low carbon and renewables are very attractive for investors so basically the result will be a lot more wind and solar power generation being built.
The problem right now is that we are going to go through a very painful period before this happens.
Govt should absolutely be helping out on this though as there are a lot of people in the UK who will be in energy poverty and deep financial trouble very soon.
On the positive side the utterly bonkers nimbysim regarding onshore (and offshore) wind and solar should hopefully disappear.
If you think wind power selling at the market rate is a ripoff, wait until you hear about how 1920-build houses that only cost a few quid to build are being resold for a quarter of a million today! The price should obviously be fixed at the cost of production plus a fair profit margin, how does 350 pounds and 10 shillings sound for that 3-bed semi?
The offshore windframs have already gone through a Govt auction process to get access to the seafloor as its Crown Estate so there has already been an effective windfall tax:
The cost of which will have been factored into the strike price that they negotiated. If we are happy to place additional tax on O&G producers for their excessive profits why not other industries?
Be very, very wary of anything Net Zero Watch publicises.
Yup, this, very much this, shady Tufton Street 'think tank' funded by dark money from some of the worst people on the planet, including the Koch brothers.
If you want an idea of the mentality behind this lot, I strongly recommend listening to the Behind The Bastards podcast on Charles Koch.
If we are happy to place additional tax on O&G producers for their excessive profits why not other industries?
It is my view that the tax system should be used to encourage 'good' sources of power, with an eye to the future, sustainability and security of supply.
This then makes a lot of renewables or nuclear sensible, makes insulation and reducing need very sensible, while oil and gas look really daft. Yet companies will want to make every last penny they can as the ship sinks...
I think in the circumstances of such a huge and temporary windfall, a windfall tax even on renewables would be reasonable. Albeit I wouldn't want it to be so large as to act as a big disincentive. But no-one putting up a windfarm right now will be banking on 30p/unit or whatever for the indefinite future. That price won't hold up for long (in the context of a windfarm lifetime).
It is my view that the tax system should be used to encourage ‘good’ sources of power, with an eye to the future, sustainability and security of supply.
I agree that we should be looking at our entire energy mix and implementing a sensible long term strategy. Right now however we are saying that the profits that are being made by O&G producers due the high prices for O&G are bad and we are going to tax said profits. The prices that are going received by wind farm companies are also a result of those high Gas prices. So either we tax them in the same way, and effectively discourage some investment as a result of reduced profitability, or we fix the price they can sell at which will also reduce their profitability.
On the positive side the utterly bonkers nimbysim regarding onshore (and offshore) wind and solar should hopefully disappear.
All over East Anglia there are signs up saying "No to solar", quite incredible - totally harmless and visually unobtrusive, but the locals seem to hate it with a passion.
Right now however we are saying that the profits that are being made by O&G producers due the high prices for O&G are bad and we are going to tax said profits.
Up to a point we are. The taxes are going forward, so not backdated to when the O&G companies started taking it in, and they have exemptions so they can write off money spent being O&G companies, so the net effect is, as the lady put it, bugger all.
The reason prices have shot up is while we need the same ammount of electricity, and only a small fraction of its cost to produce is linked to gas, the whole market hinges on that, because it’s theast resort and they can’t not generate it. With any luck capitalism will do its job and invest in cheaper renewables, because it wants to make bigger margins just as much as we want to pay less.
Sure, but as long as gas is constrained, renewable electricity will be artificially inflated as it's a traded commodity which as you say is linked to the gas price. It's going to need an intervention to reform the market, which it looks as though the EU is going to do.
@footflaps has it.
"No Solar Desert for Grays Lane" was posted up hundreds of times around my ride along the Waveney Valley on Wednesday. As if a monoculture crop field is rife with bio-diversity...
Got a load of 'no to Welwyn solar farm' signs up around a bit of field I ride though, it's a crop field, it's hardly an SSSI but there are a few expensive houses around there so they're kicking off.
Weird how Range Rover driving, mansion dwellers who take 4 short haul holidays a year come over like Swampy's lovechild as soon as anything might be built near their favorite dog walking route.
Solar farms aren't noisy, they aren't tall, they can still be used as grazing, they don't obstruct rights of way. they're pretty unobtrusive really but NIMBY's gonna NIMB.
‘Wind power, as in windmills are probably not a long term solution as they are expensive, and the gear boxes are expensive to maintain.’
Funny how this has appeared, along with can't recycle the (fibreglass) blades.
Someone replied this to a Tweet I answered - I asked for a comparison of decommissioning costs of wind turbines vs nuclear plants. Unsurprisingly they never responded.
All over East Anglia there are signs up saying “No to solar”, quite incredible – totally harmless and visually unobtrusive, but the locals seem to hate it with a passion.
Wait until they learn most solar power is produced by a big nuclear reactor 😀
Wind power, as in windmills are probably not a long term solution as they are expensive, and the gear boxes are expensive to maintain.
