The Times has reported that the Hornsea 2 windfarm, which had a contract to sell power at £73 per megawatt hour, will instead sell in the open market, where prices have averaged £200 per megawatt hour this year, and reached £508 last week.
Britain’s struggling energy consumers are likely to end up paying a billion pounds extra for Hornsea’s electricity over the next 12 months.
The new Prime Minister should urgently look into the legal options for cancelling or revoking these poorly written contracts, the spirit of which are being grotesquely abused to the huge disadvantage to British consumers.
By 2026, there could be more than 16GW of offshore windfarms exploiting the perverse loophole (Moray East, Hornsea 2, Triton Knoll, InchCape, Seagreen Phase 1, Neart na Gaoithe, Dogger Bank A, Dogger Bank B, Dogger Bank C, Sofia, Hornsea 3, Norfolk Boreas, Moray West and East Anglia Three.)
Assuming they deliver 50% of capacity each year, and the differential between market price and CfD price remains at £130/MWh, the cost to consumers will be £9billion per year, at a cost of £337 per household.

Net Zero Watch has condemned the Government’s green energy policies as “a national disaster.”

Time for emergency legislation to force them to go to their contracted rates?

Uk gov writing crap contracts. Who knew….
They need to decouple renewable electricity prices from those generated from gas.

Totally misleading article from climate change deniers. The wind farm operators can only sell at market rate for a limited time.

For balance:

https://www.bloomberg.com/news/articles/2022-08-31/uk-wind-farm-owner-to-miss-windfall-profit-despite-subsidy-delay

What were the actual terms of the contract? Not The Times version.

I thought they just agreed a strike price und a CfD (contract for difference), the minimum they would get which would ensure the project was viable. Above that they would make more money themselves?

https://www.4coffshore.com/news/cfd-round-two-results-are-in2c-offshore-wind-cheaper-than-gas-and-nuclear-nid6373.html#:~:text=Both%20Hornsea%20Project%20Two%20and,project%20lifetime%20of%2025%20years.

Could be wrong, when I was discussing this with asset owners I was more interested in selling them corrosion protection.

The idea was if market prices were below the strike price a subsidy would pay the difference. Likewise if market prices were above the strike price they would repay the difference.

https://www.gov.uk/government/publications/contracts-for-difference/contract-for-difference

But as the current market prices are far above the strike prices the new wind farms are delaying activating the CFDs.

Seems an over complicated system for me. If they want to incentivise wind farms with a fixed price just offer a fixed price contract?

Crap contracts.

The BEIS having to ask wind farms to activate the CFDs.

https://www.current-news.co.uk/news/beis-calls-on-companies-to-act-fairly-when-triggering-cfd-support-amid-high-power-prices

Totally misleading article from climate change deniers. The wind farm operators can only sell at market rate for a limited time.

What is a limited time? A Limited time appears to be well over a year. Why can they sell at market rate at all? They have got themselves a one way bet at our expense. Prices low – activate CFD immediately. Prices cripplingly high- take market prices for a substantial period.

Wind power, as in windmills are probably not a long term solution as they are expensive, and the gear boxes are expensive to maintain.
And wind isn’t a constant…

… That said…

I’m pretty sure it’s much worse than it needs to be because of price gaouging contractors that are charging a lot more than they need to..so we need to look at the people issuing the maintenance contracts, and which Conservative MP’s they are in bed with.

That’s where the real issue resides.

My (limited) understanding of the electricity market is that nuclear works much the same.

Basically gas is used as a benchmark so when it’s insanely expensive, everything else gets to also be insanely expensive, no matter the cost of production.

NB gas no more expensive to produce either, it’s just that everyone wants more of a limited supply than is actually possible.

There are a lot of ‘laws of unintended consequences’ in operation and ‘we didn’t model for that’ scenarios.

If the contract lawyers in BEIS, Dept for Energy or whatever are like the other Civil Service lawyers, they’ll be rubbish – they have very little wriggle-room, have little scope to move out the boilerplate they’re given and have very little opportunity to consult external specialist help. The power generators will have contract lawyers that will run rings around the Government ones.

Contract hardly matters. Just impose a windfall tax like they have on O&G producers.

My (limited) understanding of the electricity market is that nuclear works much the same.

Basically gas is used as a benchmark so when it’s insanely expensive, everything else gets to also be insanely expensive, no matter the cost of production.

It’s supply and demand, but the actual economic principal, not the dumbed down version people quote (which is really just the supply side or even just getting it wrong and quoting economies of scale).

On the supply side everyone gets paid the max price and makes a profit based off that. If you need 10 units of something, and factories can produce 10, you put your tender out and pick the cheapest. If you need 100 units then you have to pick the 10th cheapest, and all the others (in a properly functioning marketplace) know this and charge the same, the best factories then make the most proffit.

Demand lead pricing is the opposite, the more you drop the price, the more people will buy the item, and everyone pays the same price. The “law of supply and demand” is when you plot both on a graph and the crossing point is the price/number you should order.

The reason prices have shot up is while we need the same ammount of electricity, and only a small fraction of its cost to produce is linked to gas, the whole market hinges on that, because it’s theast resort and they can’t not generate it. With any luck capitalism will do its job and invest in cheaper renewables, because it wants to make bigger margins just as much as we want to pay less.

