Move wind farms on to new contracts and save households £18bn, says Energy UK


he trade body for the energy industry is backing a plan to ensure that older wind and solar farms return some of the massive windfalls they are getting amid hugely inflated electricity prices.

Energy UK said households across Britain could save up to £18 billion under the plan, or £250 per household.

The plan would move wind and solar farms built under the old Renewables Obligation subsidy scheme on to the newer Contracts for Difference (CfD) system.

This would mean that when electricity prices are unusually high, these old wind turbines would pay back some of their windfall profits straight to households and businesses.

On top of the estimated £10.8 to £18 billion that households could save every year, the plan would save organisations between £6.7 billion and £11.1 billion, Energy UK said.

Energy UK deputy director Adam Berman said: “The current energy market doesn’t allow customers to fully benefit from the cheapest form of electricity – domestically produced low-carbon generation.

“This proposal could reduce bills by up to £18 billion per annum, delivering much needed cuts to bills for both households and business customers.”

Removing the link between gas and retail electricity prices will be complex and take time, but this solution provides a quick fix for up to 40% of our generation capacity

The change would sign wind farms up to a system where they are always guaranteed a set price for every megawatt hour (MWh) of electricity they produce. The guarantee is known as the “strike price”.

This means that if prices on the wholesale market are lower than the strike price, the wind farm will be handed a top-up to cover the difference.

But when prices are high – as they are now – the wind farm has to return the cash it has made above the strike price to electricity buyers.

It comes as energy prices soar for millions of households. In October, the price cap will rise to £3,549 for the average household.

But this cap would have been even higher without CfD generators. Over the October price cap generators will return £23 to each household.

This figure would increase significantly, to £150-£250, under Energy UK’s plan.

The decision is part of a larger discussion about how to ensure that cheap renewable electricity is not sold at the same price as expensive electricity generated by burning gas.

(PA Graphics) / PA Graphics

Mr Berman said: “By giving generators the chance to secure a longer term agreement with lower returns in place of selling electricity at wholesale market prices, this scheme would be a significant first step to decoupling gas from retail electricity prices.

“Removing the link between gas and retail electricity prices will be complex and take time, but this solution provides a quick fix for up to 40% of our generation capacity.

“Much will depend on the details of the scheme, but with gas prices likely to remain high for some time, we are confident that it can deliver significant savings for customers next year.”

The first wind projects won CfD approval in 2015, while the Renewable Obligation scheme closed to applications in 2017.

Around 40% of Britain’s electricity comes from Renewable Obligation contracts, which also include some nuclear power.

The proposal from Energy UK would mean these generators give up their current higher returns in return for locking in a price long-term.

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