Ban on onshore wind could cost £800 million this winter

New analysis from the Energy and Climate Intelligence Unit (ECIU) has shown that a planning ban combined with an exclusion of onshore wind from two of the government’s Contracts for Difference (CfDs) renewables auctions, could be adding around £800 million to UK energy costs this winter.

Rates of onshore wind installations in England plummeted after the 2016 decision to effectively ban onshore wind through the planning system. In the five years (2012-16) prior to the ban coming into effect, installation rates in England averaged 330 megawatts per year (peaking at 460MW/yr in 2013). In the six years 2017 to 2022, only 270MW was added in total. Had rates stayed at pre-ban average levels, an extra 1.7GW would have been added by this winter (2022/23). [1]

These windfarms would have generated an estimated 2.5TWh of electricity this winter, equivalent to powering 1.5million homes for the entire winter and would have avoided 4.9TWh of gas being burned in power stations, which is enough to heat over 500,000 homes for the entire winter. [2] Payments would have been made by these onshore windfarms through the CfDs scheme reaching £280million this winter, if day-ahead wholesale prices average out at the same level as last winter (c.£200/MWh). At a lower wholesale cost of £150/MWh these farms would still be paying back £160million. [3] In addition, renewables provide further cost savings by reducing our reliance on the most expensive gas power plants that set higher prices paid to many generators.

The ban on onshore wind in England was compounded by an exclusion from the second and third UK-wide CfD auctions, such that deployment rates of onshore wind deployment fell in all parts of the UK after 2017. Had rates remained at their earlier average of almost 900MW per year in Scotland and Wales, instead of falling to just under 300MW/yr, then in the five years 2018-20 a further 3GW could have been added. These windfarms would have generated 4.3TWh of power this winter, equivalent to supplying 2.6million homes, and would have avoided the use of 8.5TWh of gas, enough for over 900,000 homes this winter. Savings from CfDs would have exceeded £500million this winter.

Taken together, the England ban and the UK-wide CfD auction exclusion have prevented deployment of 4.7GW of onshore wind capacity (equivalent to 4.1million homes’ winter power). This is requiring the UK to use an extra 13.4TWh of gas this winter (enough to heat 1.5million homes in winter), and forfeiting £800million of CfD repayments (if wholesale prices average out the same as last winter). Roughly half of this excess cost is being paid by the Government through its Energy Price Guarantee for households and Energy Bill Relief Scheme for non-domestic customers. [4]

Commenting on the findings, Simon Clarke MP said: “This analysis shows how banning onshore wind has left us more reliant on expensive gas this winter, exposing more families and businesses to the effects of Putin's invasion of Ukraine. We shouldn’t go back to the old system of imposing wind farms on people but give communities a genuine say. Unlocking Britain’s wind potential, where communities agree, would cut everyone's energy bills and allow local residents to benefit from rebates for hosting these cheap renewables.”

Dr Simon Cran-McGreehin, Head of Analysis at ECIU, said: “Putting in place the ban on onshore wind has cost bill payers dear this winter. This alongside a lost decade of installing insulation in homes has left many households paying hundreds of pounds more and the taxpayer picking up the rest of the tab through the energy price freeze.”

Recent polling for ECIU found that 73% of Conservative voters in the 2019 election say they would support an onshore wind farm in their area, compared to just 19% who say they would oppose it. Another poll found that 62% of adults say they would ‘think less of’ an MP who campaigned against the development of an onshore wind near them [5].

The UK has scope for significant onshore deployment, with over 14GW at various stages of planning and construction and a further 9GW in pre-planning. [6] For the short-term, Octopus Energy has identified 2.3GW of potential onshore wind sites with community support that could be built quickly – which ECIU calculates would save at least £400million in a winter under high prices. [7]

As it is, only 650MW of onshore wind with CfDs is currently operational (from the first round auctions), and will pay back an estimated £90million this winter (if day-ahead wholesale price averages £200/MWh as last winter). A further 900MW is due for deployment by 2024/25, having been re-admitted for the fourth round of auctions. [8]

ENDS

Notes to editors:

1. This analysis is based on the fact that deployment rates fell after 2016 in England and after 2017 in Scotland and Wales, and considers a scenario in which rates instead remained at previous rates for the subsequent six years in England and five years in Scotland and Wales. Deployment data taken from Renewable Energy Planning Database (REPD) (BEIS, accessed November 2022): https://www.gov.uk/government/publications/renewable-energy-planning-database-monthly-extract
2. Generation output is calculated on basis of 60% of annual wind generation occurring in winter, and onshore wind load factor of 27% which is the average from 2017-21 (BEIS, 2022): https://www.gov.uk/government/statistics/renewable-sources-of-energy-chapter-6-digest-of-united-kingdom-energy-statistics-dukes
   

Amount of gas avoided is based on thermal efficiency of CCGT power plants of 50%, the average from recent years. (BEIS, 2022): https://www.gov.uk/government/statistics/electricity-chapter-5-digest-of-united-kingdom-energy-statistics-dukes

Comparisons with household consumption are based on winter power demand of 55% of 2.9MWh mean annual demand and winter gas demand of 76% of 12MWh of mean annual demand.

3. Wholesale prices averaged around £200/MWh in winter 2021/22. CfD strike price is assumed to follow a linear trend from c.£100/MWh in AR1 (delivery in 2018) and c.£50MWh in AR4 (delivery in 2024/25). Data from CfD Register (LCCC, accessed November 2022): https://www.lowcarboncontracts.uk/cfd-register/

4. CfD repayments would have been made to households and non-domestic customers. Unit costs and hence CfD repayments will be split as 57% for households and 43% for Government; the split for non-domestic customers is less clear, but is likely to be similar; and so the Government will be paying around half of the total CfD savings forfeited by not building onshore windfarms.

5. MPs campaigning against onshore wind thought ‘less of’ by voters – new polling (ECIU, 2022): https://eciu.net/media/press-releases/2022/mps-campaigning-against-onshore-wind-thought-less-of-by-voters-new-polling

6. Development pipeline data from REPD (BEIS, accessed November 2022), and Energy Pulse report (Renewable UK, 2022): https://www.renewableuk.com/news/616002/Uks-pipeline-of-onshore-wind-projects-grows-by-12-in-last-12-months

7. Press release (Octopus Energy, 2022): https://octopus.energy/press/more-news-press-releases/octopus-energys-winder-platform-identifies-23gw-british-onshore-wind-potential-with-local-community-support/

8. CfD Register (LCCC, accessed November 2022): https://www.lowcarboncontracts.uk/cfd-register/

For more information:

George Smeeton, Head of Communications, ECIU, Tel: 07894 571 153, email: george.smeeton@eciu.net