I know someone has already pointed out that this is nonsense, wind is one of the cheapest forms of energy, but current generation turbines don't even have gearboxes, so it's doubly nonsense.
Wind power, as in windmills are probably not a long term solution as they are expensive, and the gear boxes are expensive to maintain.
Expensive compared to what? A nuclear reactor? A CCGT with CCUS? A bicycle?
All over East Anglia there are signs up saying “No to solar”, quite incredible – totally harmless and visually unobtrusive, but the locals seem to hate it with a passion.
Nimbyism may be their reason but in some ways I agree because we need to be growing more food crops in this country not using the space for solar panels. Domestic, public and commercial roofs are much better locations solar.
Nimbyism may be their reason but in some ways I agree because we need to be growing more food crops in this country not using the space for solar panels.
I don’t think solar farms are displacing agricultural land to any great extent. My preferred solution would be to replace golf courses with either solar installations or potato fields.
Grassland (sheep grazing) can continue quite happily around/under solar, with minimal loss of yield (a bit less direct sunlight, but also better water retention, and sunlight isn't always a limiting factor anyway). The sheep grazing cuts maintenance costs for the solar too, as means you don't need someone trimming back the growth.
More difficult for arable crops through granted. But if you replaced just half our golf courses with a mix of solar and farmland we'd have more food and vastly more renewable energy too.
phiiiiil I'm intrigued by your comment that current generation wind turbines don't have gearboxes. I've just been on the Vestas site and everything seemed to have a gearbox. How do the non-gearbox ones work? I can understand it with small fast rotating turbines, but all the big ones spin relatively slowly (spindle speeds - obviously the tip of a huge blade is shifting pretty fast 🙂 Not a turbine hater BTW, just interested in the engineering.
mick_r, some manufacturers use a direct drive coupled with a large multi-pole generator to eliminate the gearbox. See link for Enercons offering: https://www.enercon.de/en/technology/#showVideo
I'm not an engineer, it seems obvious to me though that gearboxes fail and thus eliminating them where possible is a good idea, especially with an off-shore installation!I’m intrigued by your comment that current generation wind turbines don’t have gearboxes. I’ve just been on the Vestas site and everything seemed to have a gearbox.
A quick google seems a lot of manufacturers agree: https://www.reutersevents.com/renewables/wind-energy-update/direct-drive-turbines-lean-mean-not-so-green
although not Vestas who are sticking 100% with gearbox systems: https://www.reuters.com/article/us-vestas-wind-results-gearbox-idUSKBN1FS2X0
Current solar installations cover 230km^2 of land; meanwhile 1200km^2 of agricultural land is used for biofuels, but nobody seems to complain about that. Golf courses also cover 1200 km^2.
If we really want to make use of some currently ridiculously underutilised land then we could think about solar farms on the nearly 17,000km^2 of grouse moor. Given grouse moors are terrible for biodiversity and make floods and droughts worse then that would be win-win.
Thanks for the direct drive info - will have a read. Still looks like the majority of both existing and new installations have gearboxes. Is that down to IP / licencing, or more fundamental that we need the next development step to move away from heavy / expensive / scarce magnets?
Lots of suitable roofs to fit solar panels to as well, don't lose any land that way. The hate for turbines baffles me, we have very few in reality. I look out onto 5 large ones, about a mile across the valley, I'd be more than happy for another 30, especially if the pig ugly power lines (2 sets) were removed. It's not like it's pristine moorland either, there was a coal mine and lots of open cast mining across the hill top. Quite appropriate what once produced dirty fossil fuels could now provide so much more clean energy.
The biggest irony is the banks of solar panels at the old mine site powering the pumps and mine water filtration systems. When the mine shut they left all the machinery in the pit, if they don't clean up the water the river Orwell runs orange.
That article quoted at the top is total bull. My understanding of the contracts for difference is that in return for the minimum 'strike' price for electricity delivered the generator pays back a proportion of their extra income when the price goes higher. A sort of profit sharing.
Article linked from the guardian (sorry) explains how last winter that led to £157 million cash back (£27 per household). With strike prices generally reducing on newer windfarms now coming on stream, more renewables coming on stream and higher power prices that return to the consumer should be even higher.
https://www.theguardian.com/business/2022/jan/20/paybacks-from-uk-renewables-could-cut-pounds-27-from-bills-by-end-of-winter
As for gearboxes just wait until they see the complexity of gearboxes in a gas or nuclear power station not to mention the amount of redundancy and back nuclear needs.
As other have said wind mills are comparatively cheap and quick to install, maintain and decommission compared to gas or coal power. Nuclear is literally years longer to do anything and costs a fortune to decommission.
No gearbox in a typical thermal plant. Turbines designed to spin at the right speed to get 50 Hz out of the generators.
