Make clear the risks of wind farm
WE built an energy-from-waste plant much larger than we needed on the premise that we could take waste from elsewhere. The plan never worked out, and in effect the taxpayer has been paying ever since. The Waterfront leisure pool was supposed to make money, but ended up costing nearly half a million per year. Our speculation record is not great.
A government wind-farm supporter recently told an audience that one of its advantages is that it requires no subsidies. It was money for nothing, he implied. This is certainly not true. It is true that the cost of offshore wind has fallen since the UK government’s first auction in 2015. Thanks to low interest rates, and a flood of money looking for green investment, the price per MWh fell to the equivalent of £37.50 last year. It has subsequently increased by 166%.
The problem is that the record low interest rates created an artificially low price and prices have risen to more realistic levels. Large Swedish energy company Vattenfall estimates its cost have risen by 40% and have ceased working on the multi-billion-pound Norfolk Boreas windfarm. At the last auction the UK government set the maximum price at £60 per MWh in 2023 prices. No investors were interested.
The UK auctions offer 15-year contracts guaranteeing top-ups from bill payersif the wholesale electricity price falls below a certain level. If the wholesale price is higher than the strike-price the UK government keeps the money.
The government has now increased the price to a maximum subsidy level closer to £100 per MWh for the next auction. Recent activity means Jersey’s Offshore Wind Feasibility Study, which incidentally lacks serious financials and openness about financial risk (as a minimum there should be a worstcase financial scenario calculation), is already out of date.
These windfarm contracts de-risk the investors, but in effect move the risk to the consumer, who could end up paying higher bills than they should if wholesale prices fall sharply. Furthermore, if the wind farm is larger than local requirements, due to the government’s desire to speculate, our electricity consumers will need to be ring-fenced so they do not pay the losses on their excess capacity speculation.
These losses must ultimately be borneby government ie. all taxpayers rather than based on electricity usage. The wind-farm investors will want to be paid regardless of whether the excess electricity is sold as they won’t build without a guaranteed income flow.
Also to be factored in is the escalating cost of decommissioning (removing turbines, foundations, cables, etc), a complex and expensive endeavour, and rising maintenance costs – both of which often under-estimated.
In our rush to renewable energy, we must not forget that environmental degradation takes many forms. Climate change is a fact, whether we should be trying to profit from it is questionable.
The government presentation has made it look too good to be true, and of course it is. In my opinion the whole process has not been handled in a professional manner and if a regulated entity ran such presentations regarding investment risk they would be heavily fined or closed down by the JFSC.
We have a new government in office.
Hopefully they will be more open with the public and not try and lead them by the nose.
External investors will probably be willing to provide the cash to build a windfarm, but they will want a decent return on their investment. Ultimately, you and me risk underwriting the risk and paying the cost through higher electricity bills and higher taxes.
A government wind-farm supporter recently told an audience that one of its advantages is that it requires no subsidies. It was money for nothing, he implied. This is certainly not true. It is true that the cost of offshore wind has fallen since the UK government’s first auction in 2015. Thanks to low interest rates, and a flood of money looking for green investment, the price per MWh fell to the equivalent of £37.50 last year. It has subsequently increased by 166%.
The problem is that the record low interest rates created an artificially low price and prices have risen to more realistic levels. Large Swedish energy company Vattenfall estimates its cost have risen by 40% and have ceased working on the multi-billion-pound Norfolk Boreas windfarm. At the last auction the UK government set the maximum price at £60 per MWh in 2023 prices. No investors were interested.
The UK auctions offer 15-year contracts guaranteeing top-ups from bill payersif the wholesale electricity price falls below a certain level. If the wholesale price is higher than the strike-price the UK government keeps the money.
The government has now increased the price to a maximum subsidy level closer to £100 per MWh for the next auction. Recent activity means Jersey’s Offshore Wind Feasibility Study, which incidentally lacks serious financials and openness about financial risk (as a minimum there should be a worstcase financial scenario calculation), is already out of date.
These windfarm contracts de-risk the investors, but in effect move the risk to the consumer, who could end up paying higher bills than they should if wholesale prices fall sharply. Furthermore, if the wind farm is larger than local requirements, due to the government’s desire to speculate, our electricity consumers will need to be ring-fenced so they do not pay the losses on their excess capacity speculation.
These losses must ultimately be borneby government ie. all taxpayers rather than based on electricity usage. The wind-farm investors will want to be paid regardless of whether the excess electricity is sold as they won’t build without a guaranteed income flow.
Also to be factored in is the escalating cost of decommissioning (removing turbines, foundations, cables, etc), a complex and expensive endeavour, and rising maintenance costs – both of which often under-estimated.
In our rush to renewable energy, we must not forget that environmental degradation takes many forms. Climate change is a fact, whether we should be trying to profit from it is questionable.
The government presentation has made it look too good to be true, and of course it is. In my opinion the whole process has not been handled in a professional manner and if a regulated entity ran such presentations regarding investment risk they would be heavily fined or closed down by the JFSC.
We have a new government in office.
Hopefully they will be more open with the public and not try and lead them by the nose.
External investors will probably be willing to provide the cash to build a windfarm, but they will want a decent return on their investment. Ultimately, you and me risk underwriting the risk and paying the cost through higher electricity bills and higher taxes.