They were hailed by the Government as “a new stage in Britain’s green energy investment boom”: five big new offshore wind farm projects, awarded £12 billion in subsidy contracts less than a year ago.
But this week, evidence is expected to emerge that the prices handed to the projects were too generous – saddling consumers with millions of pounds in needlessly high energy bill levies for 15 years to come.
The National Audit Office, Competition and Markets Authority and Public Accounts Committee have already warned that ministers may have signed consumers up to a bad deal because the contracts were awarded last April without proper competition.
On Thursday, ministers are expected to prove the point when they announce subsidies for another big offshore wind farm that was subject to competition – and that senior wind industry figures say will inevitably be cheaper as a result.
The development comes as it emerged the wind industry is lobbying Government to be allowed to build even bigger turbines onshore, in a move it claims is necessary if consumers want better value for money in return for the subsidies they pay.
Bill-payers are estimated to already pay close to £2 billion a year in subsidies for onshore and offshore wind farms.
Under Government plans to tackle climate change, ministers are offering new green energy projects contracts guaranteeing them a subsidised price – several times the current market price of power – for every unit of electricity they will generate.
Three offshore wind farms due to start generating power in 2017 were last year awarded contracts at £150 per megawatt-hour of electricity, while two others due to be running by 2018 or 2019 were offered £140.
In total, the NAO estimated that over their 15 year contracts the five projects will require £11.7bn in subsidies and warned that companies could reap “excessive” profits because of the lack of competition. Margaret Hodge, chair of the PAC, said consumers were being “ripped off by incompetence in Government”.
Ministers have now introduced competition for further projects, forcing companies to take part in a “reverse auction” where the cheapest green energy projects win.
On Thursday they are expected to announce which projects have been awarded subsidies of up to £260m a year.
Keith Anderson, chief corporate officer of ScottishPower, whose proposed East Anglia wind farm is one of those competing for subsidies, told the Telegraph that the subsidy price awarded this week would be lower than last year’s.
The maximum price an offshore wind project to be built after March 2017 can bid for is £140. “It’s absolutely inevitable that if you run an auction with a cap of £140, there is an incredibly high likelihood that [final] price will end up being lower than £140,” Mr Anderson said.
By far the biggest beneficiary of the contracts awarded without competition last year was Danish energy giant DONG Energy, which owns three of the five offshore wind farms and stands to reap £7.8bn in subsidies.
Benj Sykes, head of its UK wind business, said he did not know whether his company’s projects could have been built more cheaply but he insisted the subsidy price was not “in any way giving us any sort of return that is not justified”.
He said it had been important to award the contracts in order to “maintain momentum and drive projects forward”.
Gordon Edge, director of policy at RenewableUK, said the contracts last year were “vital to engender a sense of confidence among offshore wind developers at the earliest stage of the process”.
A Department of Energy and Climate Change spokesman said: “To keep the lights on after inheriting a legacy of underinvestment in our energy system we needed to move quickly to secure new capacity. The early contracts were successful in giving investors the confidence they needed, meaning that we have been able to move to real competition for contracts much faster.”
Meanwhile, German energy giant RWE is lobbying ministers for new planning guidance to make it easier to build onshore wind turbines taller than 125m (410 feet), which it claims currently struggle to get through the planning system.
The company says that taller turbines would generate more power and require a lower subsidy price as a result.
Mike Parker, head of onshore wind at RWE Innogy UK said: “By allowing turbines that are only slightly larger, say 131m high instead of 125m, so little additional visual effect, we can reduce the cost of energy and get the same amount of total energy from fewer turbines.”
A 5 to 10 metre increase in the height of the top of the turbine would increase output by 10 to 15 per cent, with a comparable percentage reduction in the required subsidy price, RWE says.
The company is calling for “an amendment to the Government’s online Planning Practice Guidance” to reflect this.
Gemma Grimes, director of onshore renewables at RenewableUK, said: “Planning guidance is a key issue for the wind industry. There are a number of local authorities that recognise the benefits of allowing various heights of wind turbines. It’s important that both Government and industry work together to maximise cost reductions.”
Dr Lee Moroney, principal analyst at the Renewable Energy Foundation, which is critical of the sector, said: “Both those living near to wind turbines and those faced with the prospect are quite clear that they would prefer smaller turbines or none at all.
“However, the industry clearly hasn’t been listening or just doesn’t care, and is now pressing for a green light for even larger turbines. Government should reject this self-serving request for special treatment.”
She added: “As turbine height and blade length increase so visual impact and in particular noise levels will also increase, with the increase tending to be non-linear. Larger turbines will just make a bad problem very much worse.”
Kris Hopkins, the Local Government Minister, said: “This Government has changed national planning guidance (relating to onshore wind) to ensure that proper weight should be given to the protection of England’s valuable landscape and heritage. We have no plans to change planning rules to encourage taller wind turbines.
“Promoting renewable energy and protecting the global environment is a worthy cause, but we shouldn’t needlessly trash the local environment in the process.”
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