The UK government hopes that offshore wind will help it to reduce its carbon emissions, reliance on imported oil, and provide it with a cheap, renewable energy for the future. Unfortunately this plan to rely on offshore wind farms is flawed and could actually lead to higher electricity prices.
Offshore wind farms have always, required heavy duty transmission lines to connect them to the land. These transmission lines are expensive to lay and delays in their construction constantly lead to wind farms waiting long periods before they are actually connected to the national grid, and their electricity can be used by consumers.
The government has created a licensing system in order to try and encourage the construction of transmission infrastructure, and reduce the time that new wind farms must wait before they are connected to the national grid. However, the public accounts committee (PAC), an influential group of MPs, has stated that as a result of the licensing system the savings that consumers could make may be deceptive.
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Margaret Hodge, chair of the public accounts committee, has warned that, “not only is it unlikely that this new licensing system for bringing electricity from offshore windfarms on to the national grid will deliver any savings for consumers, it could well lead to higher prices. Indeed the terms of the licences appear to have been designed almost entirely to attract investors at the expense of securing a good deal for consumers.”
The licensing system offer any transmission company granted a license a guaranteed income for 20 years, which could lead to as much as £17 billion in payments made over the next two decades, giving investors an estimated return of about 10%, which the PAC argues is “extremely generous given the limited risks the investors bear.”
Ofgem, the energy watchdog, has announced that it will look into the system with the potential of making changes to solve the problems that the PAC had found.
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com