Wind and solar farms will be forced to pay for the extra costs they impose on the UK’s electricity system as a result of their intermittent nature, Amber Rudd, the energy secretary has announced.
Renewable generators will be held “responsible for the pressures they add to the system when the wind does not blow or the sun does not shine”, she said, under new plans being drawn up by the Department of Energy and Climate Change.
In a long-awaited policy “reset” speech, Ms Rudd also unveiled plans to offer billions of pounds of new subsidies for offshore wind farms, potentially doubling the UK’s offshore wind capacity with a further 10 gigawatts in the 2020s, on top of 10GW expected by 2020.
However, she said that offshore wind remained “too expensive” and that the cash would be strictly conditional on deep cost reductions.
Today I set out my plan for a consumer-led, competition-focused energy system with energy security at its heart. pic.twitter.com/2I6V5vZG8O
– Amber Rudd MP (@AmberRudd_MP) November 18, 2015
She also confirmed plans to close down unabated coal-fired power plants by 2025, but said the Government would only proceed with the policy if it was “confident” that replacement gas plants would be built in time.
Ms Rudd said she wanted “a competitive electricity market, with government out of the way as much as possible, by 2025”.
But a competitive market – in which the cheapest technologies triumph – could only be achieved “when different technologies face their full costs”.
Critics of wind and solar have long argued that they impose greater costs on the UK energy system than simply the subsidies they are paid for the electricity they produce.
If the renewable generators were forced to pay their true costs, they would require even higher subsidies to be viable – affecting their competitiveness, they argue.
For example, the fact solar will generate no power at times of peak demand on dark winter evenings – and that the entire UK wind farm fleet may produce almost no power on a calm day – may increase the total amount of power plant capacity needed on the UK system to act as backup.
As UK relies on last resort plan to keep lights on, wind farms are generating 0.5% of power: https://t.co/MwzKGwkcWD pic.twitter.com/E8Vi5k0hFz
– Emily Gosden (@emilygosden) November 4, 2015
However, as the proliferation of subsidised renewables means reliable gas-fired plants may only be needed for short periods of time as backup, they are uneconomic to build without either subsidy, or sky-high prices when they do generate.
The Government has already introduced the capacity market scheme, which will cost consumers £1bn a year, in part to address this issue by offering subsidies to new gas plants.
There may also be extra costs from wind and solar because their output may fluctuate more, and less predictably, than conventional power plants – so increasing the costs of minute-to-minute balancing of UK electricity supply and demand.
Ministers have commissioned consultancy Frontier Economics to examine the true cost of renewables and DECC is now starting to consider how these costs could be reflected.
Gordon Edge, director of policy at wind industry body RenewableUK, said: “The additional costs of having variable generation on the system are low, and for the most part renewable generators already pay these costs.
“Even up to a total installed capacity of 50GW of wind – four times what we have now – the additional cost is estimated to be only £10 per megawatt hour by the Committee on Climate Change.
“However, this doesn’t account for the fact that renewables push down the wholesale price of electricity due to having almost zero running costs.
“Research published last month by Good Energy, backed by Sheffield University, shows that wind and solar power reduced the total cost of electricity by £1.55 billion in the UK in 2014 due to this ‘merit order effect’
“If we’re going to talk about system costs, then we also need to talk about the undoubted economic benefits that wind generators also bring.”
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