UK Offshore Wind auction fails to attract any bids

Because the set prices for returns were too low. That ticks me off a little bit, but its probably an emotional response rather than a considered one.
 
Strike price is set low (not unrealistically imo), but to be fair none of the wind farms signed their contracts for the previously agreed strike prices either, and waited for them to be time enforced, whilst they creamed the profits for the time in between (which was about 2 years), charging what they liked.

Some wind farms had a strike price as £40-50, but because we were going to be paying £100 for gas and £200 for imported nuclear it meant the wind farms were getting paid £200, as well CGT gas turbine companies got £200 also.

The CFD system is ****ed up, give the wind companies £60, but tell them they're not getting paid the most expensive price we pay on the market, if prices go up, like they currently do now. It's absolutely ludicrous that we were paying £200 for wind, when it was profitable at £50 (otherwise they wouldn't have agreed on the strike price). Absolutely bonkers way we structure our energy market.

Yeah, sure, steel has gone up, and labour too, but that's only the initial build cost, It's not going to have a massive impact on future costs as although materials may be more expensive, the process of making them should be cheaper as tech and efficiency improves.

Also there's actually deflation in construction material costs now, we had some pipe prices go up 30% and then 30% again, but since then they've come down about 30% and will probably fall further. Supply is catching up with the demand, and it's the massive demand and low production (covid) which has massively escalated construction material costs.

If the wind companies don't want to agree the strike price, just own our own FFS, and contract in companies to build them. Most major contractors have been working on wind farms for over 10 years now, there's enough experience there to do it ourselves. Obviously, we would need to be careful not to red tape ourselves to death like we've done with HS2 etc.

Also, offshore wind now needs to be able to complete with onshore wind again (legislation just changed opening the door to this), and onshore wind is far cheaper. If the offshore companies don't like the £45 price then tell them to do one, and build some onshore for an agreed £25-35.

Offering the £45 is one of the few things the government have done right recently and I'd say they've done well with renewables too since being in power, but they've completely ballsed up the contracts allowing the public to be shafted into paying high prices (paying the price cap excess in tax). Yet, they wouldn't even get a grip of the profiteering or introduce a suitable windfall tax on the companies operating within the UK.
 
Last edited:
£45 for a mega watt of electricity seems very low to me, especially 5 years in the future when producing have been paid £200 recently. As Andy says just up the minimum price until they bid. If the price of energy drops very low, add some extra VAT and use that revenue to support the floor price to green producers.

Offshore wind should form our primary electricity source in the future, even though it more costly than onshore. Its not right that some communities should have wind turbines near their houses, when those turbines could be placed offshore. When have a large coastline surrounded in general by shallow seas.
 
Last edited:
Andy_W said:
Strike price is set low (not unrealistically imo), but to be fair none of the wind farms signed their contracts for the previously agreed strike prices either, and waited for them to be time enforced, whilst they creamed the profits for the time in between (which was about 2 years), charging what they liked.

Some wind farms had a strike price as £40-50, but because we were going to be paying £100 for gas and £200 for imported nuclear it meant the wind farms were getting paid £200, as well CGT gas turbine companies got £200 also.

The CFD system is ****ed up, give the wind companies £60, but tell them they're not getting paid the most expensive price we pay on the market, if prices go up, like they currently do now. It's absolutely ludicrous that we were paying £200 for wind, when it was profitable at £50 (otherwise they wouldn't have agreed on the strike price). Absolutely bonkers way we structure our energy market.

Yeah, sure, steel has gone up, and labour too, but that's only the initial build cost, It's not going to have a massive impact on future costs as although materials may be more expensive, the process of making them should be cheaper as tech and efficiency improves.

Also there's actually deflation in construction material costs now, we had some pipe prices go up 30% and then 30% again, but since then they've come down about 30% and will probably fall further. Supply is catching up with the demand, and it's the massive demand and low production (covid) which has massively escalated construction material costs.

If the wind companies don't want to agree the strike price, just own our own FFS, and contract in companies to build them. Most major contractors have been working on wind farms for over 10 years now, there's enough experience there to do it ourselves. Obviously, we would need to be careful not to red tape ourselves to death like we've done with HS2 etc.

Also, offshore wind now needs to be able to complete with onshore wind again (legislation just changed opening the door to this), and onshore wind is far cheaper. If the offshore companies don't like the £45 price then tell them to do one, and build some onshore for an agreed £25-35.

Offering the £45 is one of the few things the government have done right recently and I'd say they've done well with renewables too since being in power, but they've completely ballsed up the contracts allowing the public to be shafted into paying high prices (paying the price cap excess in tax). Yet, they wouldn't even get a grip of the profiteering or introduce a suitable windfall tax on the companies operating within the UK.
Click to expand...
The practice of not taking up the CfD contract has been banned in this round which is probably why they didn't get any bids.
 
I have looked at some Investment Trusts operating in wind and solar and none of the share prices have done well recently - even over 5 years there has been limited share price growth, which suggests limited profits.
 
Andy_W said:
Some wind farms had a strike price as £40-50, but because we were going to be paying £100 for gas and £200 for imported nuclear it meant the wind farms were getting paid £200, as well CGT gas turbine companies got £200 also.

The CFD system is ****ed up, give the wind companies £60, but tell them they're not getting paid the most expensive price we pay on the market, if prices go up, like they currently do now. It's absolutely ludicrous that we were paying £200 for wind, when it was profitable at £50 (otherwise they wouldn't have agreed on the strike price). Absolutely bonkers way we structure our energy market.
Click to expand...
This is nonsense.

With CfD the companies are guaranteed to receive a minimum payment but also they start paying back if the price exceeds the strike price. CfDs only make up a small proportion of renewable contracts.

It is under the old RO system that they get paid the "marginal" rate and even in that case there is a levy of 45% on prices over £75/Mwhr


Andy_W said:
Also there's actually deflation in construction material costs now, we had some pipe prices go up 30% and then 30% again, but since then they've come down about 30% and will probably fall further. Supply is catching up with the demand, and it's the massive demand and low production (covid) which has massively escalated construction material costs
Click to expand...
The pricing of the last few auctions was done on the basis of very cheap financing being available and it is the loss of this more than actual construction costs that have made projects unviable at those rates. There were commentators who said after the last round of auctions that the projects would not be built for the strike prices agreed & it looks like they will be correct.
 
Government subsidies probably accounted for much of the investment that came from small cap investors and now the cost of ownership (for offshore wind) is fully understood the cat is out of the bag. I think the whole idea of offshore wind while practical in the initial development made sense the overall lifecycle of offshore wasn’t and therefore it’s become virtually an abject failure.
 
BoroBosco said:
This is nonsense.

With CfD the companies are guaranteed to receive a minimum payment but also they start paying back if the price exceeds the strike price. CfDs only make up a small proportion of renewable contracts.

It is under the old RO system that they get paid the "marginal" rate and even in that case there is a levy of 45% on prices over £75/Mwhr



The pricing of the last few auctions was done on the basis of very cheap financing being available and it is the loss of this more than actual construction costs that have made projects unviable at those rates. There were commentators who said after the last round of auctions that the projects would not be built for the strike prices agreed & it looks like they will be correct.
Click to expand...
The cost of borrowing is killing the renewables industry generally just now but the turbine manufacturers are also in deep financial trouble so they are hiking their prices and are being quite ‘take it or leave it’ for onshore wind farms plus not taking the wind risk any more during erection. The offshore stuff will also be very expensive to service. The goalposts have moved in a big way.
 
You must log in or register to reply here.
Back
Top