December 8, 2014
U.K.

Estimates of green subsidies all at sea

Tim Webb | The Times | December 8, 2014 | www.thetimes.co.uk

Households face paying subsidies for wind farms for years longer than planned because of the slump in oil prices, according to a former government adviser.

Under a new subsidy regime, onshore wind farms are guaranteed payments worth about twice the present market rate for electricity for 15 years.

Offshore wind farms stand to receive about triple the present rate for the same period via the levies on household energy bills.

The government has claimed that the subsidies will gradually disappear in the 2020s as gas prices rise.

However, oil prices have fallen from $100 to $70 since September because of oversupply.

The forward UK gas price has also fallen by about 8 per cent over the same period, making renewables more expensive compared with gas plants.

Dieter Helm, professor of energy of Oxford and a former adviser to the Department of Energy and Climate Change, said: “If the gas price goes down, it widens the gap between the wholesale cost of electricity and the cost of renewable subsidies. The subsidy is not going to disappear as DECC predicted.”

Experts such as Aurora, the energy research company, think that the government’s gas price forecasts were high even before the fall in oil and gas prices.

Now the gap between what the government forecast and that of the market is even wider.

For 2016, for example, the forward gas price is £5.40/MMBtu compared with a government forecast of £6.4/MMBtu.

By 2021, the government forecast of £6.3/MMBtu is almost a quarter higher than the market’s figure of £4.8/MMBtu.

The government has earmarked increasing consumer subsidies for renewables up to £7.6 billion by 2020, but Aurora estimates that the subsidies will cost consumers at least £100 million more than expected each year.

URL to article:  https://www.wind-watch.org/news/2014/12/08/estimates-of-green-subsidies-all-at-sea/