by Dr John Etherington © 2006
Summary Wind power in the
Though there are capital subsidies available for installation of wind
power in the
The crucial importance of the RO may be gauged from the statement by Paul
Golby, the chief executive of E-ON UK (former Powergen), who said:
"Without the renewable obligation certificates nobody would be building wind farms" Daily Telegraph (
Renewables Obligation
The Renewables Obligation as its name suggests places an obligation on
electricity suppliers to purchase qualifying renewably generated electricity
but it also forces a consumer-sourced 'subsidy' to be paid to the renewable
generator. The mechanism of payment results in an increase in electricity price
to all consumers, whether or not they subscribe to a 'green tariff'. Few
consumers are aware of this fact and neither government nor developers apprise
them of it.
The RO is operated through the mechanism of Renewables Obligation
Certificates (ROCs - see Figure 1) and these certificates are a marketable
commodity, generating additional income for the renewable generator.
The ROC has a buy-out price which was agreed at £30/megawatt hour (MWh) in 2002
and, index-linked, has now reached £32.33/MWh. This provides a 'floor' below
which the subsidy on wind and other renewables can never fall.
Climate Change Levy
exemption (CCLe)
In addition to the consumer-sourced RO another small advantage is given
to the renewable generator. Non-renewable fuels pay a tax of £4.30/MWh, but
renewables are exempt and so, effectively, are given
an extra £4.30/MWh for their electricity.
The net subsidy - about £45/MWh
From 2002 when the RO system replaced the former NFFO (Non-fossil Fuel
Obligation) the price of ROC's steadily increased. Two years ago it reached
about £47/MWh (buy-out price of £30 plus £17 market increment) but very
recently (2006) the increment has dropped back to c. £10 giving the RO a total
value of about £40/MWh.
Adding to this, the CCLe of £4.30/MWh, we have a total subsidy close to
£45/MWh
Wind electricity price is inflated
to £90/MWh
As of January 2006 the wholesale price of electricity has risen to about
£45/MWh (compared with c. £20/MWh a couple of years ago).
The implication is that the net subsidy, currently about £45/MWh, roughly
doubles the value of wind electricity to c. £90/MWh (and prior to 2005-6 price
changes, it almost trebled it).
This is probably the largest per unit subsidy ever paid for any commodity
and the wind power industry has gained similar advantage in most other
countries through either similar direct subsidy or, as in the
At present, coal-fired generation receives a per MWh subsidy which is
less than a 25th of the wind subsidy. Gas-fired generation has never been
subsidised and nuclear ceased to be subsidised in 1995-6 and has incidentally
repaid with interest the bail-out loan made to it some years ago.
A big wind turbine earns £400,000 p.a.
of which half is ‘subsidy’, paid by all consumers
Many wind turbines are of 2.0 MW or greater capacity
and about
120 m in height. Because of limitation by wind speed, a
2.0 MW machine produces a quarter or a little more of its rated capacity, i.e.
0.5 MW on average.
Over one year it generates 0.5 x 24 x 365 = 4,380 MWh, and at the
renewables price of £90/MWh, the gross earning is £394, 200 p.a.
About half of this income is from the consumer-sourced subsidy, without
which the machine would be close to bankruptcy.
Big earnings, big ‘footprint’ but
not much electricity or CO2-saving
One might assume that as the wind generators are so substantially rewarded,
they produce a lot of electricity but this is not so. At the moment DTI figures
show that wind provides less than 0.5% of
If the 2.0 MW wind turbines, wind-limited as above, were to replace the
output of a large, 2000 MW conventional power station it would require at least
3000 turbines spread over 750 km2 of countryside. Some Footprint‚!
Incidentally the Replaced‚ power station could not be closed as its
electricity is still required to fill the gaps when the wind turbines are not
fully generating.
The main reason given by government for installing wind power is that it
will save carbon dioxide (CO2) emission and consequently reduce the rate of Global
warming‚
Government‚s own prediction for CO2
saving by renewable electricity (mainly wind) in 2010 is just 9.2 million
tonne CO2, which is less than four ten-thousandths
(0.0004) of global man-made CO2 emission. Some chance, our Windmills‚
have, of altering the weather!
Government has been told but fails
to respond
In February 2005 the Auditor General* reported that "the level of
support provided by the Renewables Obligation is greater than necessary to
ensure that most new onshore wind farms... are developed" and that "The Renewables Obligation is currently at
least four times more expensive than the other means of reducing carbon dioxide
currently used in the United Kingdom...
Later in 2005, the House of Commons Committee of
Public Accounts ** reported that "Requiring users to source supplies from
uneconomic providers has the same affect as taxing users to subsidise the
providers, but is not as transparent or amenable to parliamentary control"
and also that "The cost of the Renewables Obligation is passed on by
electricity suppliers to consumers through higher prices. ....By 2010, the cost
of the Renewables Obligation, which does not appear on electricity bills and is
not explained to consumers, is expected to reach £1 billion per annum (at 2002
prices)."
For all the impact this has had on the Commons, the Auditor General's
Office and the Committee of Public Accounts might as well have saved public
money and gone off to the golf course!
* Renewable Energy REPORT
BY THE COMPTROLLER AND AUDITOR GENERAL. HC 210 Session 2004-2005 (
** House of Commons Committee of Public Accounts.
Department of Trade and Industry: Renewable Energy. 6th Report of Session
2005-6
John
Etherington PhD DIC BSc ARCS
Dr John Etherington was Reader in Ecology
in the