The delays in deploying renewables could cost UK consumers £2.6bn

Wednesday 13 September 2017
K Chaitanya Kumar K Chaitanya KumarSenior policy adviser020 7630 4514ckumar@green-alliance.org.uk

As this week’s government announcement on subsidies has revealed, renewables are now the cheapest source of power in the UK, but current policy is slowing down their deployment and failing to exploit renewables fully, raising costs for consumers.
 
The UK has committed 95 per cent of the money needed to meet power sector climate goals by 2025, which has led to a nine-fold fall in subsidies for offshore wind. As a result, prices have come down so much that wind and solar power are now cheaper than gas. [1]
 
But the government is not following through on its earlier progress and policy since 2015 has delayed commitment of the final five per cent support needed: onshore wind is banned, the last solar auctions were in 2015 and this week’s offshore wind auction procured 2GW less in offshore wind than it could have, despite its low price.
 
If the government fully commits to renewables and energy efficiency, it will be unnecessary to invest in the much more expensive replacement of the UK’s nuclear fleet, which will lead to higher energy bills.
 
New analysis by the think tank Green Alliance, Closing the clean power gap, follows the UK’s offshore wind auction on 11 September. [2] It shows that, without faster deployment of renewables, consumers could end up paying £2.6 billion more per year in 2025. By 2030, the benefits of investing in renewable energy are huge, resulting in consumer savings of more than £5 billion.
 
The auction has revealed a sharp contrast between official government forecasts and actual costs, showing an almost 50 per cent drop by 2022. Under current plans, however, spending on nuclear power to more than twice that on renewables by 2030, even though renewables can provide more power at a lower price. The UK is able to meet its 2030 carbon targets without further new nuclear power in the 2020s.
 
To compete with offshore wind after 2025, the costs of new nuclear plants would have to fall by at least 30 per cent (below £65/MWh). [3]

Chaitanya Kumar, senior policy adviser at Green Alliance, said:

“Since 2015, the UK has been cutting back on renewables just as they’ve become cheap, having previously invested heavily to bring down their costs. A smarter strategy would be to follow through on the earlier investment and buy more of this cheaper, clean energy, which would keep energy bills down and support new jobs in the renewables industry across the country.”

Contact
Chaitanya Kumar
Senior policy adviser, Green Alliance
ckumar@green-alliance.org.uk
Direct line: 020 7630 4514

Notes
 
[1] Office for Budget Responsibility, March 2017, Economic and fiscal outlook, http://cdn.budgetresponsibility.org.uk/March2017EFO-231.pdf. This assumes an interim target of 90 TWh of new generation by 2025. The subsidy fall is calculated by the comparison between early FIDER contracts and results from CfD round 2 auction.

[2] Closing the clear power gap is published today by Green Alliance.
 
[3] Offshore wind sets the new benchmark for low carbon technologies. We expect offshore wind costs to be well below £65/MWh post 2025 when nuclear is expected to be deployed.

[4] Green Alliance is a charity and independent think tank focused on ambitious leadership for the environment. Since 1979, it has been working with a growing network of influential leaders in business, NGOs and politics to stimulate new thinking and dialogue on environmental policy, and increase political action and support for environmental solutions in the UK.