U.K. nuclear and gas generators have been put on alert after offshore wind showed it could beat them on price this week.
“Today’s results mean that both onshore and offshore wind are cheaper than gas and nuclear,” said Hugh McNeal, chief executive of the U.K. renewable energy trade association RenewableUK, following the outcome of competitive auctions, which yielded record-low prices.
Two offshore wind projects, Hornsea 2 and Moray, emerged with a price of just £57.50 (USD $76.34) per megawatt-hour, while a third, Triton Knoll, came in at £74.75 ($99.22).
The prices, down by as much as 51 percent compared to the average in the U.K.’s last subsidy round in 2015, were cheaper than the levelized cost of gas, based on figures from the U.K. Department of Business, Energy and Industrial Strategy (BEIS), RenewableUK said in a statement.
They also undercut the cost of new nuclear power, which in the U.K. is pegged at £92.50 ($122.75) per megawatt-hour under a "contracts for difference" agreement for Hinkley Point C, a 3.2-gigawatt nuclear project planned for the southwest of the country.
“The cost to the U.K. taxpayer of subsidizing offshore [wind farms] has plummeted by more than 50 percent and is now well below the price the government has guaranteed to the developers of the contentious Hinkley Point nuclear power plant in Somerset,” wrote the Financial Times.
The report also noted that Hinkley Point C’s strike price is rising with inflation and has been guaranteed for 35 years from when the plant enters operation. The offshore wind contracts, in contrast, are for 15 years.
The news prompted nuclear firms to rush out statements in defense of their technology, emphasizing the fact that offshore wind cannot guarantee generation during low-wind periods.
The French utility EDF, which is tasked with developing Hinkley Point C, said new nuclear “remains competitive for consumers who face extra costs in providing backup power when the wind doesn’t blow or the sun doesn’t shine.”
And Rolls-Royce added that "the small modular nuclear reactor being developed by its consortium could deliver power at £60 [$79.63] per megawatt-hour,” Reuters reported.
Hornsea 2, Moray and Triton Knoll were among 11 projects selected by BEIS to provide more than 3 gigawatts of new generation capacity from less-established renewable energy technologies, including tidal and biomass. The auction excluded solar and onshore wind.
Dong Energy is set to develop Hornsea 2 off the coast of Yorkshire, and EDPR and Engie are due to build the Moray project off the northeast coast. Both projects are scheduled to come on-line during 2022 and 2023.
Innogy and Statkraft, meanwhile, will develop Triton Knoll off the coast of Lincolnshire with a slightly shorter timeline, coming on-line around 2021 or 2022.
In a press statement, Richard Harrington, Minister for Energy and Industry, highlighted the importance of offshore wind within the U.K.’s industrial strategy.
“We’ve placed clean growth at the heart of the industrial strategy to unlock opportunities across the country, while cutting carbon emissions,” he said. “The offshore wind sector alone will invest £17.5 billion [$23.23 billion] in the U.K. up to 2021 and thousands of new jobs in British businesses will be created by the projects announced today.”
Rhodri James, manager for policy and innovation at The Carbon Trust, which leads the U.K.’s Offshore Wind Accelerator research and development program, said “people are still trying to put their jaws back in place” after the outcome of the auction.
The U.K. price cuts, which follow the emergence of "subsidy-free" projects in Germany earlier this year, could prompt interest in developing offshore wind worldwide, he said.
“What you would hope is that future governments would support a further build-out of offshore wind,” James told GTM. “I think we’ll see more emerging markets showing interest. And you’d like to see the U.K. government increasing their targets for the technology.”
But another Carbon Trust expert, offshore wind associate Michael Stephenson, warned that offshore wind is in danger of becoming a victim of its own success.
“Obviously, the prices are really good,” he said, “but the prices are predicated on further innovation and further hard work.”