My understanding of the contracts for difference is that in return for the minimum ‘strike’ price for electricity delivered the generator pays back a proportion of their extra income when the price goes higher.
Indeed.
As for gearboxes just wait until they see the complexity of gearboxes in a gas or nuclear power station not to mention the amount of redundancy and back nuclear needs.
The only gearboxes we had in service were the main and start/standby boiler feed pumps. The turbine was a standard Parsons 650MW unit running at 3000rpm.
Basically gas is used as a benchmark so when it’s insanely expensive, everything else gets to also be insanely expensive, no matter the cost of production.
Except, of course, anyone exporting solar to the grid.
Except, of course, anyone exporting solar to the grid.
Or getting paid for it, even if they don't have an export meter and could send it all to the immersion heater. Solar FITs were a wheeze for the middle classes. Whether that's better or worse than a wheeze for big business is debatable. But was still a scheme that just widened inequality.
Apologies I'd forgotten how inherently simple (if complex to build) steam turbines are. Expensive to make though and they need (expensive) fuel to make the steam.
Do power station size gas turbines have a gearbox between stages or in the power take off like or are they direct drive?
The FIT tariffs may look excessive now but solar panels were very very expensive and have become cheaper due to the scale of production. The feed in tariffs (particularly in Germany) gave people the confidence to install the panels, kick-starting the mass production, and bringing prices down faster than if there was no market intervention. Without the investment in FIT tariffs solar panels would still be fewer and more expensive. This is more or less how it was explained to me at a seminar earlier this summer.
The company that owns Hornsea Windfarms publishes accounts which show their average price this year is £219 per MWh. That is market price Not a cFD price. As the link shows the vast majority from UK waters.
The Times revealed this week, Orsted, who own Hornsea 2, have not taken up their contract, and are instead selling on the open market, something you will be unlikely to hear from the BBC.
All of the electricity generated by Hornsea 2 will be sold by its parent company, Orsted A/S, the Danish state owned company, formerly known as DONG.
Their Half Year Accounts show they have been selling all of their electricity generated at an average of £219/MWh this year, up from £82/MWh last year. In a full year, this price rise means a windfall profit of £4.5bn, most of which will accrue from UK operations.
So they didn't take up their contract and are taking advantage of our ****ed market. Wheres the problem?
Every power generator outside of the South East is taking advantage after getting charged by varying degrees for years.
As said, the problem isn't the profits, they are just a symptom. The problem is the market and the reforms it needs to reflect the modern world.
Wind turbines, no one is milling anything.
Grassland (sheep grazing) can continue quite happily around/under solar, with minimal loss of yield (a bit less direct sunlight, but also better water retention, and sunlight isn’t always a limiting factor anyway). The sheep grazing cuts maintenance costs for the solar too, as means you don’t need someone trimming back the growth.
Similarly and perhaps more relevant to East Anglia, geese are also totally fine. We've also looked at perching them on landfills too. And putting turbines along the northern edge of solar farms for extra productivity.
What The BBC Did Not Tell You About Hornsea 2
Because people's agenda matter I think it is important to point out that the author, Paul Homewood, is a climate change denier.
This is what he wrote in "Conservative Woman"
"In short, although it is slightly warmer than it used to be, the UK climate has actually changed very little over the years. In particular, there is no evidence that weather has become more extreme. Heatwaves have not become more severe, nor droughts"
https://www.conservativewoman.co.uk/climate-emergency-not-here/
He has criticised a whole range of people, not just the BBC, for publicising climate change. From the Brexit Party to David Attenborough.
“Rather depressingly, even the Brexit Party have fallen for the climate emergency nonsense"
And
“Inevitably rising sea levels are mentioned, and Attenborough makes the bold claim that rising seas are already displacing hundreds of thousands of people from already vulnerable coastal areas.
“I have certainly never seen this claim before, and it seems pure hyperbole to me"
Read his views on Hornsea Windfarm with this in mind.
This is a very well structured piece covering efficiency, renewables and the flaws in the UK power market.
Warning. It's long and written by someone who knows quite a lot about the industry.
https://www.linkedin.com/pulse/uk-energy-crisis-time-split-power-market-michael-liebreich/
On the positive side the utterly bonkers nimbysim regarding onshore (and offshore) wind and solar should hopefully disappear.
Really?
I'm hoping most intelligent people realise the anti windfarm links are nonsense, but also be aware Hornsea 2 only became fully operational a few days ago 😉
I read the other day that with the biggest new offshore wind turbines, just one rotation of the blades generates enough energy to run a typical UK home for 24 hours.
As a long time townie resident of Mid Herts my dismay about the proposed Welwyn solar farm is that is yet another incursion on the Green Belt. Sure, there is nothing “wild” about the area but it becomes necessary to travel ever further to get to a sense of not being surrounded by human activity.