By Paul Homewood
The Low Carbon Contracts Company has updated all CfD strike prices for indexation to the 1st April:
https://register.lowcarboncontracts.uk/
Of particular interest are the contracts offered in last summer’s AR6 round. Offshore wind, for example, has been uplifted to £84.97/MWh.
You will recall the OBR’s latest projection for wholesale power prices. Although they reckon it will average £101.50/MWh this year, they also say it will drop in years to come.
By the time East Anglia Two begins operations in 2028, its strike price will, depending on inflation rates, likely be at least £90/MWh, which is well above the projected wholesale price of £75.20.
In fact the OBR has almost certainly overstated prices this year. Catalyst Energy report that power prices have already fallen well below the £100 mark and are clearly still on a downward trend. This is on the back of a similar fall in gas prices:
Catalyst Energy
https://www.catalyst-commercial.co.uk/works/mar25-energy-market-brief/
If this trend continues, it will inevitably mean that CfD subsidies end up being much higher than the OBR are predicting – probably double the £1.3 billion projected.
It seems likely that the energy price cap will fall for the next quarter, and no doubt Ed Miliband will claim the credit! He certainly won’t reveal that it is due to the falling international price of gas.
The real problem however is that retail prices won’t fully reflect the fall in gas prices, as this will be partly offset by increasing CfD and other subsidies.
As the OBR chart above shows, we will be locked into much higher prices for years to come. By 2029/30, the third of our electricity on CfD contracts will cost £98.90/MWh even at today’s prices.
On top of that, Renewable Obligation subsidies will increase again from this month to around £75/MWh. ROC subsidies cover about a quarter of generation.
People complain that when gas prices go up, their electricity bills do too; but when gas prices fall, they never seem to see the benefit!
This is why!
via NOT A LOT OF PEOPLE KNOW THAT
April 3, 2025 at 04:30AM
Iowa Climate Science Education 