Be very, very wary of anything Net Zero Watch publicises.

Net Zero Watch are heavily touting fracking as our way out of the energy crisis, which unsurprisingly won’t make a jot of difference to our energy bills. Some shady Tory supporting types will no doubt benefit lucratively though, so that’s all fine.

Basically gas is used as a benchmark so when it’s insanely expensive, everything else gets to also be insanely expensive, no matter the cost of production.

Kind of this.

“Just impose a windfall tax like they have on O&G producers”
There’s some irony there surely?
OP, As for links to netzerowatch climate change/damage denier’s, capitalist, non accountable pressure group, well you need to take a good hard look at yourself!

They have got themselves a one way bet at our expense.

This is how every large contract with UK gov seems to work, no?

Bank losing money? No problem, have a bailout.

Can’t find your backside with both hands? Married to a politician? Don’t worry, have an insanely overpaid contract for some plastic tat that doesn’t meet the spec and can’t be used.

Don’t know how to write software? Have a hundred mil to “have a go”.

‘Wind power, as in windmills are probably not a long term solution as they are expensive, and the gear boxes are expensive to maintain.’

Absolute nonsense. Compared to any alternative the OPEX is as cheap as it comes and the CAPEX isn’t bad, especiallt compared to any alternatvies. For energy production OPEX rules, as the gas price problems demonstrate.

Just impose a windfall tax like they have on O&G producers.

The offshore windframs have already gone through a Govt auction process to get access to the seafloor as its Crown Estate so there has already been an effective windfall tax:

Crown Estate Offshore Wind

The thing to remember is that the Strike prices (the minimum price that a power station can sell energy for) is there to ensure that projects are viable as they tend to be very long term investments and if this is adversely affected by market fluctuations then it just discourages any new power stations being built.

IIRC Hinkley Point C has a strike price of £93/MwH which everyone was screaming about back when the contract was signed.

The market is going to reverse the situation as new power stations are built especially if they’re renewables (wind, solar etc) as they are far cheaper to run than Gas, Nuclear or Coal. Building Gas, Coal or CHP stations is off the table as we now have to reach Net Zero so perversely its “good” that the market rates are so high as it means that low carbon and renewables are very attractive for investors so basically the result will be a lot more wind and solar power generation being built.

The problem right now is that we are going to go through a very painful period before this happens.

Govt should absolutely be helping out on this though as there are a lot of people in the UK who will be in energy poverty and deep financial trouble very soon.

On the positive side the utterly bonkers nimbysim regarding onshore (and offshore) wind and solar should hopefully disappear.

If you think wind power selling at the market rate is a ripoff, wait until you hear about how 1920-build houses that only cost a few quid to build are being resold for a quarter of a million today! The price should obviously be fixed at the cost of production plus a fair profit margin, how does 350 pounds and 10 shillings sound for that 3-bed semi?

The offshore windframs have already gone through a Govt auction process to get access to the seafloor as its Crown Estate so there has already been an effective windfall tax:

The cost of which will have been factored into the strike price that they negotiated. If we are happy to place additional tax on O&G producers for their excessive profits why not other industries?

Be very, very wary of anything Net Zero Watch publicises.

Yup, this, very much this, shady Tufton Street ‘think tank’ funded by dark money from some of the worst people on the planet, including the Koch brothers.

https://www.opendemocracy.net/en/dark-money-investigations/global-warming-policy-foundation-net-zero-watch-koch-brothers/

If you want an idea of the mentality behind this lot, I strongly recommend listening to the Behind The Bastards podcast on Charles Koch.

If we are happy to place additional tax on O&G producers for their excessive profits why not other industries?

It is my view that the tax system should be used to encourage ‘good’ sources of power, with an eye to the future, sustainability and security of supply.

This then makes a lot of renewables or nuclear sensible, makes insulation and reducing need very sensible, while oil and gas look really daft. Yet companies will want to make every last penny they can as the ship sinks…

I think in the circumstances of such a huge and temporary windfall, a windfall tax even on renewables would be reasonable. Albeit I wouldn’t want it to be so large as to act as a big disincentive. But no-one putting up a windfarm right now will be banking on 30p/unit or whatever for the indefinite future. That price won’t hold up for long (in the context of a windfarm lifetime).

It is my view that the tax system should be used to encourage ‘good’ sources of power, with an eye to the future, sustainability and security of supply.

I agree that we should be looking at our entire energy mix and implementing a sensible long term strategy. Right now however we are saying that the profits that are being made by O&G producers due the high prices for O&G are bad and we are going to tax said profits. The prices that are going received by wind farm companies are also a result of those high Gas prices. So either we tax them in the same way, and effectively discourage some investment as a result of reduced profitability, or we fix the price they can sell at which will also reduce their profitability.

On the positive side the utterly bonkers nimbysim regarding onshore (and offshore) wind and solar should hopefully disappear.

All over East Anglia there are signs up saying “No to solar”, quite incredible – totally harmless and visually unobtrusive, but the locals seem to hate it with a passion.

