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Author Topic: Offshore wind auction results  (Read 516 times)
GarethC
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« on: September 20, 2019, 07:58:11 AM »

Just published. Haven't even read yet!

https://www.gov.uk/government/news/clean-energy-to-power-over-seven-million-homes-by-2025-at-record-low-prices
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« Reply #1 on: September 20, 2019, 08:00:08 AM »

Beat me to it. Looks like ~£40/MWh (2012 baseline) and if I'm reading it correctly, no impact on subsidy pot as it looks to be below anticipated wholesale price. Have I got that right? Even close to right? Where's AZPS .................. I needs to know ................ now .............. it's like Xmas morning here.  extrahappy
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Just call me Mart.     Cardiff: 5.58kWp PV - (3.58kWp SE3500 + 2kWp SE2200 WNW)
GarethC
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« Reply #2 on: September 20, 2019, 08:03:45 AM »

Wow! I'm reading the same way. Full 6GW of capacity at an average of a little over £40 MWh. That's got to be essentially subsidy free surely? Someone tell me I'm getting too excited here. With this you can make the argument that renewable energy will -lower- the cost of electricity to the consumer.
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M
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« Reply #3 on: September 20, 2019, 08:06:33 AM »

Wow! I'm reading the same way. Full 6GW of capacity at an average of a little over £40 MWh. That's got to be essentially subsidy free surely? Someone tell me I'm getting too excited here. With this you can make the argument that renewable energy will -lower- the cost of electricity to the consumer.

I'm reading 'C' as subsidy free.

So generation roughly equal to HPC, but without the £45bn subsidy ........ and due sooner.
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Just call me Mart.     Cardiff: 5.58kWp PV - (3.58kWp SE3500 + 2kWp SE2200 WNW)
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« Reply #4 on: September 20, 2019, 08:07:59 AM »

Sorry, C from here: Contracts for Difference Allocation Round 3 Results – Published by BEIS on 20 September 2019
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Just call me Mart.     Cardiff: 5.58kWp PV - (3.58kWp SE3500 + 2kWp SE2200 WNW)
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« Reply #5 on: September 20, 2019, 08:14:47 AM »

Also interesting to see how the other two totally smashed the bid caps on the auction.

Gotta run now, picked the wrong day to plan a load of morning 'stuff'.
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Just call me Mart.     Cardiff: 5.58kWp PV - (3.58kWp SE3500 + 2kWp SE2200 WNW)
dan_b
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« Reply #6 on: September 20, 2019, 08:19:48 AM »

So it looks like Dogger Bank is going ahead then!
Also looks like more onshore in Orkney (I’m assuming that’s what remote island wind is), but what are the other small ones listed as “advanced conversion technology”?
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Philip R
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« Reply #7 on: September 20, 2019, 08:57:31 AM »

Are the advanced conversion devices referring to tidal stream generators?
Philip R
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dan_b
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« Reply #8 on: September 20, 2019, 09:44:10 AM »

Those two companies, Bulwell Energy and Small Heath Bio power are curious as there's very little info about them corporately.   I think they might be proposing some power from waste scheme - gassifaction and CHP
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dan_b
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« Reply #9 on: September 20, 2019, 09:48:06 AM »

And of the 4 remote Island wind projects it looks like, 2 are on Orkney, 2 are on Lewis
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GarethC
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« Reply #10 on: September 20, 2019, 10:00:11 AM »

£40/MWh in 2012 prices will be about £50-55/MWh by delivery in 2023/24, compared to recent wholesale prices averaging circa £50MWh or a bit less, but even so subsidy implications would be minimal I think.
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« Reply #11 on: September 20, 2019, 10:04:36 AM »

Beat me to it. Looks like ~£40/MWh (2012 baseline) and if I'm reading it correctly, no impact on subsidy pot as it looks to be below anticipated wholesale price. Have I got that right? Even close to right? Where's AZPS .................. I needs to know ................ now .............. it's like Xmas morning here.  extrahappy

Reeling in shock. Unbelievably low prices. That 6 GW cap was really unambitious, though. It looks rather like someone's really trying to hold the industry back, to try to protect some role for absurdly over-priced new nuclear.

re the effect on the total pot - well, more wind drives down wholesale prices. There will be more and more times of zero and negative prices. So there will still probably be actual drawdown on the pot, even when average wholesale price is above the CfD price, because the wholesale prices obtained by these windfarms will - in general - be well below the overall average because these windfarms will be generating. And it will be above the average when they're not.

All this is because we've still got a wholesale market designed on the assumptions that (1) the marginal producer will always be burning coal or gas; and (2) no one's got any capital costs to pay down.  Those assumptions were valid for a few years, and now they're not. So this market design isn't really fit for purpose any more.

Are the advanced conversion devices referring to tidal stream generators?

No, they're biogas. There is quite some doubt about how "advanced" they are - they're typically fairly ordinary biogas projects.
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GarethC
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« Reply #12 on: September 20, 2019, 10:17:53 AM »

I thought that, when the wholesale price is above the strike, the generator pays the government, am I right? Docs suggest I'm wrong...

Exciting though that the next auction round currently kicking off, for another 7GW I believe, should when it comes around achieve even lower prices (or worst case scenario, if current bidders have bid too low, at least not much higher). Wonder if the next round might be accelerated, and the capacity limit raised, due to today's results?

Not sure I follow your points on the wholesale market being inadequate Andrew, could you expand?

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dan_b
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« Reply #13 on: September 20, 2019, 10:33:17 AM »

So if there's to be another 6GW of offshore wind up and running by 2024, what size turbines will they be installing to achieve that I wonder - got to be 10-12MW machines surely, couldn't be done with smaller ones at that price and speed I would have thought?
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2.18kWp 10x South facing, plus 4x West facing 880W

Mk1 ImmerSUN DHW diverter
4kW PowerVault Battery

Tesla Model 3 Long Range
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« Reply #14 on: September 20, 2019, 10:50:32 AM »

I thought that, when the wholesale price is above the strike, the generator pays the government, am I right? Docs suggest I'm wrong...

You're right. When the  benchmark wholesale price for a given half-hour period on a given day (e.g. 17.30-18.00 on 1 December 2026) is above the strike price, the generator pays back to the counterparty (the Low Carbon Contracts Company - LCCC, owned by BEIS). When it's below the strike price, the LCCC pays the generator.

Exciting though that the next auction round currently kicking off, for another 7GW I believe

They've typically been 18-24 months apart. Which means we're only planning to build 3-4 GW per year. We need to be building at around double that.

Not sure I follow your points on the wholesale market being inadequate Andrew, could you expand?

The wholesale market price is determined by the fuel cost of the most expensive plant that needs to generate within a half-hour period. If all power can be provided by plants with no fuel cost, then the wholesale price is zero. That means that no one earns in the wholesale market during those periods.

If the market behaves as designed, then even at the most expensive times of the year, there is still competition to be the final generator in those periods, which means that the market price will be just enough to cover their fuel costs. Which means that that marginal generator never earns money to pay back its capital cost.

Most traditional market designs work on the assumption that the marginal producer (i.e. the most expensive producer that is called upon to supply) has positive short-run marginal costs. For things like coffee and dougnuts, that works just fine, because there's always a cost to producing one more cup of coffee or one more doughnut. However, when wind turbines are generating more than enough power to meet demand, that extra unit of generation, if demand were one unit higher, , comes for free - the wind is free at that moment in time, and there are no additional costs to the generator to meet that extra one unit of demand. So the wholesale price drops to zero.
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