United Kingdom

United Kingdom

Wind prices equal gas in Scotland

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"Stunned," is the British Wind Energy Association's reaction to the low prices bid into the latest round of renewable energy support in Scotland. Bids for wind energy schemes begin at less than two pence a kilowatt hour. At £0.0189/kWh this makes wind competitive with all forms of conventional electricity generation -- including gas. It is the first time that wind prices have dropped to the level of those of fossil fuel.

Ninety wind schemes for 478 MW bid for contracts in the third round of the Scottish Renewables Order (SRO-3). In total, 144 final bids were received covering a range of renewable technologies, including hydro, wave, biomass and waste to energy. They are all competing for a slice of the 110-120 MW on offer.

Wind emerges as the cheapest technology overall and has achieved the greatest price reductions from previous competitions. Wind schemes of over 1 MW in size range in price from £0.0189 to £0.0316/kWh, with an average of £0.0251. This is 35% lower than bids into SRO-2 -- the previous round of support. Small projects average £0.0337/kWh. "It really knocks the economic argument on the head," comments the Nick Goodall of the British Wind Energy Association (BWEA). "The big question is, are they going to get built?" he adds.

This is a valid question posed by many in the industry. To some extent, the low prices reflect Scotland's very high wind speeds. But in addition, developers are apparently assuming that by the time they build their wind farms, wind turbine prices will have fallen even further from today's levels. Up to five years is allowed for development before the 15 year SRO power purchase contracts on offer start their count down.

The bid prices were published on December 22 by the Office of Electricity Regulation in advice on setting the order to the Scottish industry minister, Brian Wilson. But details of the wind bids were revealed a few weeks before by John Brown of the Scottish Office to an astonished audience at a BWEA meeting in Edinburgh.

The advice was one of Stephen Littlechild's last activities as Electricity Regulator, before his position was taken by Callum McCarthy at the start of the year. McCarthy is the first UK Energy Regulator with responsibility for both electricity and gas.

In exploring options for making up the order, Littlechild pointed out that a least cost combination of projects would consist exclusively of large wind schemes. A more likely option, however, will involve a diversity of technologies. Indeed, Wilson has already said that no single technology will take more than 50% of the order. Littlechild advises an order made up of 42 projects from just three technology bands: nine large wind schemes, 17 small wind and 16 waste to energy. The cost to the consumer would be about £117 million.

The Scottish Office says it expects to announce contracts in the spring.

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