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Give community wind power the same EMR terms as Hinkley C!

22nd October, 2013

David Toke

EDF etc have been offered terms for constructing Hinkley C which are way superior to the terms being currently offered to renewable energy ...

EDF etc have been offered terms for constructing Hinkley C which are much superior to the terms being currently offered, under the terms of Electricity Market Reform (EMR), to community wind power schemes (and also, in crucial ways, all renewables). Hinkley C is getting £92.5 per MWh for 35 years with 65 per cent of its capital costs 'underwritten' by loans which will be guaranteed by the Treasury.

From 2018 onshore wind is being offered, under EMR, a 'headline' strike price of £95 per MWh, but only for 15 years and without any loan guarantees. Remember that independent generators will, in reality be paid a lot less than than £95 per MWh, perhaps little more than around £80 per MWh, since the contracts for differences (CfD) feed-in tariffs are available only to major electricity companies. The Big utilites (in effect the Big Six) will cream off this sort of difference between these two figures. So £92.5 per MWh over at least a 20 year contract with 65 per cent of their costs raised through Treasury guaranteed (and therefore low interest) loans would be a very good boost for community wind power schemes - that is if such power purchase agreements (PPAs) were directly available to such schemes.

The Government has talked about extending the size of the schemes which qualify under the small feed-in tariff from 5MW to 10 MW. However this makes little difference as the rates payable under the small feed-in tariff are very low for anything larger than a few hundred KW. A 2 MW project, for example, would receive less than £60 per MWh.

In addition to offering Hinkley C type terms to community wind schemes, other types of renewable energy schemes could do with having much longer power purchase agreements and access to Treasury loan guarantees. Indeed the length of the PPAs for renewables in general has been cut from 20 years under the Renewables Obligation to 15 years under EMR. Tidal and wave and offshore wind schemes would benefit greatly from having access to Treasury loan guarantees. Offshore wind schemes could benefit greatly from having 35 year contracts as much of their infrastructure would last for that long. Why not give all renewables PPAs of at least 20 years and give them access to at least £10 billion worth of Treasury-backed loan guarantees?

David Toke is Reader in Energy Politics at the Department of Politics and International Relations, University of Aberdeen. 

David Toke's Green Energy Blog

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