Contracts awarded to renewable energy projects last week would save £7 billion on electricity costs under wholesale prices seen in the current crisis, according to analysis from the Energy and Climate Intelligence Unit (ECIU).
The government awarded 11GW of projects contracts in the fourth auction of its Contracts for Difference (CfD) scheme, with record low strike prices seen including offshore wind hitting £37.35/MWh (or £43.37/MWh in today’s money).
Meanwhile there has been continued volatility in gas prices, in part driven by the Russian invasion of Ukraine and the following uncertainty. As a result, electricity prices in Britain have risen to around £200/MWh, according to the ECIU.
Existing projects developed with CfDs have been paying back due to this high power prices, with £300 million paid over six months over the last winter period, and £1 billion forecast to be paid back between April 2022 and March 2023.
If power prices were to remain at these levels, projects awarded CfDs this week would save £7 billion, or over £100 per home.
“To keep bills low, these new wind farms can’t come online soon enough,” Dr Simon Cran-McGreehin, head of analysis at ECIU said.
“At today’s prices with gas so expensive every household would be getting the equivalent of a £100 net zero dividend. In the meantime, existing wind and solar projects are already doing their bit to help bill payers, saving an estimated £1.3billion over 18 months in the current gas crisis.”
As more renewables continue to be deployed, savings will increase. For example, the CfD wind projects already contracted and coming online over the next few years are expected to bring an annual saving of £6.7 billion per year under wholesale prices of £200/MWh. Adding to that the projects contracted last week, savings grow to almost £14 billion.
Reaching the government’s target of 50GW of offshore wind by 2030 would take the total CfD saving from wind and solar to £34 billion a year, according to the ECIU, this would be equivalent to over £500 per homes.