Subsidy-free wind on the verge

This year’s energy auction, designed to encourage more renewable energy, may well see offshore wind at wholesale rates and a real shift to renewables making up the bulk of the UK’s energy supply.

The Contracts for Difference (CfD) scheme is the government’s main mechanism for supporting low-carbon electricity generation, in which producers are paid a fixed price on contract – if the wholesale rate is at a higher than the contract, producers have to pay the difference. CfDs aid renewable energy by smoothing the high upfront costs and long lifetimes with direct protection from volatile wholesale prices, and consumers from paying increased support costs when electricity prices are high.

The current generation multi-megawatt turbines are likely to be a very competitive option in the next auction as CfD as subsidies will be pegged at £65m, allowing even subsidy-free deals for offshore wind to be competitive.

Such subsidy-free renewable deals are yet to be concluded in the UK, despite the UK being the world’s leading offshore wind energy market.

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