New Offshore Wind Strike Prices More Than Double Cost Of Gas Power

By Paul Homewood

DSENZ has just published the Administrative Strike Prices for the next round of Contracts for Difference, AR7:

https://www.gov.uk/government/publications/contracts-for-difference-cfd-allocation-round-7-administrative-strike-prices-methodology-note

It destroys once and for all the myth that renewables are cheaper than gas. The price for offshore wind, for example, is set at £113/MWh, at 2024 prices. But we can already add 3% to that to bring it into current prices – so that’s around £116/MWh.

These prices are more than 11% higher than last year’s auction round.

It may be the case that the prices bid will come in slightly lower than these ASPs, which are the maximum on offer. But they inevitably be much higher than the cost of gas power.

Natural gas is currently trading at 78p/therm. Assuming fuel efficiency of 55%, fuel cost for a CCGT would work out at around £49/MWh. We are already paying CCGTs to provide standby, so this covers all the other overhead and running costs.

Miliband needs another 25 GW of offshore wind power. At these prices, that will add £6 billion to the cost of electricity.

And this, of course, does not account for all the other indirect costs of intermittent renewables, such as grid balancing, grid upgrades and standby cover.

Worse still, Miliband has decided to extend the CfD contracts from 15 to 20 years – in short, we will be locking in these high prices for even longer.

Onshore and solar power are little better, still both costlier than gas power. As for floating offshore wind at £271/MWh, one can only conclude that Mad Miliband is intent on bankrupting the country.