By Paul Homewood
h/t KB
There have been headlines that wind power has actually been reducing electricity prices lately, so it is worth taking a look at how the system works, specifically Contracts for Difference (CfDs).
In essence, CfDs are guaranteed, fixed prices, most notably for offshore wind and biomass. (The other energy sources covered are tiny in comparison). They are called Strike Prices.
As with any fixed price system, buyers lose when market prices are low, and win when they are high.
We can take a close look at December 2021, to see the system in operation.
| CfD Generation | 2.2 TWh |
| Av Strike Price | £143.32/MWh |
| Av Market Price | £184.10/MWh |
| CfD Subsidy/(Refund) | £83.1 million |
In other words, market prices have been about £40/MWh higher than the strike price, so the generators refund money to the government, which ultimately comes off our electricity bills.
It goes without saying that until the last few months, market prices have been well below that strike prices, and subsidies paid by energy consumers has been typically in the hundreds of millions every month.
It is a stretch, however, to claim that our electricity prices have been “reduced” because of wind and other renewable power. It would be more accurate to say that they have not gone up as much as they would have done otherwise.
Looked at another way, we have been paying a much higher price than we used to, £143.32/MWh, and will continue to carry on paying this ultra high price, index linked of course.
How long market prices stay at current levels is anybody’s guess, of course. But whether they do or not, energy consumers will suffer.
It should also be pointed out that this £83.1m is chicken feed against the renewable subsidies paid out via ROCs, which will cost £550m a month this year.
So our monthly electricity bills are inflated by £550m a month, against which the renewable lobby brags that it gives us £83m back!
via NOT A LOT OF PEOPLE KNOW THAT
January 24, 2022 at 10:15AM
Iowa Climate Science Education 