Three new windfarms – Triton Knoll in Lincolnshire, Hornsea in Sheffield and Moray in Scotland – have been awarded contracts that have seen the price of offshore wind fall to record lows. The three new windfarms will be delivered in 2021-23 and have a generating capacity of 3.2GW. This is the same capacity as the nuclear power station being built at Hinkley Point C. However, the windfarms can be built and made operational in a far shorter time than the nuclear reactor and they cost far less. What does this fall in the cost of renewable energy mean for the industry and those who work in it?

Subsidies and Auctions

Under the current system, if the market price of an hour of energy is £50 but a company needs to sell it for £95 to make a profit, the government gives the company that £45 difference as a subsidy. The government auctions the contracts to build and run the windfarms. Energy companies bid the lowest guaranteed price at which they can offer electricity. The lowest bids cost the government the least and win the auction. 

The guaranteed price of power for the new windfarms was expected by industry figures to go as low as £70 per megawatt hour, but in fact went far lower. Denmark’s Dong Energy will receive £57.50 for Hornsea, as will Spain’s EDP for Moray. Germany’s Innogy will receive £74.75 for Triton Knoll; this higher cost is a reflection of the project being completed earlier.

Price Drop

Contracts awarded in 2014 were at £155 per MWh, this incredible price drop of 62.9% in such a short period has been attributed to the technology maturing as well as larger turbines being built to better designs that use less steel. Low bids were also thought to be a response to the government not setting out its agenda for further auctions – £440million a year for auctions held before 2020 had been allocated, but no timetable has been set since the general election in June. 

Hinkley Point C was awarded a strike price of £92.50 per MWh, in negotiations between EDF and the government in 2013. The nuclear reactor has been dogged by delays – it was originally due to be providing energy in time for this Christmas! – and the cost to consumers over the life of the project is now at £50billion, more than eight times the £6bn estimate in 2013. So with the price of offshore windfarms dropping dramatically, and Hinkley’s time line so far being as dramatic as a series finale of Game of Thrones, what’s the future of Nuclear? 

Future of UK Energy 

Green Alliance, an independent thinktank, say any new nuclear sites need to lower their prices by at least 30% to compete with renewables. Onshore wind and solar are cheaper than gas plants, and with offshore wind now at a record low – it’s becoming a less attractive option for companies to invest in nuclear. Hinkley is unlikely to be abandoned, but further sites that EDF or their Chinese partners were planning to build will be faced with greater hesitation. Next month a flagship government review of energy costs is due, which is likely to shape policy and future developments. 

Job Numbers

Offshore wind currently provides almost 20,000 jobs in the UK, and obviously these three new windfarms will mean more opportunities, investment and growth for the sector. Despite deep cuts in recent years, oil and gas supports over 300,000 UK jobs and is expected to provide two thirds of the UK’s energy mix by 2035. So whilst jobs in renewables are growing, oil and gas are still the major player in the UK. The UK civil nuclear supply chain employs over 64,000 people, although many of these jobs are indirect or not part of energy supply. Globally jobs in renewables are booming, earlier this year it was revealed that in the US solar employs more than coal, gas and oil combined. 

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