Overnight, the Low Carbon Capture Company (LCCC) released the full data for renewables subsidies for December 2023. This is a short article that analyses the level of subsidies going to wind and other renewables.
Figure 1 shows the monthly subsidies for onshore (grey bars) and offshore (blue bars) wind since 2017. The orange area is offshore generation and the yellow area in onshore generation each month.
December saw the highest subsidies on record at over £255m. The next highest month was February 2020 at £188m. The months for highest generation tend to be December to February or March, so we might expect subsidies to continue at similar levels for some months to come.
The subsidies are paid to top-up the revenue of wind farm operators to the value of their Contract for Difference (CfD) when the market reference price is below the strike price of the CfD. Typically, the market reference price is set by gas-fired generation, so when the blue/grey bars are positive wind power is more expensive than gas. When the bars are negative, wind is cheaper than gas.
For some months in late-2021 and during 2022, gas was more expensive, so the operators had to pay back some of what they received so they did not get more than their strike price. However, gas prices have fallen since 2022 and CfD strike prices are index-linked and rise each year in line with inflation. So, even though gas prices are at the high end of their pre-crisis range, the gap between strike prices and gas prices has been rising again so subsidies have gone up.
However, as more wind farms have come online and taken up their CfD contracts, the amount of generation has also risen, so the average subsidy per MWh in 2023 was lower than that in 2020. If gas prices stay around their current level, we can expect another jump in subsidies from April 2024 as CfD strike prices index upwards again.
Figure 2 shows total CfD subsidies by year across all technologies.
The CfD subsidies for technologies other than wind are tiny in comparison. Overall subsidies for 2023 were the third highest on record at £1.45bn, just under the £1.5bn recorded in 2019. The subsidies for 2023 rose steadily each quarter, with the fourth quarter of 2023 coming in at £604m, close to the peak of £658m in the fourth quarter of 2020. It is therefore entirely possible that 2024 will run 2020 close to become the record year for subsidies.
Looking at 2022, the £346m paid back during that year is trivial in comparison to the overall £7.2bn paid in subsidies since 2017.
My conclusion from this is that renewables are not and never have been cheap. There was of course the anomaly of the gas supply crisis in 2022, exacerbated by Putin’s invasion of Ukraine. Gas prices are still elevated even though the crisis has abated, but subsidies are back to high levels and look set to increase. Do not let anyone tell you that renewables are cheap.
David Turver writes the Eigen Values Substack page, where this article first appeared.
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We gave up on windmills in the 17th century why do we think they are any better now?
Water was more reliable than wind, and steam trumped the two of them. It is a brainless fantasy to imagine that any of this wind and solar can be the ‘answer’ to reducing fossil fuel consumption (lets assume that it might do something beneficial for a moment…). The real end game is not hydrogen, or fairy farts, but nuclear fusion. Its been 30 years away for about 50 years now, so there’s a good cause for scepticism. But if it can work, sometime in the next 50 years, we will drop fossil fuels like a stone. The current problems in their entirety are panic driven, trying to do thing before the technology is commercially viable. The motives are greed and a strange God complex mixed together, imo. I travelled behind a van with ‘We’re saving the world’ written on the back. Turns out they are collecting waste cooking oil from pubs and restaurants. Every body wants to save the world, or so the song goes, but to what end…
Spot on Neil!
I’d like to think fusion is a lot closer than we think for the simple reason of the billions of dollars going into the building of the reactors in France and the US, surely they are not investing all that into a dead end?
They may be investing in a dead end, but then again they may reap a fabulous reward if they can make it functional on an industrial scale. We do seem to be making progress towards the objective, but there are still many hurdles to cross.
Remember though that availability and price of energy drives the capitalist system. We will only be allowed the energy that the eco socialists think we need and how that fits into their central planning ideas for the economy.
Hydrocarbons are not from Fossils nor rocks. It is abiotic RENEWABLE self creating energy at the core and mantle.
We don’t.—— Or I should say Liberal Progressive Western Governments pandering to the UN and WEF and the banking system that is in control of the money supply don’t. ——It isn’t about what is better. It is about ideology and control of the world’s wealth and resources.
The wind turbines out at sea won’t last anything like the quoted 20 years because of salty sea-air corrosion. They already cost a fortune to maintain and service because of their ridiculous locations that can only be accessed on calm days when the silly things aren’t spinning(and conventional grown-up power stations have to supply reality to the delusional). And beware ‘enough power to supply 20,000 homes’ baloney – a) only when it’s windy and b) homes yes…but not hospitals, offices, trains, shops, schools…I won’t add industry because we’ve exported industry to coal burning China. Welcome to Clown World Conservative Britain.
“Clown World Conservative Britain”. Yes but they just happen to be the government at the moment. They are all in on it. It was Labour (Miliband 2008) that gave us the Climate Change Act. Then in 2019 not a single MP of any party questioned the cost or practicality of the NET ZERO amendment. It was simply waved through with no questions asked. So let us not kid ourselves that this is all the doing of Tories. Labour with the likes of Miliband in there are eco socialists to the core and will bludgeon us even harder.
The Bird Choppers murder about 1 million large birds and bats p.a. in the UK. There are not enough rare earth minerals globally, nor land capacity in the UK to make them the primary source of anything. They are Gaia unfriendly, 2x more expensive than a coal plant and annihilate wildlife. They are bullshit. Follow the money….
What would the subsidies look like if we still made our electricity from coal ?
I suspect they would be off the scale. Not to mention the money going back into our economy generating thousands of well paid jobs.
They are not Government subsidies, they are our subsidies!
This is really higher-order absurdity: We’re paying people to produce something they can then sell to us at a higher price than the one we would have to pay if we weren’t paying them.
It’s called picking winners and losers.
£250 million per month….
As I’ve already tried the email address: The donation form is broken. It’s no longer possible to enter letters into the postcode field and hence, donations can’t be made.
Additional request: That’s now the second time I couldn’t make a donation. Can sombody please report (can’t do this myself) the comment above to ensure it gets someone’s attention?
The moderator will see what you just said.
Thanks.
Did you get it resolved
Yes. Works again now. Voluntarily parting with one’s money could be less difficult.
These direct subsidies are only part of the cost of wind power.
Gas (and more especially coal) are hobbled by the cost of emissions permits (which increase the cost of fossil-fuel-generated electricity).
And the standing charge includes a sum for installing grid connections for the new wind power installations.
And of course the intermittency of wind power causes the fossil fueled backup to be used less efficiently.