Right now however we are saying that the profits that are being made by O&G producers due the high prices for O&G are bad and we are going to tax said profits.

Up to a point we are. The taxes are going forward, so not backdated to when the O&G companies started taking it in, and they have exemptions so they can write off money spent being O&G companies, so the net effect is, as the lady put it, bugger all.

The reason prices have shot up is while we need the same ammount of electricity, and only a small fraction of its cost to produce is linked to gas, the whole market hinges on that, because it’s theast resort and they can’t not generate it. With any luck capitalism will do its job and invest in cheaper renewables, because it wants to make bigger margins just as much as we want to pay less.

Sure, but as long as gas is constrained, renewable electricity will be artificially inflated as it’s a traded commodity which as you say is linked to the gas price. It’s going to need an intervention to reform the market, which it looks as though the EU is going to do.

@footflaps has it.

“No Solar Desert for Grays Lane” was posted up hundreds of times around my ride along the Waveney Valley on Wednesday. As if a monoculture crop field is rife with bio-diversity…

Got a load of ‘no to Welwyn solar farm’ signs up around a bit of field I ride though, it’s a crop field, it’s hardly an SSSI but there are a few expensive houses around there so they’re kicking off.

Weird how Range Rover driving, mansion dwellers who take 4 short haul holidays a year come over like Swampy’s lovechild as soon as anything might be built near their favorite dog walking route.

Solar farms aren’t noisy, they aren’t tall, they can still be used as grazing, they don’t obstruct rights of way. they’re pretty unobtrusive really but NIMBY’s gonna NIMB.

‘Wind power, as in windmills are probably not a long term solution as they are expensive, and the gear boxes are expensive to maintain.’

Funny how this has appeared, along with can’t recycle the (fibreglass) blades.

Someone replied this to a Tweet I answered – I asked for a comparison of decommissioning costs of wind turbines vs nuclear plants. Unsurprisingly they never responded.

All over East Anglia there are signs up saying “No to solar”, quite incredible – totally harmless and visually unobtrusive, but the locals seem to hate it with a passion.

Wait until they learn most solar power is produced by a big nuclear reactor 😀

Wind power, as in windmills are probably not a long term solution as they are expensive, and the gear boxes are expensive to maintain.

I know someone has already pointed out that this is nonsense, wind is one of the cheapest forms of energy, but current generation turbines don’t even have gearboxes, so it’s doubly nonsense.

Wind power, as in windmills are probably not a long term solution as they are expensive, and the gear boxes are expensive to maintain.

Expensive compared to what? A nuclear reactor? A CCGT with CCUS? A bicycle?

All over East Anglia there are signs up saying “No to solar”, quite incredible – totally harmless and visually unobtrusive, but the locals seem to hate it with a passion.

Nimbyism may be their reason but in some ways I agree because we need to be growing more food crops in this country not using the space for solar panels. Domestic, public and commercial roofs are much better locations solar.

Nimbyism may be their reason but in some ways I agree because we need to be growing more food crops in this country not using the space for solar panels.

I don’t think solar farms are displacing agricultural land to any great extent. My preferred solution would be to replace golf courses with either solar installations or potato fields.

Grassland (sheep grazing) can continue quite happily around/under solar, with minimal loss of yield (a bit less direct sunlight, but also better water retention, and sunlight isn’t always a limiting factor anyway). The sheep grazing cuts maintenance costs for the solar too, as means you don’t need someone trimming back the growth.

More difficult for arable crops through granted. But if you replaced just half our golf courses with a mix of solar and farmland we’d have more food and vastly more renewable energy too.

phiiiiil I’m intrigued by your comment that current generation wind turbines don’t have gearboxes. I’ve just been on the Vestas site and everything seemed to have a gearbox. How do the non-gearbox ones work? I can understand it with small fast rotating turbines, but all the big ones spin relatively slowly (spindle speeds – obviously the tip of a huge blade is shifting pretty fast 🙂 Not a turbine hater BTW, just interested in the engineering.

mick_r, some manufacturers use a direct drive coupled with a large multi-pole generator to eliminate the gearbox. See link for Enercons offering: https://www.enercon.de/en/technology/#showVideo

I’m intrigued by your comment that current generation wind turbines don’t have gearboxes. I’ve just been on the Vestas site and everything seemed to have a gearbox.

I’m not an engineer, it seems obvious to me though that gearboxes fail and thus eliminating them where possible is a good idea, especially with an off-shore installation!

A quick google seems a lot of manufacturers agree: https://www.reutersevents.com/renewables/wind-energy-update/direct-drive-turbines-lean-mean-not-so-green

although not Vestas who are sticking 100% with gearbox systems: https://www.reuters.com/article/us-vestas-wind-results-gearbox-idUSKBN1FS2X0

Current solar installations cover 230km^2 of land; meanwhile 1200km^2 of agricultural land is used for biofuels, but nobody seems to complain about that. Golf courses also cover 1200 km^2.

If we really want to make use of some currently ridiculously underutilised land then we could think about solar farms on the nearly 17,000km^2 of grouse moor. Given grouse moors are terrible for biodiversity and make floods and droughts worse then that would be win-win.