The Obscene Profitability of Wind Power

Due to the pandemic and the virtual shutdown of the national economy the day-ahead wholesale price of electricity has plummeted. In May it averaged  £22.17 MWh. There have been occasions where the price has gone negative for several hours at a time. Normally the average monthly price per MWh is around £45.

As you can imagine this is really bad news for any generator that is dependant on the market price of electricity to support its operation.

But one group of producers has no worries.  

The subsidy payments received by generators classed as "renewable" dwarf these market prices. 

Here I’ll just deal with the most outrageous and costly i.e. windfarms. But biomass, Solar PV and others are all excruciatingly expensive too. Its just there's less of them.

The effect of the subsidy payments to wind-farms is such that until the price goes significantly negative it is not in their interest to shut down. They have privileged access to the grid so can demand access when the wind blows whatever the current grid status. But they suffer no penalty when they (often) fail to produce when needed. 

So in times of low demand and high wind they continue to produce. They only stop when they get bought off by the National Grid with what is known as a constraint payment. In 2019 wind turbine constraint payments came to over £139 million. Money for nothing – except to stop risking overloading the grid.

Today almost all wind-farms are subsidised by the now defunct Renewable Obligation scheme (RO). This was replaced in 2017 with Contracts for Difference(CfD) which is arguably even more costly and inflexible than its predecessor. 

ROC stands for "Renewable Obligation Certificate". Today one ROC is worth £50.05. Every time a wind turbine produces one MWh of electricity it gets the market payment for that MWh topped up an amount dictated by the RO scheme

A land based wind turbine gets 0.9 ROCs (£45.05) + Market Price for each MWh.

A offshore wind turbine gets 1.8 ROCs (£90.10) + Market Price for each MWh.

So back in May on average a land based wind turbine was in total being paid about three times the market price while an off-shore turbine was paid fives times the market price. In normal times they still (on average) get paid double and triple the market price per MWh respectively.

Even at times of oversupply, when prices fell to zero (or below) they were still guaranteed that subsidy – or an even larger constraint payment.

This RO subsidy scheme for wind turbines alone is currently costing UK customers £2.7 Billion a year and will continue to do so for the next 20 or so years. Here's the figures on the REF website

The companies running these wind-farms are over-joyed at their profitability. Truly when comes to acting as money making machines all other unsubsidised generation capacity pales by comparison. Look at this chart (HERE) from OfGem and weep.

So while renewable generation undermines the integrity of the grid it is obscenely profitable. 

Why is it so profitable? 

Because of a massively over-generous ROC subsidy. A subsidy which, at the end of the day gets paid by the consumer.

Years ago when the RO scheme was dreamed up, the idea was that the payments (i.e. number of certificates issued per MWh) would be changed as the technology/costs/profitability evolved. 

However this was only done once. When the ROC payments per MWh for on-shore and off-shore turbines were slightly reduced from 1.0 and 2.0 to 0.9 and 1.8 respectively it caused such a mountain of complaint from the renewable industry that it has never been attempted again. So today these vastly extravagant payments remain untouched. 

I suppose though we should be grateful that they are not on the new CfD scheme. This guarantees an index-linked fixed price. 

Current offshore windfarms using the CfD scheme are: 

• Beatrice (g’teed £162/MWh) 
• Burbo Bank Extension (g’teed £173/MWh) 
• Dudgeon (g’teed £173/MWh) 
• Walney Extension (g’teed £173/MWh). 

All of these make the RO scheme look cheap! These prices are index linked and so will only increase as time goes on. 

Of course today we have the wind industry crowing about “falling” CfD’s for future (i.e. jam tomorrow) wind farms. Much is being made of the proposed future Dogger Bank offshore scheme where the CfD auction was won at £48/MWh. 

But will they ever be built at that price? Besides that we are still lumbered with the excruciatingly over-priced one we have today!

A few years back there was similar huge publicity for Solar PV when CfD auctions were also won at around £50 MWh. It was headline news on the BBC and  all over the papers. Then after the razzamatazz, it all went quiet.

None were built. Just more unsubstantiated hype. More jam tomorrow. You have to give it to them though. It was wonderful propaganda.

Today the UK consumer (and industry) are literally being robbed by the big energy companies and their renewables scam. Large companies stack up huge profits from wind farms. Not because their wind turbines are wonderfully efficient (far from it) but because they are hugely subsidised

There is no excuse for this. The RO scheme was designed to be flexible and take into account the varying profitability of renewable generators. But today  it has ossified to the benefit of financial parasites.

If the UK govt had any balls it would cut the ROC (at least) in half and phase it to zero within 5 years.

But you know and I know that won't happen. Wind turbines are simply too fashionable. Nobody dares question their economics, or who actually ends up paying for this extortion racket.

So just get used to being robbed for the next twenty years. You (and I) have no other choice.

But perhaps we don't have to stay quiet while our pockets are being fleeced.