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Windpower
finances
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To understand what motivates the developers
and energy companies you have to understand
the finances of wind power. The finances of
wind power are skewed by subsidies called ROCs.
In April 2010, ROCs will replaced by Feed-in
Tariffs - FiTs
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| What
are Renewable Obligation Certificates - ROCs |
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ROCs earn a lot of money for Windfarm operators |
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The money earned from the energy produced is
negligible compared to the income from ROCs |
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ROCs are tradeable certificates awarded to generators
of renewable energy by OFGEM |
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They were designed to incentivise the generation
of electricity from eligible renewable sources
in the UK |
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Electricity suppliers in the UK are obliged
to source an increasing proportion of electricity
from renewables - see Percentages |
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Suppliers meet their obligations by presenting
Renewables Obligation Certificates (ROCs) |
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The cost of ROCs is effectively paid by all
electricity consumers - it is on your bill |
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ROCs are cited as the main reason for energy
companies developing wind farms in rural areas |
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| How
ROCs work |
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For each megawatt hour of
energy a wind turbine company produces, the
electricity regulator Ofgem gives them one ROC
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ROCs can be bought and sold |
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Electricity companies which have more ROCs than
they need sell them |
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Energy providers that do not generate renewable
energy are forced to buy ROCs |
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ROCs are typically selling for about £90 |
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This equates to around £0.09 for each
unit of electricity generated |
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In 2007 OFGEM announced ROCs were a "very costly
way" of supporting renewable energy generation |
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| Criticisms
of ROCs |
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Prof. Ian Fells, a world leading expert on renewable
energy, stated that behind the building of windfarms
is a gold rush, created by a government struggling
to meet its own renewable energy targets. |
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It has led to developers racing to build turbines
with little care for the environment |
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The real profit comes from the sale of ROCs,
that ingenious hidden subsidy. |
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A wind farmer is allowed to create one ROC
for every 1,000 kilowatt hours of electricity
generated |
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Potentially 2628 ROCs each year for each I MW
turbine installed using a load factor of 30% for
onshore wind |
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eg A 4 MW wind farm over 25 years and assuming
one ROC is worth around £50. would generate
a subsidy of £4x25x50 x2628= £13,140,000 |
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Therefore 1 2MW turbine would make £6,570,000
over 25 years |
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So - the Scoping Report for Ingram Grange specifies
9 2MW turbines - that would make £59,130,000
over 25 years |
Ingram
Grange Windfarm Subsidies |
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The Scoping Report for Ingram Grange Winfarm
specifies 9 2MW turbines |
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Based on £50 per ROC, the subsidies over 25
years would be 9x2x25x50x2628=£59,130,000 |
ROC
Percentage Targets and Prices by Year |
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Energy providers must source a percentage of
their electricity from renewable energy |
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Either by producing it or buying in ROCs |
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This table show the annualpercentage targets
and the price |
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| Obligation
period |
%age
of Supply |
Price
(£/MWh) |
Effective
Price per Unit (p/kWh) |
| 1 April 2006 to 31 March 2007 |
6.7 |
£33.24 |
0.22 |
| 1 April 2007 to 31 March 2008 |
7.9 |
£34.30 |
0.29 |
| 1 April 2008 to 31 March 2009 |
9.1 |
£35.76 |
0.33 |
| 1 April 2009 to 31 March 2010 |
9.7 |
£37.19 |
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| 1 April 2010 to 31 March 2011 |
10.4 |
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| 1 April 2011 to 31 March 2012 |
11.4 |
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| 1 April 2012 to 31 March 2013 |
12.4 |
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| 1 April 2013 to 31 March 2014 |
13.4 |
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| 1 April 2014 to 31 March 2015 |
14.4 |
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| 1 April 2015 to 31 March 2016 |
15.4 |
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Feed-in
Tariffs - FiTs |
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FiTs should provide a long term incentive for
generators to invest in renewable energy |
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Energy companies will be obliged to buy electricity
from renewable sources at above market rate |
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eg if the retail price of electricity is13p/kwh,
then the energy companies might have to pay 40p/kwh |
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This will make investment in renewable sources
such as wind power more profitable |
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2010-11
Scale - 500kW - 5MW
Tariff p/kWh -
4.5 |
| More
Info |
| Even
the CEO of E.ON UK (formerly
Powergen) is on record as saying:
"Without the renewable obligation certificates
nobody would be building wind farms." |
Wasted
Subsidies
The Renewable Obligation subsidy system pays
for wind power at the point of generation, not
delivery. This means that even the wind-generated
electricity that is lost in transmission or
wasted because it is generated when there is
no demand is rewarded with government subsidies. |
Committee
of Public Accounts Report
The Committee of Public Accounts Report on Renewable
Energy, published in September 2005, concluded
that the Renewable Obligation subsidy system
gives undue support to wind power at the expense
of other renewable technologies. This report
estimated that the Renewable Obligation subsidy
system will be adding £1 billion a year
to electricity prices by 2010. The expansion
of distribution and transmission capacity needed
to meet the government’s 10% renewables
target will add another £1.5 billion to
consumer costs. |
Total
Labour Subsidies
According to Ofgem, the Labour government's
wind subsidies currently stand at £485
million a year.
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This
is all about subsidies - not about being green
"Wind farms get around three times as much
in subsidy - a mixture of selling ROCS [renewable
obligation certificates] and a share of fines
paid by non-renewable plants - as they do from
selling electricity"
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A Quote
Wind turbines are a quick and cheap way for
power companies to avoid penalties for not meeting
government targets on renewables and for gaining
subsidies. |
Royal Academy of
Engineering 2004 Report
According to a report by
the Royal Academy of Engineering in 2004 (see
ref 17) the cost of generating electricity from
onshore wind farms is 5.4 pence per kWh with
standby generation. The cost of generating electricity
from offshore wind farms is 7.2 with standby
generation. (The cost of the standby generation
capacity was based on the cost of an open-cycle
gas turbine, which is the cheapest new plant
option.) In comparison, the cost of generating
electricity from gas-fired (CCGT) plant is 2.2;
from nuclear fission plant, it is 2.3, which
includes decommissioning costs. (Decommissioning
costs are assumed to be neutral in the calculations
for the cost of wind power. |
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