UK consumers could save more than £2 billion if the Government’s planned renewable energy auctions are opened up to include a wider mix of technologies, according to a report published by Drax on 16 February.
Drax, an electricity production and sales company also focused on biomass, informed that it commissioned NERA Economic Consulting and Imperial College to look at hidden costs that are not reflected in the contracts the UK Government awards for renewable generation. These hidden costs, or whole system costs are increasing as intermittent renewables increase. These intermittent renewables mean other forms of power generation need to kick in, and flex up and down to meet electricity demand. These costs are passed on to consumers via their energy bills, Drax said.
Currently, the Government is planning to hold three auctions for new Contracts for Difference (CfDs) over the next four years, and all are focused on offshore wind. According to the report, there are significant differences in the true costs of renewables once these additional costs are recognised. Offshore wind could require a CfD of £127 per MWh, onshore wind £92-97 per MWh, solar £96 per MWh, and biomass £84 per MWh.
Once these new support levels are modelled over the planned energy auctions, the new energy mix that could win contracts is shown to save consumers £1.9 -£2.2 billion. This support is already paid for through energy bills and the new cost-efficient mix would lessen the impact, Drax said.
Drax Group CEO, Dorothy Thompson said: “The UK’s system faces growing challenges, from costs to reliability as traditional forms of generation are replaced with renewables.
“Intermittent renewables like wind and solar are vital as we continue to clean up energy generation, but they need to be backed up by a constant supply of electricity that can be flexed up and down to make sure the UK’s businesses and households always have power on demand.
“Opening up energy auctions to include other renewables could save consumers £2 billion and with more biomass in the mix energy security is also boosted. Using the latest technology we’ve upgraded half our power station to run on compressed wood pellets, which give an 80% plus carbon saving against coal. With the right support we stand ready to finish the job.”
NERA Economic Consulting Associate Director, Daniel Radov , added: “NERA Economic Consulting is pleased to be able to continue its partnership with Imperial College in modelling the total costs of different power generation technologies, and in helping to inform the policy discussion around renewable energy and decarbonisation.
“To ensure that we achieve environmental targets as efficiently as possible, it is essential to have policies in place that provide the right incentives to minimise costs. We hope the combination of Imperial’s whole-system energy modelling with NERA’s ability to model the details of the CfD auctions will contribute to a better understanding of the advantages and disadvantages of different policy approaches.”
Source: Drax